QUESTION: What can I use the money I receive from a reverse mortgage for?October 7, 2018
QUESTION: How will I receive the fund proceeds for my reverse mortgage?October 19, 2018
The following glossary of mortgage terms is a good first step to help consumers better understand some of the terms and topics in the mortgage loan process:
The gradual repayment of a mortgage loan by installments.
- ANNUAL PERCENTAGE RATE (APR)
The actual cost of a mortgage stated as a yearly rate including such items as interest, mortgage insurance and closing costs required by the lender and
- APPRAISED VALUE
An opinion of a property’s fair market value based on an appraiser’s knowledge, experience and analysis of the property.
An increase in the value of a property due to changes in market conditions or other causes. The opposite of “Depreciation.”
- CLOSING COSTS
Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Buyer’s closing costs typically include fees for application, processing, underwriting, flood certification, transfer taxes (where applicable), title company, interest, tax & insurance escrows
- CLOSING DISCLOSURE (CD)
Explains the costs of the transaction. This document must be given to the consumer 3 days prior to closing which ensures no surprises at the closing table.
- CONVENTIONAL LOAN
These are loans that are sold to government sponsored enterprises like Fannie Mae and Freddie Mac. Conventional loans are not insured by any government program such as FHA, VA, or USDA. Conventional loans are the most common type
- DEPARTMENT OF VETERANS AFFAIRS (VA)
VA loans are guaranteed by the U.S. Department of Veterans Affairs. VA loans are offered to eligible American veterans or their surviving spouses.
- ESCROW ACCOUNT
An account into which deposits for real estate taxes and insurance (mortgage insurance, hazard insurance and flood insurance as applicable) are made as part of the monthly mortgage payment. The mortgage servicer pays the taxes and insurance out of the account when due. The consumer receives an annual escrow analysis stating all funds paid into and out of the account.
- FEDERAL HOUSING ADMINISTRATION (FHA)
FHA loans are designed for borrowers who are unable to make a large down payment. These loans are insured by the Federal Housing Administration.
- HAZARD INSURANCE
This insurance, also known as homeowners insurance, protects homeowners against unexpected events that affect your home. Replacement cost coverage ensures that your home will be fully rebuilt in case of a total loss.
A person’s financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts owed to others.
- LOAN ESTIMATE (LE)
This document is issued within three business days after a completed application is received.
- LOAN APPLICATION
The loan application is a detailed form designed to provide information to originate your loan. Lenders use the application to evaluate whether or not
they can give you a loan and if so, the amount of money they can lend you. The loan application form requests information such as bank account balances, employment and income information and liabilities.
- LOAN-TO-VALUE (LTV) RATIO
The relationship between the principal balance of the mortgage and the appraised value of the property. For example, an $80,000 mortgage on a home valued at $100,000 has a LTV of 80% ($80,000/$100,000). The remaining $20,000 is your down payment.
- INTEREST RATE LOCK
A written agreement in which the lender guarantees
a specified interest rate if a mortgage goes to closing within a set period of time.
- MORTGAGE BANKER
An institution involved in the origination, processing, underwriting and funding of mortgage loans. A mortgage banker may or may not service the loans it originates and funds.
- MORTGAGE INSURANCE
A policy that insures the lender against loss caused by a mortgagor’s default. Mortgage insurance can be issued by a private company or by a government agency such as the Federal Housing Administration.
The process of estimating how much money a prospective homebuyer will be able to borrow before they apply for a loan.
- PORTFOLIO LOAN
A loan which is serviced by the lender that issued the money.
A legal document evidencing a person’s right to, or ownership of a property.
- TITLE INSURANCE
Insurance that protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property. Your lender will require that you purchase a lender’s policy. The seller typically purchases an “Owner’s Policy” for
- TRANSFER TAX
State or local tax payable when title passes from one owner to another.
The process of final evaluation of a borrower’s
loan application to determine whether or not the application meets the lenders guidelines by assessing the borrower’s ability to repay the loan based on an analysis of their credit, capacity, and collateral.
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