Uniform Residential Loan Application
A way to reduce the remaining balance on the loan by paying more than the scheduled principal amount due.
A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages).
The cost of a property plus the value of any capital expenditures for improvements to the property minus any depreciation taken.
The date that the interest rate changes on an adjustable-rate mortgage (ARM).
The period elapsing between adjustment dates for an adjustable-rate mortgage (ARM).
An analysis of a buyer's ability to afford the purchase of a home. Reviews income, liabilities, and available funds and considers the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that are likely.
The gradual repayment of a mortgage loan, both principal and interest, by installments.
The length of time required to amortize the mortgage loan expressed as a number of months. For example, 360 months is the amortization term for a 30-year fixed-rate mortgage.
The cost of credit expressed as a yearly rate, including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans, however, APR should not be confused with the actual note rate.
A written analysis prepared by a qualified appraiser and estimating the value of a property.
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.
Anything owned of monetary value including real property, personal property, and enforceable claims against others (including bank accounts, stocks, mutual funds, etc.).
The transfer of a mortgage from one person to another.
An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower, and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer.
The fee paid to a lender (usually by the purchaser of real property) when an assumption takes place.
This refers to the debt-to-income ratio calculated using principal, interest, taxes, insurance, and consumer credit obligations divided by gross monthly income. It is expressed as a percentage.
A financial statement that shows assets, liabilities, and net worth as of a specific date.
A mortgage with level monthly payments that amortizes over a stated term but also requires that a lump sum payment be paid at the end of an earlier specified term.
The final lump sum paid at the maturity date of a balloon mortgage.
Income before taxes is deducted.
A plan to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is substantial savings in interest.
A second trust that is collateralized by the borrower's present home, allowing the proceeds to be used to close on a new house before the present home is sold. Also known as "swing loan."
An individual or company that brings borrowers and lenders together for the purpose of loan origination.
When the seller, builder, or buyer pays an amount of money upfront to the lender to reduce monthly payments during the first few years of a mortgage. Buydowns can occur in both fixed and adjustable-rate mortgages.
Limits how much the interest rate or the monthly payment can increase, either at each adjustment or during the life of the mortgage. Payment caps don't limit the amount of interest the lender is earning and may cause negative amortization.
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
The frequency (in months) of payment and/or interest rate changes in an adjustable-rate mortgage (ARM).
Loan is ready to be closed with no additional conditions.
A meeting held to finalize the sale of a property. The buyer signs the mortgage documents and pays closing costs. Also called "settlement."
These are expenses—over and above the price of the property—that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.
A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the disclosure include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the disclosure is represented by a separate number within a standardized numbering system. The totals at the bottom of the Closing Disclosure define the seller's net proceeds and the buyer's net payment at closing.
An agreement, often in writing, between a lender and a borrower to loan money at a future date subject to the completion of paperwork or compliance with stated conditions.
A property with the same basic characteristics as the property you are attempting to find the value of (usually a real estate appraisal.) It should have been sold recently and be as similar as possible.
Interest paid on the original principal balance and on the accrued and unpaid interest.
A property owned as a group, with rights to occupy specific units of the structure. An overseeing board often referred to as a Homeowners Association, governs the property.
A short-term interim loan for financing the cost of construction. The lender advances funds to the builder at periodic intervals as the work progresses.
Credit owed by the individual, not secured by real estate.
An organization that handles the preparation of reports used by lenders to determine a potential borrower's credit history. The agency gets data for these reports from a credit repository and from other sources.
A mortgage not insured by FHA or guarantee by the VA or Farmers Home Administration (FMHA).
A provision in an ARM allowing the loan to be converted to a fixed rate at some point during the term. Usually, conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra.
The ratio expressed as a percentage, which results when a borrower's monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (Conventional loans).
A report detailing an individual's credit history that is prepared by a credit bureau and used by a lender to determine a loan applicant's creditworthiness.
A credit score measures a consumer's credit risk relative to the rest of the U.S. population, based on the individual's credit usage history. The credit score most widely used by lenders is the FICO® score, developed by Fair, Issac and Company. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information that are on your credit report. Higher FICO® scores represent lower credit risks, which typically equate to better loan terms. In general, credit scores are critical in the mortgage loan underwriting process.
