Become an expert with Rapid Knowledge
The mortgage process involves you making one of the most important decisions in your life, therefore, it can be overwhelming. That is why we are providing you with the knowledge to help you learn and make the most informed decision.
Adjustable rate mortgages are a type of mortgage loan that has interest rates automatically adjust or fluctuate with certain market indexes.
An annual percentage rate (APR) is a broader measure of the cost of borrowing money than the interest rate.
Amortization means paying off a loan with regular payments over time, so that the amount you owe decreases with each payment.
Buying agents or purchasing agents are people or companies that offer to buy goods or property on behalf of another party.
Cash out refinancing occurs when a loan is taken out on property already owned, and the loan amount is above and beyond the cost of transaction, payoff of existing liens, and related expenses.
Closing costs are fees paid at the closing of a real estate transaction. This point in time called the closing is when the title to the property is conveyed to the buyer. Closing costs are incurred by either the buyer or the seller.
A conventional loan is any mortgage loan that is not insured or guaranteed by the government (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs).
A credit report is a statement that has information about your credit activity and current credit situation such as loan paying history and the status of your credit accounts.
A credit score predicts how likely you are to pay back a loan on time. Companies use a mathematical formula—called a scoring model—to create your credit score from the information in your credit report.
Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This number is one way lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.
A down payment is the amount you pay toward the home upfront. You put a percentage of the home’s value down and borrow the rest through your mortgage loan.
An earnest money is a token, or proof of good faith that the buyer has been serious in pursuing purchase.
Equity is the amount your property is currently worth minus the amount of any existing mortgage on your property.
An escrow account is set up by your mortgage lender to pay certain property-related expenses, like property taxes and homeowner’s insurance. A portion of your monthly payment goes into the account.
FHA loans are loans from private lenders that are regulated and insured by the Federal Housing Administration (FHA). FHA loans differ from conventional loans because they allow for lower credit scores and down payments as low as 3.5 percent of the total loan amount.
A fixed-rate mortgage is a type of home loan for which the interest rate is set when you take out the loan and it will not change during the term of the loan.
Forbearance is when your servicer allows you temporarily to pay your mortgage at a lower rate or temporarily to stop paying your mortgage.
Foreclosure is when the lender or servicer takes back property after the homeowner fails to make mortgage payments. In some states, the lender has to go to court to foreclose on your property (judicial foreclosure), but other states do not require a court process (non-judicial foreclosure).
A gift letter is a statement that ensures your lender the money that came into your account is a gift and not a loan. The person who gave you the money must write and sign the gift letter as well as provide their personal information.
A Good Faith Estimate (GFE) is a form that a lender must give you when you apply for a reverse mortgage. The GFE lists basic information about the terms of the reverse mortgage loan offer.
A homeowners’ association (HOA), is typically formed to manage shared expenses such as landscaping and other maintenance costs for a planned subdivision or other organized community.
An appraisal is a written document that shows an opinion of how much a property is worth.
A home equity line of credit (HELOC) is a line of credit that allows you to borrow against your home equity. Equity is the amount your property is currently worth, minus the amount of any mortgage on your property.
IPAC stands for income, property, assets and credit, the four key pillars of any mortgage approval.
An interest-only mortgage is a loan with scheduled payments that require you to pay only the interest for a specified amount of time.
An interest rate on a mortgage loan is the cost you will pay each year to borrow the money, expressed as a percentage rate.
An interest rate cap, sometimes referred to as an annual cap, is the maximum interest rate increase that can occur annually for an adjustable rate mortgage (ARM) even if the rate would have increased more under market interest rates.
Each year Fannie Mae, Freddie Mac, and their regulator, the Federal Housing Finance Agency (FHFA), set a maximum amount for loans that they will buy from lenders.
The loan-to-value (LTV) ratio is a measure comparing the amount of your mortgage with the appraised value of the property. The higher your down payment, the lower your LTV ratio.
A land contract — often described by other terminology listed below — is a contract between the buyer and seller of real property in which the seller provides the buyer financing in the purchase, and the buyer repays the resulting loan in installments.
