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Glossary
A
An adjustable rate mortgage (ARM) is a type of mortgage loan in which the interest rate can change over time, usually based on an index.
Amortization is the process of paying off the principal and interest on your loan. You may see it expressed as an amortization schedule—essentially an outlook of every payment you need to make until you've paid off the balance of the loan in full.
An annual percentage rate (APR) is a broader measure of the cost of borrowing money than the interest rate. The APR reflects the interest rate, any points, mortgage broker fees, and other charges that you pay to get the loan. For that reason, your APR is usually higher than your interest rate.
An appraisal is an unbiased estimate of your property's fair market value by a licensed professional. It's something that is typically required by all lenders during the mortgage process to ensure that the loan amount does not exceed the value of the home. A property's appraisal is based on a number of factors—including location, condition, and sales of similar homes in the area.
Appreciation is the increase in value of your home over time. It can be affected by all kinds of events, from property renovations to changes in the housing market.
Items of value that you own, such as cash, stocks, bonds, and real estate.
B
Bankruptcy is a legal process through which people or other entities who cannot repay debts to creditors may seek relief from some or all of their debts. In most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor. This process hurts your credit, and can stay on your credit report for seven to ten years depending on the type of bankruptcy filed.
Basis points, otherwise known as bps or "bips," are a unit of measure used in finance to describe the percentage change in the value of financial instruments or the rate change in an index or other benchmark. One basis point is equivalent to 0.01% (1/100th of a percent) or 0.0001 in decimal form. Basis Points are used to remove any kind of ambiguity when referring to the specifics of an interest rate.
Buyer's Market is typically when there are many more homes for sale than there are people looking to buy homes. Homebuyers have the upper hand.
C
A cash-out refinance is when a mortgage is refinanced for more than the outstanding balance, converting home equity into cash. Cash-out refinancing can be a great way to free up money to pay off outstanding debt or to make an investment in home improvements or other home projects.
Cash reserves are a "rainy day" savings you've set aside for emergencies, such as the loss of a job. It is recommended you have 2 months of mortgage payments on hand in case of emergency.
Cash to close is the total amount needed to bring to the closing attorney's office on closing day. It typically includes down payment, fees, pre-paid taxes, homeowner's insurance, and any homeowners association fees that may be applicable. Cash to close is usually paid in the form of a wire transfer or a certified bank or cashier's check.
A certificate of eligibility (COE) is a document required for some VA loans. It is provided by the Veterans Administration and is given to qualifying veterans who have been honorably discharged after serving a certain amount of time in the armed forces.
A clear to close (CTC) is one of the final steps of the loan process. This means that your loan documents have been reviewed by an underwriter and you have been approved for the loan.
Close of escrow is the point in the homebuying process when the funds held in escrow and the loan amount are transferred to the seller, and all outstanding third-party costs, such as taxes and HOA fees, are settled.
Closing also known as the mortgage settlement, is the final step of the homebuying process. All outstanding fees listed in the closing disclosure are paid, the escrow funds are cleared to be delivered to the seller, and the buyer and seller sign documents to transfer ownership of the property. The buyer signs the mortgage loan, and the title company registers the title deed to the property in the buyer's name.
Closing costs are paid to various third parties to complete the sale of the property at the closing of the real estate transaction. Depending on the lender, they're comprised of attorney fees, title search, title insurance, taxes, lender costs, and housing costs like homeowners insurance. These costs are paid by buyers and sellers.
A closing disclosure (CD) is a standardized document from the lender that provides final details about the mortgage loan. It includes the loan terms, projected monthly payments, fees, and other closing costs. The lender is required to give you the CD at least 3 business days prior to the date of close so you can compare it against the loan estimate (LE). If something on your CD doesn't look right, be sure to ask your lender about it prior to close.
A co-applicant is someone whose income and credit history are put on the loan application in addition to the primary borrower. Co-applicants are a common addition when the primary borrower may not qualify for the mortgage on their own. See co-signer definition as well.
A co-borrower is a spouse whose income and credit history are put on the loan application in addition to the primary borrower. Additionally it can be any buyer listed on the loan document. They are equally responsible for the payback of the loan and are also listed on the home's title.
