Programs Flashcards
Conforming Loan
A loan that does not exceed Fannie Mae’s and Freddie Mac’s loan limits and guidelines. Fannie Mae and Freddie Mac loans are referred to as conforming loans.
Fixed-Rate Mortgage
A mortgage with payments that remain the same throughout the life of the loan, because the interest rate and other term are fixed and do not change.
Compensating Factors
Factors such as equity, assets, credit score, etc. that reflect a borrower’s ability to repay a loan from sources other than just the monthly income and monthly debt.
Child Support
Monetary payments that are made from one ex-spouse to another after divorce proceedings have been finalized. Child support payments are typically made by the noncustodial parent to the one with custody of the child.
Cash-Out Refinance
Occurs when a borrower refinances a mortgage at a higher principal amount owed on the existing mortgage in order to get additional money. It often serves as an alternative to taking out a home equity loan.
Automated Underwriting
Quick loan processing completed through a computer-based system that evaluates past credit history to determine if a loan should be approved. This system removes the possibility of personal bias against the buyer; though, it is subject to later verification.
Seller Concessions
Occurs if the seller 1) pays a percentage of the buyers closing costs out of pocket, or 2) agrees to give back a certain percentage of the purchase price to the buyer to cover the buyer’s closing costs. In the second case, the buyer and seller first agree on a higher purchase price. Essentially, the buyer finances the closing costs. Also known was “seller contributions”.
Condominium
A form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex. The owner usually pays HOA fees for amenities or services, such as shared pools or lawn care.
Jumbo Mortgage Loan
A mortgage loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits (set by the Federal Housing Finance Agency). Fannie Mae and Freddie Mac loans are referred to as conforming loans. A jumbo loan is known as a “nonconforming loan”.
Energy Efficient Mortgage (EEM)
A Federal Housing Administration program that helps homebuyers save money on utility bills by enabling them to finance cost of adding new energy efficient features to a new or existing home as part pf the purchase price.
Money Market Account
An interest-bearing account that typically pays a higher interest rate than a savings account, and which provides the account holder with limited check-writing ability.
401(k) Plan
A qualified employer-established plan to which employees may make salary deferral (salary reduction) contributions on a post-tax and/or pre-tax basis.
Gift Letter
An official letter written by an individual that accompanies a deposit into a bank account. Most lenders allow potential borrowers to receive a gift from relatives. This can cover many of the costs of obtaining a mortgage.
Origination Fee
The charge for originating a loan. It is paid at closing and is usually calculated in the form of points. One point equals one precent of the loan amount. On a conventional loan, the loan origination fee is the number of points a borrower pays.
Appraisal Fee
Fee charged by an appraiser to estimate the market value of a property.