The customer's monthly obligations divided by their monthly gross income.
The document used in some states instead of a mortgage. Title is conveyed to a trustee.
Failure to make mortgage payments on a timely basis or to comply with other requirements of a mortgage.
Failure to make mortgage payments on time.
An independent agency of the federal government which guarantees long-term, low or no-down-payment mortgages to eligible veterans.
This is a sum of money given to bind the sale of real estate or a sum of money given to ensure payment or an advance of funds in the processing of a loan.
In an ARM with an initial rate discount, the lender gives up a number of percentage points in interest to reduce the rate and lower the payments for part of the mortgage term (usually for one year or less). After the discount period, the ARM rate usually increases according to its index rate.
Part of the purchase price of a property that is paid in cash and not financed with a mortgage.
Money given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment.
A borrowers normal annual income, including overtime that is regular or guaranteed. Salary is usually the principal source, but other income may qualify if it is significant and stable.
Is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.
The amount of financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on the mortgage.
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit of funds or documents into an escrow account to be disbursed upon the closing of a sale of real estate.
The use of escrow funds to pay real estate taxes, hazard insurance, mortgage insurance, and other property expenses as they become due.
The part of a mortgagor’s monthly payment that is held by the servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due.
Request for a borrower to pay their own taxes and insurance. Escrow wavers are rarely granted with less than a 25% equity position.
Provides financing to farmers and other qualified borrowers who are unable to obtain loans elsewhere.
Also called Freddie Mac, it is a quasi-governmental agency that purchases conventional mortgages from insured depository institutions and HUD-approved mortgage bankers.
A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standard for underwriting mortgages.
Also known as Fannie Mae. A tax-paying corporation created by Congress that purchases and sells conventional residential mortgages as well as those insured by FHA or guaranteed by VA. This institution, which provides funds for one in seven mortgages, makes mortgage money more available and more affordable.
The most common form of ownership where the vestee owns both the land and the structures.
A loan insured by the Federal Housing Administration open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderate-priced homes almost anywhere in the country.
Requires a small fee (up to 3 percent of the loan amount) paid at closing or a portion of this fee added to each monthly payment of an FHA loan to insure the loan with FHA. On a 9.5 percent $75,000 30-year fixed-rate FHA loan, this fee would amount to either $2,250 at closing or an extra $31 a month for the life of the loan. In addition, FHA mortgage insurance requires an annual fee of 0.5 percent of the current loan amount.
FICO® scores are the most widely used credit score in U.S. mortgage loan underwriting. This 3-digit number, ranging from 300 to 850, is calculated by a mathematical equation that evaluates many types of information that are on your credit report. Higher FICO® scores represent lower credit risks, which typically equate to better loan terms.
The primary lien against a property.
The monthly payment due on a mortgage loan including payment of both principal and interest.
A mortgage interest that are fixed throughout the entire term of the loan.
A mandatory insurance for some homeowners whose property is built in a designated flood zone.
A legal procedure in which property securing debt is sold by the lender to pay a defaulting borrower's debt.
This means the property is completely paid for and has no liens attached.
An adjustable-rate mortgage (ARM) with a monthly payment that is sufficient to amortize the remaining balance, at the interest accrual rate, over the amortization term.
Also known as Ginnie Mae, it provides sources of funds for residential mortgages, insured or guaranteed by FHA or VA.
A type of flexible-payment mortgage where the payments increase for a specified period of time and then level off. This type of mortgage has negative amortization built into it.
A Grant Deed is the most common form of title transfer deed. A Grant Deed contains warranties against prior conveyances or encumbrances.
The total amount the borrower earns per month before any expenses are deducted.
A mortgage that is guaranteed by a third party.
A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm, and the like. It would not cover earthquake, riot, or flood damage.
The percentage of gross monthly income budgeted to pay housing expenses.
A combination fixed rate and adjustable-rate loan—also called 3/1,5/1,7/1—can offer the best of both worlds: lower interest rates (like ARMs) and a fixed payment for a longer period of time than most adjustable-rate loans. For example, a "5/1 loan" has a fixed monthly payment and interest for the first five years and then turns into a traditional aadjustable-rate loan, based on then-current rates for the remaining 25 years. It's a good choice for people who expect to move or refinance before or shortly after the adjustment occurs.
