a fee, calculated as a small percentage of the value of the loan, charged by a mortgage lender for processing the loan. One of many fees often due at closing and one that must be disclosed on the Good Faith Estimate when a buyer first completes a loan application.
for an adjustable rate mortgage, this is the maximum payment amount a buyer could ever be expected to pay per month.
a second mortgage “piggybacked” onto a first mortgage and used in lieu of mortgage insurance. Cost effectiveness of a piggyback loan depends on current market factors.
a type of mortgage that may be carried by the borrower from one home purchase to the next, portable.
Power of attorney
a legal document that grants an individual the rights to act on behalf of another. For example, if a borrower dies or becomes incapable of managing his or her home loan or mortgage, a power of attorney assigned by that individual could manage his or her mortgage and related decisions.
Preferred Lender
a lender that is closely affiliated with a brokerage based on reputation and other industry factors. A mortgage lender that is recommended by a broker.
Pre-paid costs or fees
any of a number of fees associated with a mortgage and usually paid out of pocket at the time of closing; includes origination fees, underwriting fees, attorney fees, etc.
Pre-qualification
the process in which a homebuyer may find out how much of a home loan he or she would be approved for with a lender; gives many buyers more flexibility when shopping for a home.
Primary mortgage market
direct lenders.
Prime loan
a conforming loan, one whose loan limits fall within those set by Fannie Mae or Freddie Mac and often awarded to borrowers with good credit.
Principal
the amount borrowed on a home loan.
Principal balance
the amount currently owed on a home loan.
Private label mortgage outsourcing
a process in which a private bank or financial lender outsources mortgage products to another lender.
Private mortgage insurance, PMI
a type of insurance many homebuyers are required to purchase, particularly when they are unable to put down a certain dollar amount on the loan; protects the lender in the event of borrower default.
Processing fees
lender fees associated with creating the loan or mortgage, usually part of closing costs.
Property address
the physical street address of a home or property required for mortgage application.
Property appraisal
a fair market value of property performed by a licensed appraiser; takes into account not only condition but also the value of similar local properties or comparable sales.
Property taxes
annual local taxes charged against the value of a homeowner’s property.
Property valuation
see Property appraisal.
Quitclaim deed
a document that releases one party in a home title from any responsibility and grants all responsibility to another. Commonly used for spouses or in family situations in which more than one individual has an interest in a mortgage or property title.
Rate commitment option, RCO
see Rate lock.
Rate Lock
a short-term agreement by a lender to “hold” a certain interest rate on a home loan while the buyer negotiates a sale transaction. Also, Rate commitment option.
Real estate investment trust
securities or mutual funds that invest directly in real estate.
Real Estate Settlement Procedures Act (RESPA)
this act passed in 1974 reeled in hidden costs, fees and kickbacks that had become widespread among real estate entities. Per this act all fees and costs must be disclosed to both buyers and sellers.
Real estate tax
see Property tax.
Refinance
process by which a borrower/homeowner may negotiate a lower interest rate on a mortgage, thereby lowering monthly payments. They may choose to work with their current lender, or refinance with another lender.
Remaining balance
The current balance owed on a home loan.
Remaining term
The current amount of time remaining in the length of the loan.
Repayment schedule
mortgage payments laid out over the life of the loan. Some mortgage calculators let borrowers see their repayment schedule based on the amount of the home loan, the interest rate and monthly payments. See also Amortization.
Reverse Mortgage
a type of mortgage designed for homeowners over 62 years of age; gives them access to home’s equity in cash payments, frees up money they may use for other important costs or to make needed home repairs. Since
Reverse mortgages
are typically structured as loans, these payments are not typically considered income.
Sales contract
a real estate sales agreement is a formal written contract made between a homebuyer and seller. The document includes property address, condition, purchase price, inspections, date of closing, date of possession and more.
Second mortgage
also known as a home equity loan, a second mortgage gives borrowers flexibility to access the cash equity in their home, usually useful for other high-dollar expenses such as auto and college loans.
Secondary mortgage market
the segment of the mortgage and real estate securities market that deals in the investment of mortgages; not direct mortgage lenders.
Seller’s agent
a real estate agent that works on behalf of the home seller.
Short sale
useful tool for lenders and homeowners when foreclosure could be a worst-case scenario. In a short sale, lenders give homeowners permission to discount the home value (an outstanding loan balance) to affect a quick sale, thereby averting foreclosure.
Speculative home market
one in which investors snatch up homes for quick re-sale hoping to cash in on improving markets; considered risky by some.
Sub-prime loan
a high-risk loan packaged with non-conforming loan limits and interest rates that make it possible for homebuyers with poor credit to qualify for a mortgage.
Survey
a formal survey of property that establishes boundary lines and defines any types of limits on construction and other features that could affect the value of property; in many cases lenders require buyers to purchase a property survey.
Swing loan
see Bridge loan.
Tenancy in common
one or more persons may possess the property title, but ownership may be declared in various percentages.
Third-party fees
see Closing costs.
Title
the official document used in the real estate industry that specifies at any one time who owns a piece of property.
Title company
a title company typically handles all tasks associated with the property title, including insurance and search.
Title insurance
insurance taken out on the property title that protects both borrower and lender in the event of a title dispute.
Title search
research on a property title usually conducted by a title company to determine if there exist any outstanding liens against the property prior to a sales transaction.
Truth in Lending disclosure
a document that all lenders are required to provide when a borrower applies for a home loan. The document discloses interest rates, the amount to be loaned, plus the final cost of the loan upon maturity.
Turnaround loan
see Bridge loan.
Underwriter
the company or service that evaluates a borrower’s creditworthiness prior to loan and mortgage approval.
VA loans
special, often discounted, home loans designed military Vets
Warranty deed
indicates no past liens or disputes against the property; the holder of the property deed has the right to sell it to another.