Your go-to resource for understanding key mortgage terms and concepts.
Mortgage Glossary for Trealtorr.com
Understanding Mortgages Made Easy
Mortgages can feel confusing, but they don’t have to be! This glossary explains all the important terms in plain language, with simple examples to help you make smarter decisions.
1. Mortgage
A loan you take to buy a house. You promise to pay back the money in monthly amounts, including interest.
Example: If you borrow $200,000 to buy a home, the mortgage helps you pay the seller. Then, you repay the lender over time.
2. Mortgage Broker
A person who helps you find the best loan for your situation by comparing different lenders. Unlike banks, which offer only their own loans, brokers look at many options to save you money.
Example: A broker compares loans from multiple lenders and helps you get a lower interest rate. They care about what’s best for you, not their profit, unlike banks. Contact Trealtorr Mortgage Broker Here
3. Interest Rate
The percentage you pay to borrow money. It’s like a fee for using the lender’s money.
Example: If your loan is $100,000 with a 4% interest rate, you’ll pay $4,000 each year in interest.
4. Principal
The amount of money you borrow, not including interest.
Example: If you take out a $150,000 mortgage, that $150,000 is your principal.
5. Down Payment
The money you pay upfront when buying a house. It reduces the amount you need to borrow.
Example: If a house costs $200,000 and you pay $20,000 upfront, your down payment is 10%.
6. Fixed-Rate Mortgage
A loan where the interest rate stays the same for the whole term, making your monthly payments predictable.
Example: If your rate is 5%, it will always stay 5%, even after 10 years.
7. Adjustable-Rate Mortgage (ARM)
A loan where the interest rate changes over time, which can make your payments go up or down.
Example: Your rate starts at 3% for five years, then changes depending on market rates.
8. Amortization
The process of paying off your loan with regular monthly payments over time.
Example: Each payment you make includes some interest and some of the principal, so you owe less every month.
9. Closing Costs
Fees you pay when finalizing your home purchase. This includes things like loan processing and title insurance.
Example: If closing costs are $5,000, you pay this in addition to your down payment.
10. Pre-Approval
A letter from a lender saying how much money they are willing to lend you based on your income and credit.
Example: If you’re pre-approved for $300,000, sellers know you’re a serious buyer.
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11. Private Mortgage Insurance (PMI)
Insurance you pay if your down payment is less than 20%. It protects the lender, not you.
Example: If you put 10% down, you might pay $100 extra per month for PMI.
12. Escrow
A special account where your lender holds money for property taxes and insurance.
Example: Part of your monthly mortgage payment goes into escrow, so your taxes are paid automatically.
13. Loan-to-Value Ratio (LTV)
The percentage of the home’s value that you borrow.
Example: If your home is worth $200,000 and you borrow $160,000, your LTV is 80%.
14. Debt-to-Income Ratio (DTI)
The percentage of your income that goes toward debt payments.
Example: If you earn $5,000 a month and spend $2,000 on debts, your DTI is 40%.
15. Refinancing
Replacing your old loan with a new one, often to get a lower interest rate or change your payment terms.
Example: You refinance your 6% mortgage to a 4% rate, saving you hundreds each month.
16. Adjustable-Rate Mortgage (ARM)
A loan where the interest rate can change after a certain period, usually after 5, 7, or 10 years. Your monthly payment might go up or down depending on the market.
Example: You might start with a 3% rate for the first 5 years, but after that, it can adjust to 5%, 6%, or more depending on market conditions.
17. Fixed-Rate Mortgage
A loan where the interest rate stays the same throughout the entire term of the loan. Your monthly payments will never change.
Example: If your rate is 4%, it will stay at 4% for 30 years, making your monthly payments stable and predictable.
18. Home Equity
The value of your home minus the amount you owe on your mortgage.
Example: If your home is worth $200,000 and you owe $150,000, your home equity is $50,000.
19. Loan Term
The length of time you agree to pay back your mortgage loan, often 15 or 30 years.
Example: A 30-year loan means you have 30 years to repay the loan, with smaller monthly payments, but you pay more interest overall.
20. Prepayment Penalty
A fee that some lenders charge if you pay off your mortgage early.
Example: If you sell your home or pay off your loan in 5 years, a lender might charge you a prepayment penalty to make up for lost interest.
21. Title Insurance
Insurance that protects you or the lender if there’s a problem with the ownership of the home.
Example: If a previous owner’s debts or legal issues come up after you buy the home, title insurance will protect you from financial losses.
22. Underwriting
The process the lender goes through to decide whether to approve or deny your loan.
Example: The lender looks at your credit, income, and assets to decide if you qualify for a mortgage.
