Glossary of Terms
Gift Letter A written letter signed by the individual giving funds for the purpose of buying a home which states there is no obligation to repay the sum of money being given.
Gross Monthly Income Total monthly income earned before taxes or other deductions.
Hazard Insurance Also referred to as homeowners or fire insurance; coverage for physical damage to a property from fire, wind, vandalism or other hazards.
Home Equity Line of Credit (HELOC) Also referred to as a revolving line of credit; usually a second mortgage, which allows the borrower to obtain multiple advances up to a specific credit limit.
Index Generally a published number or percentage, such as the yield on the One-Year Treasury Bill, which is used to compute the interest rate for an adjustable rate mortgage.
Jumbo Loan A loan that exceeds the Fannie Mae legislated mortgage amount, which is currently $333,700. Jumbos are also called non-conforming loans.
Legal Description Describes the location of the property which has been recorded at the county.
Lien A legal claim or attachment against property as security for a loan.
Loan-To-Value Ratio The ratio between the amount of any mortgages against a property divided by the sales price or appraised value.
Monthly Payment Usually the amount of principal, interest, taxes and insurance paid each month on a mortgage loan.
Mortgage The conveyance of an interest in real property given as security for the repayment of a loan.
Origination Fee A fee paid to the lender for processing a loan application. The origination fee is stated in the form of points. One point equals one percent of the mortgage amount.
PITI Reserves A cash amount a borrower must have left over after making a down payment and paying the closing costs for the purchase of a home.
Private Mortgage Insurance (PMI) Insurance written by a private company to protect the lender against loss resulting from nonpayment or default.
Purchase Contract (Earnest Money Agreement/Offer) A written agreement between a buyer and seller of real property, setting forth the price and terms of the sale, also known as a sales contract.
Qualifying Ratios Calculations that are used in determining whether a borrower can qualify for a mortgage. The two calculations are housing expense divided by gross income, and the total debt including other monthly debt payments divided by gross income.
Rate Lock A commitment issued by a lender to a borrower guaranteeing a specific interest rate for a specific period of time.
Title Insurance Provides insurance that public records have been examined to insure that there are no liens or other claims against the property.
Truth in Lending Act A federal law that requires lenders to fully disclose the terms and conditions of a mortgage including the Annual Percentage Rate (APR) and other charges.
Underwriting The process of evaluating a loan application to determine credit worthiness and risk involved for the lender.
VA Loan A loan that is guaranteed by the U.S. Department of Veterans Affairs, also known as a government loan.