Mortgage Terms Flashcards
subordinate loan
ranked behind that held by secured lenders in terms of the order in which the debt is repaid. “Subordinate” financing implies that the debt ranks behind the first secured lender, and means that the secured lenders will be paid back before subordinate debt holders
escrow accounts
set up by your mortgage lender to pay certain property-related expenses on your behalf
lien
A lien is an encumbrance on one person’s property to secure a debt the property owner owes to another person. The statement that someone’s property is “tied up” describes the effect of liens on both real and personal property
tolerances
A tolerance level indicates how much the GFE estimated charges can increase at closing.
rate lock agreement
A lock-in or rate lock on a mortgage loan means that your interest rate won’t change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application.
lender credits
When a borrower receives a lender credit, this typically means they will eventually be paying for closing costs, just not upfront. When a lender agrees to credit closing costs, it is usually at the price of a slightly higher interest rate so the costs will be paid back by the borrower over the life of the loan.
yield spread premiums
A yield spread premium is the difference between the interest rate you pay on your mortgage and the interest rate required by the funding lender or government sponsored enterprise (GSE), company or investor that purchases the mortgage.
federal mortgage loans
FHA
A Federal Housing Administration (FHA) loan is a mortgage that is insured by the Federal Housing Administration (FHA) and issued by an FHA-approved lender.
accrued interest
the interest on a bond or loan that has accumulated since the principal investment, or since the previous coupon payment if there has been one already. For a financial instrument such as a bond, interest is calculated and paid in set intervals (for instance annually or semi-annually)
daily simple interest
A mortgage where interest is calculated on a daily basis, as opposed to a traditional mortgage where interest is calculated on a monthly basis. On a simple-interest mortgage, the daily interest charge is calculated by dividing the interest rate by 365 days, and then multiplying that number by the outstanding mortgage balance. If you multiply the daily interest charge by the number of days in the month, you will get the monthly interest charge
discount points
A discount point is a sum of money paid by the borrower or home buyer to the lender of the mortgage to decrease the interest rate of a mortgage.
third-party providers
Mortgage Lending Programs • Credit card programs • Payday lending and other alternative credit programs • Debit card programs • Rewards programs • Deposit taking or affinity relationships • Overdraft payment programs • Audit programs of third-party relationships, • Broker-dealer relationships for brokerage services • Mortgage brokerage services • Automobile dealer relationships • Flood determination services
Underwriting
the process a lender uses to determine if the risk of offering a mortgage loan to a particular borrower under certain parameters is acceptable. Most of the risks and terms that underwriters consider fall under the three C’s of underwriting: credit, capacity and collateral
finance charges
A finance charge is the total amount of interest and loan charges you would pay over the entire life of the mortgage loan.
subordination
Subordination itself is the act of placing something in a lower-ranking position.