The index is the measure of interest rate changes a lender uses to decide the amount an interest rate on an ARM will change over time. The index is generally a published number or percentage, such as the average interest rate or yield on Treasury bills. Some index rates tend to be higher than others, and some more volatile.
This refers to the original interest rate of the mortgage at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). It's also known as "start rate" or "teaser."
The regular periodic payment that a borrower agrees to make to a lender.
A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (MI).
The fee charged for borrowing money.
The percentage rate at which interest accrues on the mortgage. In most cases, it is also the rate used to calculate the monthly payments.
An arrangement that allows the property seller to deposit money to an account. That money is then released each month to reduce the mortgagor's monthly payments during the early years of a mortgage.
For an adjustable-rate mortgage (ARM), the maximum interest rate, as specified in the mortgage note.
For an adjustable-rate mortgage (ARM), the minimum interest rate, as specified in the mortgage note.
A form of holding title where the owners have 100% rights of survivorship unless redirected by a will.
A loan which is larger than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.
The penalty a borrower must pay when a payment is made a stated number of days (usually 15) after the due date.
An alternative financing option that allows low- and moderate-income home buyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes, and insurance (PITI) payments on the first mortgage, plus an extra amount that accumulates in a savings account for a downpayment.
A person's financial obligations. Liabilities include long-term and short-term debt.
For an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the life of the mortgage.
For an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the life of the loan. See cap.
An agreement by a commercial bank or other financial institution to extend credit up to a certain amount for a certain time.
A cash asset or an asset that is easily converted into cash.
A sum of borrowed money (principal) that is generally repaid with interest.
The relationship between the principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.
The guarantee of an interest rate for a specified period of time by a lender, including loan term and points, if any, to be paid at closing. Short-term locks (under 21 days) are usually available after lender loan approval only. However, many lenders may permit a borrower to lock a loan for 30 days or more prior to submission of the loan application.
The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.
The date on which the principal balance of a loan becomes due and payable.
That portion of the total monthly payment that is applied toward principal and interest. When a mortgage negatively amortizes, the monthly fixed installment does not include any amount for principal reduction and doesn't cover all of the interest. The loan balance, therefore, increases instead of decreasing.
A legal document that pledges a property to the lender as security for payment of a debt.
The lender in a mortgage agreement.
An individual or company that brings borrowers and lenders together for the purpose of loan origination.
The account set by the lender to pay taxes and insurance on behalf of the borrower.
A contract that insures the lender against loss caused by a mortgagor's default on a government mortgage or conventional mortgage. Mortgage insurance can be issued by a private company or by a government agency.
The amount paid by a mortgagor for mortgage insurance.
A type of term life insurance In the event that the borrower dies while the policy is in force, the debt is automatically paid by insurance proceeds.
The borrower in a mortgage agreement.
Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. Negative amortization occurs when the monthly payments do not cover all of the interest costs. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. Negative amortization can occur when an ARM has a payment cap that results in monthly payments not high enough to cover the interest due.
The borrower's gross income minus federal income tax.
The value of all of a person's assets, including cash.
An asset that cannot easily be converted into cash.
A property not used as a residence by the owner of the property.
A person, designated by the state, which can certify the identity of a person when signing various documents.
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
Any debt or recurring payment the borrower is obligated to pay, including mortgage payments.
A fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
A property purchase transaction in which the party selling the property provides all or part of the financing.
Designation given to property used as the owner's residence.
A policy of the title insurance which protects the buyer against problems with the title.
The date when a new monthly payment amount takes effect on an adjustable-rate mortgage (ARM) or a graduated-payment mortgage (GPM). Generally, the payment change date occurs in the month immediately after the adjustment date.
A limit on the amount that payments can increase or decrease during any one adjustment period.
A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be.
Financing obtained, subordinate to the first mortgage, to facilitate closing the first mortgage. Also known as a Secondary Financing.
A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months (usually three).
A point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $165,000 one point means $1,650 to the lender. Points usually are collected at closing and may be paid by the borrower or the home seller or may be split between them.
The title report generated at the beginning of the application process. It tells the mortgage company what liens are on the property and gives advice as to what will need to be done to gain clear title prior to recording the trust deed.