23. Closing
The final step in buying a home when the property officially changes ownership and you sign all necessary documents.
Example: You pay your down payment, closing costs, and officially become the owner of your new home!
24. Home Inspection
A thorough examination of a property to check for problems like structural issues, leaks, or pest infestations.
Example: A home inspector finds that the roof needs repairs before you buy the house.
25. Appraisal
An expert’s estimate of your home’s market value, typically done by an independent appraiser.
Example: The appraiser says your house is worth $250,000, so the bank knows how much money it should lend you.
26. Cash-Out Refinance
Refinancing your mortgage to get extra cash by borrowing more than what you owe.
Example: You refinance your mortgage for $180,000 but still only owe $150,000, so you get $30,000 in cash to use for other things, like home renovations.
27. Fixed-Rate Loan
A mortgage where the interest rate stays the same throughout the life of the loan.
Example: With a fixed-rate mortgage, if your rate is 5%, it will stay at 5% for 15 years or 30 years, depending on the loan term.
28. Balloon Mortgage
A type of loan where you make smaller payments for a set period, but then owe a large lump sum at the end of the term.
Example: You may pay low monthly payments for 5 years, but at the end, you owe a huge amount all at once, often leading to refinancing or selling the home.
29. Jumbo Loan
A loan for an amount that exceeds the conforming loan limits set by the government. Typically used for high-value properties.
Example: If the loan exceeds the limits (usually over $510,000), it’s considered a jumbo loan.
30. VA Loan
A type of mortgage offered to veterans and active military service members with little to no down payment.
Example: A veteran can buy a home with no down payment required and often no mortgage insurance, thanks to a VA loan.
31. FHA Loan
A government-backed loan that allows you to buy a home with a low down payment, often as little as 3.5%.
Example: First-time homebuyers with limited savings can use an FHA loan to buy a home with a small down payment.
32. USDA Loan
A government-backed loan for rural and suburban homebuyers with low or moderate incomes.
Example: If you buy a house in a rural area, you might qualify for a USDA loan, which often requires no down payment.
33. Co-Signer
A person who agrees to take responsibility for your mortgage if you cannot make payments.
Example: If you have a lower credit score, a parent or relative might co-sign your loan to help you qualify.
34. Principal and Interest
The two main parts of your mortgage payment. Principal is the loan amount, and interest is the fee you pay to borrow the money.
Example: If your monthly mortgage payment is $1,200, $1,000 may go toward principal, and $200 goes to pay the lender for interest.
35. Reverse Mortgage
A loan for homeowners age 62 or older, allowing them to convert part of their home equity into cash.
Example: If you’re retired and need extra income, a reverse mortgage lets you take money from your home’s value without selling it.
36. Closing Disclosure
A document provided to you 3 days before closing, outlining the terms of your loan, including fees, interest rates, and monthly payments.
Example: You’ll review this document carefully to make sure everything matches the terms you were given during the application process.
37. Debt Consolidation Loan
A loan that combines multiple debts into one, potentially lowering your overall interest rate.
Example: You use a debt consolidation loan to pay off credit card balances and a car loan, making one monthly payment instead of several.
38. Equity Loan
A loan you take out by borrowing against the equity in your home.
Example: If you’ve built up $50,000 in equity, you could take out a home equity loan to use for renovations or other expenses.
39. Fannie Mae and Freddie Mac
Government-sponsored companies that buy and guarantee mortgages, making it easier for people to borrow money.
Example: When you get a conventional loan, there’s a good chance it’s backed by Fannie Mae or Freddie Mac, which helps keep interest rates lower.
40. Foreclosure
The process in which the lender takes control of a home when the borrower fails to make payments.
Example: If you don’t pay your mortgage for months, the bank might start foreclosure proceedings, and you could lose your home.
41. Home Equity Line of Credit (HELOC)
A line of credit that allows you to borrow against your home’s equity, similar to a credit card.
Example: You get approved for a HELOC for $40,000, and you can borrow money whenever you need it, paying it back over time.
42. Subprime Mortgage
A loan given to borrowers with poor credit. It usually comes with higher interest rates because the risk is higher.
Example: If your credit score is low, you might qualify for a subprime mortgage, but your interest rate will likely be higher than someone with good credit.
43. Property Taxes
Taxes paid to local governments based on the value of your property.
Example: You may pay $3,000 in property taxes every year based on the value of your home.
44. Debt Settlement
Negotiating with creditors to reduce the total amount of debt you owe.
Example: A mortgage lender may agree to forgive part of your debt if you’re having financial trouble, allowing you to pay off the rest.
45. Pre-Approval
A letter from a lender stating how much money they’re willing to lend you based on your financial information.