A Loan Estimate is a three-page form that you receive after applying for a mortgage.
A mortgage broker acts as an intermediary who brokers mortgage loans on behalf of individuals or businesses.
Mortgage insurance protects the lender if you fall behind on your payments. Mortgage insurance is typically required if your down payment is less than 20 percent of the property value.
In the United States, a mortgage note is a promissory note secured by a specified mortgage loan. Mortgage notes are a written promise to repay a specified sum of money plus interest at a specified rate and length of time to fulfill the promise
An origination fee is what the lender charges the borrower for making the mortgage loan
Points, also known as discount points, lower your interest rate in exchange paying for an upfront fee.
In lending, pre-approval is the pre-qualification for a loan or mortgage of a certain value range.
A prepayment penalty is a fee that some lenders charge if you pay off all or part of your mortgage early.
Prepaids are upfront cash payments made before your down payment to obtain a mortgage. Prepaid costs are paid at closing and placed into an escrow account to cover mortgage expenses that are typically included in monthly homeownership-related fees
The principal is the amount of a mortgage loan that you have to pay back.
Principal, Interest, Taxes, and Insurance, known as PITI, are the four basic elements of a monthly mortgage payment.
A principal reduction is a decrease in the amount owed on a loan, typically a mortgage.
Private Mortgage Insurance (PMI) is a type of mortgage insurance that benefits your lender. You might be required to pay for PMI if your down payment is less than 20 percent of the property value and you have a conventional loan
A property inspection waiver (PIW) mortgage is a mortgage that’s eligible for an appraisal waiver, which means the loan can be approved without a full home appraisal report.
Property taxes are taxes charged by local jurisdictions, typically at the county level, based upon the value of the property being taxed.
A purchase agreement is a binding contract between a buyer and seller that outlines the details of a home sale transaction
When you lock the interest rate, you’re protected from rate increases due to market conditions. If rates go down prior to your loan closing and you want to take advantage of a lower rate, you may be able to pay a fee and relock at the lower interest rate.
Refinancing is the replacement of an existing debt obligation with another debt obligation under a different term and interest rate.
A reverse mortgage allows homeowners age 62 or older to borrow against their home equity. It is called a “reverse” mortgage because, instead of making payments to the lender, you receive money from the lender.
A retail lender is a lender who lends money to individuals or retail customers. Banks, credit unions, savings and loan institutions, and mortgage bankers are popular examples of retail lenders
A second mortgage or junior lien is a loan you take out using your house as collateral while you still have another loan secured by your house.
The security interest is what lets the lender foreclose if you don’t pay back the money you borrowed.
“Seller’s agent” means a licensee acting on behalf of the seller in a real estate transaction who undertakes to accept the responsibility of serving the seller consistent with those fiduciary duties existing under common law.
A seller credit is money that the seller gives the buyer at closing as an incentive to purchase a property. The credits may subsidize a buyer’s out-of-pocket closing costs, cover the cost of needed repairs, or otherwise sweeten the deal to move the sale forward.
Seller financing is a loan that the seller of your home makes to you.
A short sale is a sale of your home for less than what you owe on your mortgage. A short sale is an alternative to foreclosure, but because it is a sale, you will have to leave your home.
Third Party Fees are fees that you have to pay when getting a loan. This includes the broker, attorney and others.
The Rural Housing Service, part of the U.S. Department of Agriculture (USDA) offers mortgage programs with no down payment and generally favorable interest rates to rural homebuyers who meet the USDA’s income eligibility requirements.
Underwriting simply means that your lender verifies your income, assets, debt and property details in order to issue final approval for your loan
A VA loan is a loan program offered by the Department of Veterans Affairs (VA) to help servicemembers, veterans, and eligible surviving spouses buy homes.
A wholesale mortgage lender is a bank or other lending institution that funds and sometimes services mortgage loans, but uses independent mortgage brokers for the initial interaction with the client, including the application process.