The portion of interest, collected at loan closing, which covers the time period between funding and the beginning of the first 30-day period covered by the first payment. For example, if the loan closed on 2/15, the first payment due on 4/1 would pay interest from 3/1 to 4/1. The prepaid interest would cover the period from 2/15 to 2/28.
Expenses necessary to create an escrow account or to adjust the seller's existing escrow account. Can include taxes, hazard insurance, private mortgage insurance and special assessments.
A fee that may be charged to a borrower who pays off a loan before it is due.
The process of determining how much money you will be eligible to borrow before you apply for a loan.
Buyer has discussed their financial situation with a loan expert. No attempt has been made to verify the validity of any of the borrower’s information. PRE-Qualification is only an indication of what the buyer should qualify for.
The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in other rates, including mortgage interest rates.
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
The outstanding balance of principal on a mortgage not including interest or any other charges.
This refers to the principal and interest portions of the monthly mortgage payment.
The four components of a monthly mortgage payment. Principal refers to the part of the monthly payment that reduces the remaining balance of the mortgage. Interest is the fee charged for borrowing money. Taxes and insurance refer to the monthly cost of property taxes and homeowners insurance, whether these amounts are paid into an escrow account each month or not.
Mortgage insurance provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
A statement of a business’s gross income, cost of goods, operating costs, and net profit or loss.
The agreement made between the buyer and seller of a property, containing the purchase price and contingencies of the sale.
Calculations used to determine if a borrower can qualify for a mortgage. They consist of two separate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio.
Assuming market risk on an interest rate in the hopes that it will go lower prior to closing.
A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time.
How a buyers housing expense and debt picture relates to their income.
A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.
The cancellation of a contract. With respect to mortgage refinancing, the law that gives the homeowner three days to cancel a contract in some cases once it is signed if the transaction uses equity in the home as security.
The noting in the registrar’s office of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it a part of the public record.
Money paid to the lender for recording a home sale with the local authorities, thereby making it part of the public records.
Slang for refinance or a new mortgage on a property that does not change ownership.
Paying off one loan with the proceeds from a new loan using the same property as security.
A credit arrangement, such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services.
Financing obtained, subordinate to the first mortgage, to facilitate closing the first mortgage. Also known as a "piggyback" loan.
Where existing mortgages are bought and sold.
The property that will be pledged as collateral for a loan.
An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. See Owner Financing.
An organization that collects principal and interest payments from borrowers and manages borrowers’ escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary mortgage market.
All the steps and operations a lender perform to keep a loan in good standing, such as collection of payments, payment of taxes, insurance, property inspections and the like.
The method used to determine the monthly payment required to repay the remaining balance of a mortgage in substantially equal installments over the remaining term of the mortgage at the current interest rate.
A mortgage that allows for the interest rate to increase according to a specified schedule (i.e., seven years), resulting in increased payments as well. At the end of the specified period, the rate and payments will remain constant for the remainder of the loan.
This refers to a complete loan application package submitted for approval to the underwriting department.
The underwriter cannot yet approve or deny the loan. More information is required.
A percentage interest in a property by two or more individuals without rights of survivorship.
When a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package the mortgages it plans to deliver to the secondary mortgage market.
The insurance policy insuring the lender and/or the buyer that the liens are as stated in the title report. Any claim arising from a lien other than that disclosed is payable by the title insurance company.
An examination of municipal records to determine the legal ownership of property. Usually is performed by a title company.
A document that gives evidence of an individual's ownership of property.
Total obligations as a percentage of gross monthly income including monthly housing expenses plus other monthly debts.
An index used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. Based on the results of auctions that the U.S. Treasury holds for its Treasury bills and securities or derived from the U.S. Treasury's daily yield curve, which is based on the closing market bid yields on actively traded Treasury securities in the over-the-counter market.
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
An adjustable-rate mortgage (ARM) with one interest rate for the first five or seven years of its mortgage term and a different interest rate for the remainder of the amortization term.
The process of evaluating a loan application to determine the risk involved for the lender. Underwriting involves an analysis of the borrower's creditworthiness and the quality of the property itself.
A mortgage that is guaranteed by the Department of Veterans Affairs (VA). Also known as a government mortgage.
A document signed by the borrower's financial institution verifying the status and balance of his/her financial accounts.
A document signed by the borrower's employer verifying his/her position and salary.