Example: You get pre-approved for a $200,000 mortgage, so when you find a house you like, you know you can afford it.
46. Pre-Qualification
An estimate of how much you can borrow based on basic information, like your income and debts. Unlike pre-approval, it’s not a guarantee.
Example: You give a lender your basic financial information, and they say you might qualify for a $180,000 loan, but it’s not a guarantee until you get fully pre-approved.
47. Underwater Mortgage
When you owe more on your mortgage than your home is worth.
Example: If your house is worth $150,000 but you owe $200,000, you have an underwater mortgage, which can make it hard to sell the home.
48. Mortgage Insurance
Insurance that protects the lender if you default on your loan, often required if you put down less than 20%.
Example: You buy a house with only 5% down, so you’ll likely need mortgage insurance until you build enough equity.
49. PMI (Private Mortgage Insurance)
A type of mortgage insurance that protects the lender if you default on your loan. It’s usually required if your down payment is less than 20%.
Example: With a 10% down payment on a $300,000 house, you might pay $100 or more per month for PMI until you reach 20% equity.
50. Loan-to-Value (LTV) Ratio
The ratio of the loan amount to the appraised value of the property, used by lenders to assess risk.
Example: If your home is worth $200,000 and you borrow $160,000, your LTV ratio is 80%, which is typical for most loans.
51. Debt-to-Income (DTI) Ratio
A ratio that compares your monthly debt payments to your gross monthly income. Lenders use it to determine if you can afford the mortgage.
Example: If you make $4,000 per month and pay $1,000 in monthly debt, your DTI ratio is 25%, which is considered manageable by most lenders.
52. Fixed-Rate vs. Adjustable-Rate
Fixed-Rate Mortgage: The interest rate remains the same throughout the life of the loan.
Adjustable-Rate Mortgage (ARM): The interest rate changes after an initial period, usually after 5 or 10 years.
Example: If you like stability, go for a fixed-rate mortgage. If you’re okay with possible changes in your payments, an ARM might be a good option.
53. Loan Origination Fee
A fee charged by the lender for processing the loan application, typically a percentage of the loan amount.
Example: If you’re borrowing $250,000 and the origination fee is 1%, you’ll pay $2,500 for the lender’s services.
54. Bridge Loan
A short-term loan used to “bridge” the gap between buying a new home and selling your old one.
Example: If you want to buy a new house but haven’t sold your old one, a bridge loan lets you borrow the money to close on the new home.
55. Closing Costs
The fees and expenses you pay when you finalize your mortgage loan, usually 2% to 5% of the home’s purchase price.
Example: If you buy a home for $300,000, your closing costs might range from $6,000 to $15,000, including title insurance, taxes, and lender fees.
56. Short Sale
When you sell your home for less than what you owe on the mortgage, and the lender agrees to accept the lower amount.
Example: If you owe $250,000 but the house can only sell for $220,000, the lender might agree to a short sale and forgive the remaining $30,000.
57. Conventional Loan
A mortgage not insured or guaranteed by the government. It’s often used by people with good credit and a stable income.
Example: Most people who have a down payment of at least 20% use a conventional loan to buy their homes.
58. Interest-Only Mortgage
A type of mortgage where you only pay the interest for a certain period, usually 5 to 10 years. After that, you start paying off the principal.
Example: In the beginning, you pay only the interest on your loan, which keeps payments low. But later on, you’ll have to pay both the interest and the principal, which means higher monthly payments.
59. Mortgage Broker
A professional who helps you find the best mortgage by working with multiple lenders. Unlike a bank, a broker has many options and is focused on getting you the best deal.
How You Can Help: As a mortgage broker, I can shop around to get you a better deal than a bank. Banks often offer mortgages that benefit them more than the borrower.
They may charge higher rates or fees, but as a broker, I’ll look at multiple lenders to find a rate and term that suits your needs. I work for you, not the bank, and my goal is to get you the best loan possible. Contact Trealtorr Mortgage Broker Here
60. Rate Lock
An agreement between you and the lender to keep your interest rate the same for a certain period, even if market rates go up.
Example: If you lock in a 3.5% rate for 60 days and interest rates rise to 4%, your rate stays at 3.5%.
61. Co-Borrower
A person who applies for a mortgage with you, sharing the responsibility for the loan.
Example: If you and your spouse apply for a mortgage together, you’re both co-borrowers, and both are responsible for paying the loan.
62. Escrow Account
An account that holds money for property taxes and insurance. You make monthly payments, and the lender pays your bills when they’re due.
Example: Your lender might include $200 per month in your mortgage payment for property taxes, then use that money to pay your taxes when they’re due.