A co-signer may be required on a loan if the primary applicant may not qualify for the mortgage on their own. This person agrees to pay the borrower's debt if they are unable to do so.
Collateral is an asset that a lender accepts as security for a loan. In a traditional mortgage, the collateral is the home itself. If you fail to make loan payments to your lender, they have the option to repossess or claim ownership of the collateral—i.e. the property.
A comparable sale (also known as a "comp") are used to determine the value of a home by comparing it to similar properties sold in the same neighborhood or in an area as close as possible to the house being valued.
Condominium insurance (also known as an HO-6 insurance policy) protects the interior of a condo unit, usually defined as everything within its four walls. Since the common areas outside the condo are collectively owned by the condo association, those are covered under separate policies. Check your condo association bylaws to find more specific information regarding required insurance.
A condo, also known as a condominium, is a housing or residential complex in which there are separate units, with each unit being owned by an individual.
Conforming loans are mortgages that meet Fannie Mae and Freddie Mac guidelines. Conforming lenders underwrite and fund the loans and then sell them to investors like Fannie Mae and Freddie Mac. Once securitized, the loans are sold to investors on the open markets.
A contingency is a condition in a purchase contract that needs to be met by you or the seller before you're obligated to buy the home. Contingencies protect both parties in a real estate transaction and often include clauses that allow you to back out of the sale if you're unable to secure financing or if the home fails to pass inspections.
Often when building or renovating your home, you will run into contractor bids for the project. This is when several contractors present you with quotes in order to win the project for your home construction or renovation project.
A conventional mortgage or conventional loan is any type of home buyer's loan that is not offered or secured by a government entity. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies.
A cooperative (also known as a co-op) is a multi-unit development where owners technically don't "own" their units outright. Instead, owners are allotted shares in a corporation (the building), along with the right to live in one of the units. Shareholders periodically pay fees that cover shared expenses and maintenance. These operations are handled by a governing board that is also in charge of setting all the building rules and requirements for moving in, as well as screening potential residents.
A credit check (also known as a credit inquiry) is when a lender looks into your financial history with credit reporting agencies to determine your creditworthiness. Southway Mortgage uses both "soft" and "hard" credit checks to see if you qualify for a loan. For pre-approval, we issue a soft credit check that does not impact your credit score. Once you actually apply for a mortgage, we issue a hard credit check that can negatively impact your score for a short time.
Your credit score (also known as a FICO score) is a number which reflects your financial stability and trustworthiness. It is calculated by evaluating your financial history and ability to repay debts and other loans ontime. Scores range from 300–850, the higher the credit score the better.
A credit (also known as a lender credit) is money that the lender provides to lower your closing costs in exchange for a higher interest rate.
D
Your debt-to-income ratio (DTI) measures an individual’s monthly debt compared to your monthly income, calculated by your monthly debt divided by your monthly gross (pre-tax) income. DTI is one of the factors used to determine how much you can afford in a monthly mortgage payment.
A default is when a borrower fails to pay their mortgage. At this point, the borrower risks foreclosure, whereby the lender has the option to repossess the home.
Depreciation refers to the loss of value on an asset over time.
A down payment is the amount of cash you pay upfront toward the purchase of a home. It's often expressed as a percentage of the selling price of a home, typically 5–20% depending on the type of loan. The difference between your down payment and the price of the home is what you finance with a mortgage.
E
Earnest money (also known as a good faith deposit) is money that the buyer gives the seller when a sales contract is drawn to show intent to purchase. The money is deposited into a third-party account, known as escrow, and held until closing. Once contracts are signed, the earnest money becomes part of the down payment. If the contract falls through, the earnest money is either forfeited and the seller keeps it or the money has to be returned to the buyer, dependent on the contract.
Equity is the difference between the market value of a home and the amount of debt/mortgage balance left on the home. In other words, your equity is the amount of ownership you have in your property.
Escrow is a third-party account where money between two or more parties is managed. Escrow accounts may be used to hold a buyer's deposits while a real estate transaction is being processed. Escrow accounts are also commonly used to hold property taxes and insurance premiums until the payments to these bills are due.
F
Fannie Mae is a government-sponsored enterprise (GSE) that purchases mortgage loans from smaller banks or credit unions and guarantees, or backs, these loans on the mortgage market for borrowers.
