Home Loan Toolkit Flashcards
Total monthly home payment
More than just your mortgage; it includes principal and interest (P&I), mortgage insurance, property taxes, homeowner’s insurance, homeowner’s association or condominium fees, if they apply.
Principal
The amount you pay each month to reduce the loan balance.
Interest
The amount you pay each month to borrow money.
Fixed-rate mortgage
The principal and interest stays the same for as long as you have your loan.
Adjustable-rate mortgage (ARM)
A mortgage loan that does not have a fixed interest rate. During the life of the loan the interest rate will change based on the index rate. Also referred to as “Adjustable Mortgage Loans (AMLs)” or “ Variable-Rate Mortgages
(VRMs).”
Balloon payment
The final lump sum payment due at the end of a balloon mortgage.
Prepayment penalty
A fee charged to borrowers for paying off a loan before it is due. Prepayment penalties are provisions
that are not included in all loans.
Private mortgage insurance (PMI)
The insurance purchased by a conventional loan borrower to protect the lender in the event of default. The cost of mortgage insurance is usually added to the monthly payment. Private mortgage insurance is generally maintained until over twenty percent of the outstanding amount of the loan is paid or for a set period of time.
PMI lets the borrower make a lower down payment by insuring the lender against loss if they fail to pay the mortgage.
Prepayment
Any amount paid to reduce the principal balance of a loan before the due date or payment in full of a mortgage. This can occur with the sale of the property,
the pay off of the loan in full, or a foreclosure.
Points
Fees that borrowers can pay to a lender to lower the interest rate on a mortgage loan. Also known as “discount points,” points each cost 1% of the amount of the loan and are added to the closing costs. The use of discount points to lower the rate of interest for the full term of a loan is known as “permanent buy-down.”
Zero points loan
A loan priced at market rate without points in either direction, up or down.
Lender credit
Paid points at closing to receive a lower interest rate.
Loan estimate
A disclosure that helps applicants of forward closed-end mortgages comprehend the expense, risk, and characteristics of the specific loan for which they are applying.
A standard form showing important facts about the loan.
Total loan cost
Includes what your lender charges to make the loan, as well as costs for services such as appraisal and title.
Annual Percentage Rate (APR)
A measure of your costs of credit, including interest and other charges over the loan term expressed as a yearly rate.
Total Interest Percentage (TIP)
The total amount of interest that you pay over the loan term as a percentage of the loan amount.
Intent to proceed
The buyer expresses the desire to proceed with the mortgage application. Lenders have to wait until the buyer expresses intent to proceed before requiring them to pay an application fee, appraisal fee, or most other fees.
Rate lock
Sets your interest rate for a period of time; are typically available for 30, 45, or 60 days, and sometimes longer.
Closing agent
A third-party that performs loan closings on behalf of a lender. The title company typically acts as the closing agent, however, in some states, an attorney is required to act as the closing agent.
Title insurance
Insurance that protects the lender or homebuyer against any claims that arise from arguments about ownership of the property. It is also an insurance title search protection against errors.
Lender’s Title Insurance
An insurance policy that protects the lender by insuring the amount of the loan only.
Owner’s Title Insurance
Voluntary homeowner’s insurance that protects against potential liabilities and covers the full purchase amount.
Home inspector
An examination of the structure and mechanical systems to determine a home’s quality, soundness and safety. The homebuyer generally pays inspection fees.
Home appraiser
A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate, the home’s market value.
Closing Disclosure
Gives a consumer an explanation of all the costs associated with their loan. It must be delivered 3 business days before consummation for all forward closed-end mortgages.
Origination Costs
The cost for the lender to make or originate the loan.
Underwriting
The process of analyzing a loan application to determine the amount of risk involved in making the loan. It includes a review of the potential borrower’s credit history and a judgement of the property value.
Mortgage Servicer
The company that is tasked with collecting mortgage payments. They are in charge of collecting payments, managing escrow accounts, including paying out the taxes and insurance when they come due and evaluating the account for escrow analysis. They also deal with delinquencies, defaults, and a foreclosure if necessary.
Home Equity Line of Credit (HELOC)
An open-end mortgage loan, which is usually a second mortgage that allows a borrower to obtain cash against the equity of a home up to a predetermined amount.
Right to rescind
The Truth in Lending Act (TILA) gives homeowner’s that take out a HELOC the right to change their mind and cancel the loan within three days of receiving a proper notice of the right to rescind from the lender. The buyer cannot rescind if using HELOC to buy a home.
Consumer Financial Protection Bureau (CFPB)
A federal agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives.