63. Equity Line of Credit
A type of credit where you borrow against the equity in your home, often used for large expenses like home improvements.
Example: You can borrow money from your home’s equity, pay it back, and borrow again as needed, just like a credit card with a lower interest rate.
64. Bankruptcy
A legal process where a person or business is unable to repay their debts. Bankruptcy can have a serious impact on your ability to get a mortgage.
Example: After filing for bankruptcy, you may have to wait a few years before being eligible for a new mortgage.
65. Property Deed
A legal document that shows ownership of a property.
Example: When you buy a house, the deed transfers ownership from the seller to you.
66. Market Value
The amount a home is worth based on current market conditions.
Example: If homes in your area are selling for $250,000, that’s the market value of your property.
67. Foreclosure Process
The steps a lender takes to take ownership of your home after you fail to make payments.
Example: The foreclosure process can last several months and may lead to losing your home if payments aren’t made.
68. Debt Consolidation Loan
A loan that combines multiple debts into a single loan, often with a lower interest rate.
Example: You may take out a debt consolidation loan to pay off credit cards, making one monthly payment instead of multiple bills.
69. Title Insurance
Insurance that protects you and the lender against legal claims or ownership disputes over the property.
Example: If someone claims they own part of your house, title insurance helps cover the legal costs to prove it’s yours.
70. Balloon Mortgage
A type of loan where you make small monthly payments for a set time, then pay off the rest in one big payment.
Example: You might pay $800 a month for five years, but in the sixth year, you owe $50,000 in a lump sum.
71. Refinancing
Replacing your current mortgage with a new one to get better terms, like a lower interest rate.
Example: If you’re paying 6% interest and rates drop to 4%, refinancing can lower your monthly payments.
72. Second Mortgage
An additional loan taken out against your home’s equity, often used for big expenses like renovations or paying off debt.
Example: You have $50,000 in equity, so you take out a second mortgage to remodel your kitchen.
73. Jumbo Loan
A loan that’s bigger than the limit set by the government. It’s used for expensive homes and often has stricter requirements.
Example: If you buy a $1,000,000 home, you might need a jumbo loan since it’s above the regular loan limits.
74. FHA Loan
A loan backed by the Federal Housing Administration, often for first-time buyers with lower credit scores.
Example: With an FHA loan, you could buy a house with a 3.5% down payment instead of the usual 20%.
75. VA Loan
A loan backed by the Department of Veterans Affairs, available to military members and their families.
Example: If you’re a veteran, you can get a VA loan with no down payment and no PMI.
76. USDA Loan
A loan backed by the U.S. Department of Agriculture for homes in rural areas.
Example: You want to buy a home in a small town, and a USDA loan helps you do it with no down payment.
77. Amortization Schedule
A table that shows how much of each payment goes toward interest and how much goes toward the loan balance.
Example: At the start of your loan, most of your payment goes to interest, but later, more goes to the principal.
78. HELOC (Home Equity Line of Credit)
A revolving line of credit that lets you borrow against your home’s equity as needed.
Example: You get a HELOC to cover home repairs, and you only pay interest on the amount you borrow.
79. Assumable Mortgage
A mortgage that can be transferred from the seller to the buyer, often at the same interest rate.
Example: You buy a house and take over the seller’s mortgage with a 3% rate instead of getting a new loan at 5%.
80. Construction Loan
A short-term loan for building a new home.
Example: You borrow money to build your house, and once it’s done, you switch to a regular mortgage.
81. Reverse Mortgage
A loan for people 62 and older that lets them use their home’s equity without selling it.
Example: A retired homeowner uses a reverse mortgage to get monthly payments and stay in their home.
82. Mortgage Term
The length of time you have to pay back your mortgage.
Example: A common mortgage term is 30 years, but you can also choose 15 or 20 years.
83. Escrow Closing
The final step in a home sale where the money, title, and keys are exchanged.
Example: At the escrow closing, you sign the final papers and officially own the home.
84. Principal Balance
The amount of money you still owe on your loan, not including interest.
Example: If your loan started at $200,000 and you’ve paid $50,000, your principal balance is $150,000.
85. Adjustable-Rate Cap
The limit on how much the interest rate can increase on an adjustable-rate mortgage.
Example: If your cap is 2%, your rate can’t go up more than 2% in one adjustment period.
86. Payment Shock
A sudden increase in your monthly mortgage payment, often with an adjustable-rate mortgage.
Example: Your payment goes from $1,200 to $1,800 after the rate adjusts, which can be tough to handle.
87. Subprime Loan
A loan for people with low credit scores, usually with higher interest rates.
Example: If your credit score is 580, you might qualify for a subprime loan but pay more in interest.