An FHA insured loan is a US Federal Housing Administration mortgage insurance backed mortgage loan that is provided by an FHA-approved lender. FHA mortgage insurance protects lenders against losses.
The Fair Isaac Corporation (FICO) generates credit scores based on information collected by three national credit reporting agencies: Experian, Equifax, and TransUnion. Typical FICO scores are in the 300–850 range. However, FICO has variations of scoring for different types of lenders. Credit scores are designed to give lenders an evaluation of your likelihood to pay your bills on time. A higher credit score indicates a more favorable borrower.
A fixed rate mortgage has payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Flood certification is a document issued to certify whether a property is located in a flood zone based on FEMA (Federal Emergency Management Association) flood maps. A flood certification is required by your lender and determines whether special flood insurance is needed for your home.
Flood insurance is special coverage that covers water damage caused by flooding. If your home is found to be located within a flood zone, your lender will likely require you to have a flood insurance policy. Premiums vary depending on how prone the property is to flooding.
Foreclosure is the process of repossessing a home after the borrower defaults on their mortgage. Homeowner gives up the rights to the home and it is typically sold by the lender in a foreclosure auction.
Freddie Mac is the officially recognized nickname for the Federal Home Loan Mortgage Corp. (FHLMC). Freddie Mac is a stockholder-owned, government-sponsored enterprise (GSE) chartered by Congress in 1970 in support of homeownership for middle-income Americans.
For sale by owner (FSBO) indicates that a property is being offered for sale directly by the owner rather than through the services of a real estate agent or broker. Some sellers choose this option to avoid paying the real estate agent a commission on the sale.
G
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.
H
A home inspection is an examination to evaluate the condition, safety, and soundness of a home. Inspections are typically ordered by the borrower and/or the borrowers lender to ensure the home is fit for purchase.
Homeowners Associations are organizations that make and enforce certain rules for the homes and residents in their neighborhood. Members are required to pay dues which help the neighborhood pay for maintenance.
Homeowners insurance is a form of financial protection against loss or damage to your home in the event of burglary, fire, or natural disaster. It is mandatory to have this insurance in place before closing on your mortgage.
A Homestead Credit is a tax benefit for homeowners with low to moderate income which helps to offset the cost of property taxes.
The US Department of Housing and Development (HUD) is an agency in the federal government which helps to improve the housing market and educate people on homeownership.
I
A home inspection is a thorough examination of the condition of a home, often in connection with the sale of that home. The inspector prepares and delivers to the client a written report of findings. The client then uses the knowledge gained to make informed decisions about their pending real estate purchase. The home inspector describes the condition of the home at the time of inspection but does not guarantee future condition, efficiency, or life expectancy of systems or components.
The interest rate is the cost of borrowing money, expressed as a percentage of the loan. Most consumer mortgages use simple interest which is defined as paying interest only on the principal. Some loans use compound interest which is applied to the principal and also to the accumulated interest of previous periods (this is also known as a negative amortization loan). Borrowers are often quoted interest rates in addition to annual percentage rates (APRs), which are interest rates plus lender fees and charges.
An investment property is real estate purchased to generate income and profits (i.e., earn a return on the investment) through rental income or appreciation. Investment properties tend to have the highest interest rates and down payment requirements of all property types as they are not typically used for personal use and carry a greater risk.
J
A jumbo loan (also known as a non-conforming loan) is a home loan that exceeds the maximum Federal Housing Administration (FHA) limit. Jumbo loans are not guaranteed by Fannie Mae or Freddie Mac, which means that the lender has no protection in the event that the borrower defaults. The maximum limit depends on the location of the home and what the conforming loan limit is for that area. Typically, more expensive areas of the country have higher conforming loan limits.
L
A lien is a legal claim against a piece of property that if financed giving the lender recourse or commonly referred to as a legal interest in the property until owed debts are paid off. Failure to replay your loan gives the lienholder the right to seize your home.
Listing agents (also known as seller's agents) are a licensed real estate agent who represent someone who is selling a property. They are responsible for handling negotiations and meet with potential buyers on behalf of the property owner. They help sellers navigate the sales process at each step.