88. Biweekly Mortgage
A mortgage where you make payments every two weeks instead of monthly, helping you pay off the loan faster.
Example: By paying every two weeks, you make 26 payments a year, which equals 13 full payments instead of 12.
89. Seller Concession
When the seller agrees to cover some of the buyer’s closing costs to help make the sale.
Example: The seller pays $5,000 of your closing costs, so you don’t have to bring as much money to closing.
90. Lender Credit
When the lender covers part of your closing costs in exchange for a higher interest rate.
Example: The lender pays $2,000 of your closing costs, but your rate goes up from 3.5% to 3.75%.
91. Loan Estimate
A document from the lender that shows the estimated costs of your mortgage.
Example: Before you commit, the lender gives you a loan estimate that shows your monthly payment and closing costs.
92. Rate Lock Extension
An agreement to extend the rate lock period if your closing is delayed.
Example: You were supposed to close in 30 days, but it’s taking 45 days, so you get a rate lock extension.
93. Prepayment Penalty
A fee charged if you pay off your mortgage early.
Example: If you refinance or sell your house before a certain time, you might pay a penalty for doing so.
94. Points (Discount Points)
A fee you pay upfront to lower your mortgage interest rate.
Example: Paying $2,000 in points might lower your rate from 4% to 3.75%, saving you money in the long run.
95. Closing Disclosure
A document you get three days before closing that shows the final terms and costs of your mortgage.
Example: You review the closing disclosure to make sure everything matches what you agreed to with the lender.
96. Cash-Out Refinance
Refinancing your mortgage for more than you owe and taking the difference in cash.
Example: Your home is worth $300,000, and you owe $200,000. You refinance for $250,000 and use the extra $50,000 for home improvements.
97. Earnest Money Deposit
A deposit you make when you make an offer on a house to show you’re serious about buying.
Example: You offer $2,000 as earnest money, and it’s applied to your down payment if the deal goes through.
98. Non-Occupant Co-Borrower
A co-borrower who doesn’t live in the home but helps you qualify for the loan.
Example: Your parent co-signs your mortgage to help you qualify but doesn’t live with you.
99. Loan Modification
A change to the terms of your loan to make it more affordable.
Example: Your lender reduces your interest rate or extends your term to lower your monthly payments.
100. Closing Costs Credit
When the seller or lender agrees to cover some or all of the closing costs.
Example: The seller agrees to give you a $3,000 credit toward your closing costs to help seal the deal.
101. Hard Money Loan
A short-term loan secured by real estate, often used by investors or house flippers.
Example: You borrow $100,000 from a private lender to buy and fix up a home, then sell it for a profit.
102. Bridge Loan
A short-term loan that helps you buy a new home before selling your current one.
Example: You use a bridge loan to cover the down payment on your new house while waiting for your old one to sell.
103. Debt-to-Income (DTI) Ratio
A percentage that shows how much of your income goes toward debt payments.
Example: If you earn $4,000 a month and pay $1,200 in debt, your DTI is 30%.
104. Private Money Lender
An individual or company that lends money for real estate, often with flexible terms.
Example: A private lender gives you a loan for an investment property when a bank says no.
105. Mortgage Banker
A person or company that funds mortgage loans directly.
Example: A mortgage banker approves and gives you the loan without involving another lender.
106. Interest-Only Mortgage
A loan where you only pay the interest for a set time before starting to pay the principal.
Example: For the first five years, your payment covers just the interest, making it lower than a regular mortgage.
107. No-Doc Loan
A loan that doesn’t require proof of income or employment, often with higher interest rates.
Example: You get a no-doc loan if you’re self-employed and can’t show pay stubs but have a good credit score.
108. Loan-to-Value (LTV) Ratio
The percentage of the home’s value that you’re borrowing.
Example: If your home is worth $200,000 and your loan is $160,000, your LTV is 80%.
109. Foreclosure
When the lender takes your home because you stopped making payments.
Example: You couldn’t pay your mortgage for six months, so the bank foreclosed and sold the house.
110. Short Sale
Selling your home for less than what you owe on the mortgage with the lender’s approval.
Example: You owe $250,000, but your house sells for $200,000. The lender forgives the rest.
111. Tax Lien
A legal claim by the government against your property if you don’t pay your taxes.
Example: If you owe $10,000 in property taxes, the government could place a lien on your home until you pay.
112. 1031 Exchange
A tax-deferred exchange of investment properties.
Example: You sell one rental property and buy another, avoiding capital gains taxes.
113. ARM Margin
The amount added to the index rate to determine the interest rate on an adjustable-rate mortgage.
Example: If the index is 3% and your margin is 2%, your interest rate is 5%.
114. Appraisal Gap
The difference between the appraised value of a home and the agreed-upon sale price.
Example: The home appraises for $290,000, but you agreed to pay $300,000.
115. Debt Consolidation Loan
A loan that combines multiple debts into one payment, often with a lower interest rate.
Example: You use a debt consolidation loan to pay off credit cards and your car loan.
116. Prequalification
An estimate from a lender of how much you can borrow, based on basic financial info.
Example: The lender tells you that, based on your income and credit score, you might qualify for a $250,000 loan.
117. Preapproval
A more detailed evaluation by a lender showing how much you’re approved to borrow.
Example: The lender verifies your income and credit score and preapproves you for a $200,000 mortgage.
118. Escrow Account
An account used to pay property taxes and insurance as part of your monthly mortgage payment.
Example: You pay an extra $200 a month into escrow to cover taxes and insurance when they’re due.
119. Rescission Period
The three-day period you have to cancel a refinance loan after signing the paperwork.
Example: You change your mind about refinancing and cancel the loan within three days.
120. Settlement Statement
A detailed document showing all the costs and payments in a real estate transaction.
Example: At closing, you review the settlement statement to see how much you owe in closing costs.
121. PITI
An acronym for Principal, Interest, Taxes, and Insurance—the main parts of your monthly mortgage payment.
Example: If your mortgage payment is $1,500, it includes $900 for principal and interest, $400 for taxes, and $200 for insurance.
122. Fixed-Rate Mortgage
A mortgage where the interest rate stays the same for the entire loan term.
Example: Your payment is $1,200 every month for 30 years because the rate never changes.
123. Loan Origination Fee
A fee charged by the lender for processing your loan.
Example: Your lender charges a $1,500 origination fee to cover the cost of preparing your mortgage.
124. Underwriting
The process where the lender evaluates your financial information to decide if you qualify for a loan.
Example: The underwriter checks your credit score, income, and debts before approving your mortgage.
125. Due-On-Sale Clause
A part of the mortgage contract that requires the loan to be paid in full when the property is sold.
Example: You sell your house, so you must pay off the remaining balance on your mortgage.
126. Down Payment Assistance
Programs that help buyers with the cost of their down payment, often offered by governments or nonprofits.
Example: A local program gives you $5,000 toward your down payment to make buying a home more affordable.
127. Payment Holiday
A break from making mortgage payments, often offered during financial hardship.
Example: After losing your job, your lender gives you a three-month payment holiday to get back on your feet.
128. Default
Failing to make your mortgage payments as agreed.
Example: You miss three mortgage payments in a row, and the lender considers you in default.
129. Partial Claim
When a lender or insurer pays part of your missed payments to help you avoid foreclosure.
Example: The FHA covers three months of your missed payments, and you repay them later.
130. Balloon Payment
A large payment due at the end of a loan term, after smaller payments during the loan period.
Example: You pay $800 per month for five years, then owe $50,000 at the end as a balloon payment.
131. Loan Modification
A change in the terms of your loan to make payments more manageable.
Example: Your lender lowers your interest rate to reduce your monthly mortgage payment.
132. HELOC (Home Equity Line of Credit)
A revolving line of credit based on the equity in your home.
Example: You have $50,000 in equity and use a HELOC to borrow $10,000 for home improvements.
133. Cash-Out Refinance
Replacing your mortgage with a new one for more than you owe and taking the difference in cash.
Example: You owe $150,000, refinance for $180,000, and get $30,000 to pay for a new roof.
134. Reverse Mortgage
A loan for homeowners 62 or older that lets them use their home equity without selling.
Example: A senior homeowner gets monthly payments from a reverse mortgage to help with living expenses.
135. Equity Stripping
When unscrupulous lenders encourage borrowers to take out excessive loans, reducing home equity.
Example: A lender convinces you to refinance multiple times, leaving you with little equity.
136. Subprime Loan
A loan offered to borrowers with lower credit scores, often with higher interest rates.
Example: With a credit score of 580, you get a subprime loan with a 9% interest rate.
137. Co-Borrower
Someone who applies for the loan with you and shares responsibility for payments.
Example: You and your spouse are co-borrowers on the mortgage for your new home.
138. Deed-in-Lieu of Foreclosure
Voluntarily giving your home to the lender to avoid foreclosure.
Example: You can’t afford the mortgage, so you hand over the deed instead of going through foreclosure.
139. Housing Expense Ratio
The percentage of your income spent on housing costs.
Example: If you earn $4,000 a month and your mortgage is $1,000, your housing expense ratio is 25%.
140. Interest Rate Cap
A limit on how much the interest rate can increase on an adjustable-rate mortgage.