The loan commitment is a letter from a lender indicating your eligibility for a home loan. It is the lender's promise to fund the loan as stated by the terms in the letter. You receive a loan commitment letter once your application has been reviewed and the underwriting process is complete.
A loan estimate (also known as an LE) is a standardized 3-page form that details the interest rate, term, monthly payment, and closing costs associated with your loan. Lenders are required by law to provide you with a loan estimate within three days of your application.
Interest is the price you pay for borrowing money from your lender for your mortgage loan.
A loan originator (also known as a MLO or Mortgage Loan Originator) is a licensed individual in a specific state authorized to initiate mortgage applications. From making first contact, to getting preapproved, to applying for a loan and on through to closing, the loan originator will help you move through the process as smoothly as possible. Loan originators can also be mortgage brokers who work with several lenders to help you find the right loan.
A loan processor is a financial professional who works in the mortgage industry and is responsible for processing and preparing loan applications for underwriting. They work closely with loan officers and underwriters to ensure that all necessary documents are collected, verified, and organized properly, and that all loan applications are complete and accurate. The loan processor's responsibilities may include gathering and reviewing credit reports, employment and income verification, property appraisals, and other relevant documentation. They may also be responsible for communicating with borrowers to request additional information or clarification on their loan applications. The loan processor plays a critical role in ensuring that mortgage applications are processed efficiently and accurately, and that loans are approved and closed in a timely manner.
The term of a loan refers to the length of time over which the borrower is expected to repay the loan. It is the period of time from the date of loan origination to the date when the loan is fully repaid, including both principal and interest. Loan terms can vary depending on the type of loan, the amount borrowed, and the borrower's creditworthiness. For example, a mortgage loan might have a term of 15, 20, or 30 years, while a personal loan might have a term of 2 to 5 years. The loan term is an important factor in determining the amount of the borrower's monthly payments, as longer loan terms generally result in lower monthly payments but higher total interest paid over the life of the loan.
LTV stands for "loan-to-value" ratio, which is a financial metric used in the mortgage industry to assess the risk of a loan. The LTV ratio is calculated by dividing the amount of the loan by the appraised value of the property being purchased or refinanced. For example, if a borrower is seeking a mortgage loan of $200,000 to purchase a home appraised at $250,000, the LTV ratio would be 80% ($200,000 ÷ $250,000 = 0.8 or 80%).
Lenders use the LTV ratio to evaluate the risk of a loan, as a higher LTV ratio indicates a higher risk of default. A lower LTV ratio, on the other hand, indicates a lower risk, as the borrower has more equity in the property. Lenders may set maximum LTV ratios for certain types of loans or for borrowers with specific credit profiles, and borrowers with higher LTV ratios may be required to pay mortgage insurance to mitigate the lender's risk.
M
Market conditions refer to the state of the overall economy and specific industries or sectors within it, including factors such as supply and demand, interest rates, consumer confidence, employment levels, and other macroeconomic indicators. In the context of the mortgage industry, market conditions can influence the availability and pricing of mortgage loans, as well as the demand for housing and the value of real estate. Understanding market conditions is important for lenders, borrowers, and other stakeholders in the mortgage industry in order to make informed decisions about lending, buying, selling, and investing in real estate.
Market value is the price at which an asset, such as a piece of real estate, would be sold in a transaction between a willing buyer and a willing seller, both of whom are aware of the relevant facts about the property and the market conditions in which it is being sold. Market value is determined by a variety of factors, including the condition and location of the property, comparable sales in the area, and current market trends. In the context of the mortgage industry, market value is important in determining the amount that can be borrowed against a property, as well as the amount that a lender is willing to lend.
MCC stands for Mortgage Credit Certificate, which is a type of tax credit for eligible first-time homebuyers. The MCC program is offered by some state and local governments and allows homebuyers to claim a portion of the interest paid on their mortgage as a tax credit on their federal income tax return. The tax credit amount is calculated as a percentage of the mortgage interest paid, up to a maximum amount determined by the program guidelines. The MCC program is intended to help make homeownership more affordable for first-time buyers by reducing their federal income tax liability. To qualify for the MCC program, homebuyers must meet certain income and purchase price limits and other eligibility criteria set by the program.