Example: Your ARM has a 2% cap, so your rate can’t go up more than 2% per adjustment period.
141. Owner-Occupied Property
A property that you live in as your primary residence.
Example: You buy a house and live there instead of renting it out.
142. Investment Property
A property purchased to generate rental income or profit from appreciation.
Example: You buy a duplex and rent out both units to tenants.
143. Fixed Payment
A monthly payment that stays the same throughout the loan term.
Example: Your 30-year mortgage has a fixed payment of $1,500 each month.
144. Graduated Payment Mortgage (GPM)
A loan where payments start low and gradually increase over time.
Example: You pay $800 a month in year one, and it increases to $1,200 by year five.
145. Closing Disclosure
A document that outlines the final terms and costs of your mortgage.
Example: You review the closing disclosure three days before signing your loan paperwork.
146. Earnest Money Deposit
A deposit made to show you’re serious about buying a home.
Example: You offer $5,000 in earnest money when you sign the purchase agreement.
147. Seller Concession
When the seller agrees to cover part of the buyer’s closing costs.
Example: The seller pays $3,000 toward your closing costs to help you buy the house.
148. Loan Estimate
A document that provides an estimate of your loan terms and closing costs.
Example: Your lender gives you a loan estimate within three days of applying for a mortgage.
149. Homeowners Association (HOA)
A group that manages and enforces rules for a community of homeowners.
Example: You pay $200 a month to the HOA for neighborhood upkeep and amenities.
150. Private Mortgage Insurance (PMI)
Insurance that protects the lender if you don’t make your payments, usually required for loans with less than 20% down.
Example: You pay $100 a month for PMI until you have 20% equity in your home.
151. Blanket Mortgage
A single mortgage covering multiple properties.
Example: A real estate investor uses a blanket mortgage to buy three rental homes at once.
152. Rent-to-Own Agreement
An arrangement where you rent a home with the option to buy it later.
Example: You pay $1,200 a month in rent, and part of it goes toward the home’s purchase price.
153. Jumbo Loan
A mortgage for an amount higher than the conforming loan limit.
Example: You take out a $900,000 jumbo loan to buy a luxury home.
154. Manufactured Home Loan
A loan specifically for buying a manufactured or mobile home.
Example: You finance a $70,000 manufactured home with a 15-year loan.
155. Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that can change over time.
Example: Your ARM starts with a 4% rate for five years, then adjusts annually based on the market.
156. VA Funding Fee
A one-time fee paid to the Department of Veterans Affairs for VA loans.
Example: You pay a 2.3% VA funding fee on a $200,000 loan, which is $4,600.
157. Rural Development Loan
A loan program for homes in rural areas with low interest rates and no down payment.
Example: You qualify for a USDA loan to buy a home in a small town.
158. Borrower’s Credit Report
A report that shows your credit history and score, used to determine loan eligibility.
Example: Your credit report shows you have a 750 score and no missed payments, so you get a good rate.
159. Refinancing Costs
The fees and charges associated with replacing your current mortgage.
Example: You pay $3,000 in closing costs to refinance your loan to a lower rate.
160. Title Insurance
Insurance that protects against losses from issues with the property’s title.
Example: Title insurance covers you if someone claims ownership of your land after you buy it.
161. Prepaid Interest
Interest you pay at closing for the days between your closing date and the start of the loan term.
Example: You close on the 25th of the month, so you pay interest for six days until the next month begins.
162. Assumable Loan
A loan that a buyer can take over from the seller with the same terms.
Example: You buy a house and assume the seller’s mortgage with a 3% interest rate.
163. Construction Loan
A short-term loan to finance building a new home or property.
Example: You get a construction loan to pay contractors while your new house is being built.
164. Closing Date
The day you sign all the documents and officially become the homeowner.
Example: Your closing date is scheduled for March 15th.
165. Debt-to-Income Ratio (DTI)
The percentage of your monthly income used to pay debts.
Example: You earn $5,000 a month and pay $2,000 in debts, so your DTI is 40%.
166. Loan Servicer
The company that manages your loan payments and handles escrow accounts.
Example: Your loan servicer sends you monthly mortgage statements and pays your property taxes from escrow.
167. Contingency Clause
A condition in the purchase agreement that must be met for the sale to proceed.
Example: Your offer includes a financing contingency, so the sale only happens if your loan is approved.
168. Principal Balance
The amount of money you still owe on your loan, not including interest.
Example: After one year, your principal balance is $190,000 on your $200,000 mortgage.
169. Default
Failure to make mortgage payments on time.
Example: Missing three payments in a row could put you in default on your loan.
170. Settlement Statement
A document that lists all the costs and fees paid at closing.
Example: The settlement statement shows you paid $4,000 in closing costs and a $2,000 down payment.
171. Interest Rate Lock
An agreement to freeze your interest rate for a certain period while your loan is processed.
Example: You lock in a 5% rate for 30 days to protect yourself from rate increases.
172. Biweekly Mortgage
A payment plan where you pay half your monthly payment every two weeks.
Example: Instead of $1,200 monthly, you pay $600 every two weeks, saving on interest.
173. Home Inspection
An examination of the property to check for issues before purchase.
Example: The inspector finds a leaky roof during the home inspection.
174. Lien
A legal claim against your property for unpaid debts.
Example: The contractor places a lien on your house because you didn’t pay for the renovation.
175. Prepayment Penalty
A fee charged for paying off your mortgage early.
Example: You pay off your loan five years early and owe a $1,000 prepayment penalty.
176. Mortgage Note
A document that outlines the terms of your loan and your promise to repay it.
Example: The mortgage note specifies your interest rate, loan term, and payment amount.
177. Title Search
A review of property records to ensure the seller has the right to sell.
Example: The title search confirms there are no liens on the house you’re buying.
178. Underwriter
The person who evaluates your loan application to decide if you qualify.
Example: The underwriter checks your credit, income, and assets before approving the loan.
179. Down Payment Assistance
Programs that help buyers cover their down payment costs.
Example: You receive $5,000 from a state program to help with your down payment.
180. Mortgage Escrow Account
An account managed by the lender to pay property taxes and insurance.
Example: You pay an extra $300 a month into escrow for taxes and insurance.
181. FHA Loan Limits
The maximum amount you can borrow with an FHA loan, based on location.
Example: In your county, the FHA loan limit for a single-family home is $420,000.
182. ARM Adjustment Period
The time between interest rate changes on an adjustable-rate mortgage.
Example: Your ARM adjusts every year after the initial fixed-rate period.
183. Origination Fee
A fee charged by the lender to process your loan application.
Example: You pay a 1% origination fee on your $200,000 loan, which is $2,000.
184. Homebuyer Education Course
A class that teaches first-time buyers about the home-buying process.
Example: Completing the course qualifies you for a down payment assistance program.
185. Adjustable Payment Plan
A mortgage plan where payment amounts can change based on the loan type.
Example: Your payments increase every two years as part of the plan.
186. Manufactured Housing
Homes built in a factory and transported to a site.
Example: You purchase a manufactured home and place it on a lot you own.
187. Permanent Loan
A long-term mortgage that replaces a construction loan.
Example: After your home is built, the construction loan is converted into a permanent loan.
188. Mortgage Discount Points
Fees paid upfront to reduce your loan’s interest rate.
Example: You pay $3,000 in discount points to lower your rate from 6% to 5.5%.
189. Mortgage Amortization Schedule
A chart showing how each payment is divided between principal and interest.
Example: The schedule shows you’ll pay $500 toward interest and $300 toward principal in your first payment.
190. Real Estate Owned (REO)
A property owned by a lender after foreclosure.
Example: The bank lists an REO property for sale after the previous owner defaulted.
191. Property Taxes
Taxes paid to local government based on your home’s value.
Example: Your property taxes are $2,400 annually, paid through your escrow account.
192. Annual Percentage Rate (APR)
The total cost of your loan, including interest and fees, expressed as a yearly percentage.
Example: Your loan has a 5% interest rate and a 5.5% APR after fees are included.
193. First-Time Homebuyer Credit
A tax credit or benefit for first-time homebuyers.
Example: You get a $2,000 tax credit after buying your first home.
194. Lender’s Title Insurance
Insurance that protects the lender’s interest in the property.
Example: The lender requires you to buy title insurance as part of the closing costs.
195. Home Equity Conversion Mortgage (HECM)
A type of reverse mortgage insured by the FHA.
Example: A senior homeowner uses a HECM to get monthly payments based on their home’s equity.
196. Short Sale
Selling a home for less than what is owed on the mortgage.
Example: You owe $250,000 but sell your house for $200,000 with the lender’s approval.
197. Seller Financing
When the seller acts as the lender, letting the buyer make payments directly to them.
Example: The seller agrees to finance your home purchase at a 5% interest rate.
198. Loan Origination System (LOS)
Software that lenders use to process and approve loans.
Example: The lender’s LOS helps track your application and documents during the loan process.
199. Closing Agent
The person who handles the final paperwork and ensures the transaction is completed.
Example: The closing agent coordinates signing and funds transfer on closing day.
200. Hard Money Loan
A short-term loan backed by property, often used for real estate investments.
Example: You use a hard money loan to buy and renovate a fixer-upper quickly.
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