Mortgage Insurance Premium (MIP) is an insurance policy that protects the lender against losses in the event that the borrower defaults on the loan. MIP is typically required for FHA (Federal Housing Administration) loans, which are designed to help low-to-moderate income borrowers who may not qualify for conventional mortgages.
MIP is paid by the borrower and can be paid upfront as a lump sum at closing, or it can be included in the monthly mortgage payment. The amount of MIP that must be paid varies depending on the size of the down payment, the loan amount, and the term of the loan. MIP payments typically continue for the life of the loan, or until the loan is refinanced or paid off.
A mortgage note is a legal document that serves as evidence of a borrower's debt to a lender for a mortgage loan. The note outlines the terms of the loan, including the amount borrowed, the interest rate, the repayment period, and any other relevant conditions or provisions.
Mortgage points, also known as discount points or loan origination points, are fees paid by a borrower at the time of closing to reduce the interest rate on their mortgage loan. Each point typically costs 1% of the loan amount and can lower the interest rate by a specified amount, usually 0.25% or 0.125%.
A mortgagee is a lender who provides a mortgage loan to a borrower to finance the purchase or refinance of a property. The mortgagee is the party that holds a security interest in the property, meaning that they have the right to foreclose on the property and sell it to recover their investment if the borrower fails to meet their obligations under the mortgage agreement.
A mortgagor is a borrower who obtains a mortgage loan to finance the purchase or refinance of a property. The mortgagor is the party that grants the mortgage to the lender and is responsible for making payments on the loan according to the agreed-upon terms.
A multiple offer, also known as a bidding war, occurs when two or more buyers submit competing offers on a property that is for sale. This can happen in a seller's market where there are more buyers than available properties, or when a particularly desirable property hits the market.
N
Negative amortization occurs when the borrower's monthly payment on a loan is not sufficient to cover the interest due on the loan. As a result, the unpaid interest is added to the loan balance, causing the total amount owed to increase over time instead of decreasing.
A nonconforming loan, also known as a jumbo loan, is a type of mortgage loan that exceeds the maximum loan amount limits set by government-sponsored enterprises (GSEs) such as Fannie Mae and Freddie Mac.
Fannie Mae and Freddie Mac have loan limits that vary by location and are adjusted annually to reflect changes in home prices. If a loan exceeds these limits, it is considered a nonconforming loan.
A notice of default is a formal legal document that is sent by a lender to a borrower who has fallen behind on their mortgage payments. The notice of default informs the borrower that they are in default of their loan agreement and that the lender intends to begin foreclosure proceedings unless the borrower brings their payments up to date.
O
In the context of a real estate transaction, the occupancy date is usually specified in the purchase agreement or lease agreement. For a home purchase, the occupancy date may be the same as the closing date, or it may be negotiated separately between the buyer and seller.
Origination refers to the process of creating a new loan or mortgage. It involves the application, underwriting, and approval of the loan, as well as the disbursement of funds to the borrower.
An origination fee is a fee charged by a lender for processing and originating a loan. This fee is typically expressed as a percentage of the loan amount and is intended to cover the cost of underwriting, processing, and funding the loan.
Owner occupancy refers to the use of a property by the owner as their primary residence. In the context of a mortgage, owner occupancy usually refers to the requirement that the borrower will occupy the property as their primary residence, rather than using it as a second home or investment property.
P
PITI stands for Principal, Interest, Taxes, and Insurance. It is a term commonly used when referring to the components of a mortgage payment.
A Planned Unit Development (PUD) is a type of residential development that typically combines different types of housing, such as single-family homes, townhouses, and condominiums, with common areas and shared amenities.
A preapproval letter is a document issued by a lender that confirms a borrower's eligibility for a mortgage loan, subject to certain conditions. It is important to remember that a preapproval letter is not a guarantee of funding. The lender will still need to verify the borrower's information and complete the underwriting process before finalizing the loan. Additionally, borrowers should be aware that preapproval letters typically have an expiration date and may be subject to certain conditions, such as a satisfactory appraisal of the property being purchased.
Prepaid costs are expenses associated with closing a mortgage loan that are paid in advance by the borrower. These costs are typically required by the lender and may include items such as property taxes, homeowners insurance, and mortgage interest.
Pre-qualification is a preliminary assessment of a borrower's creditworthiness and ability to qualify for a mortgage loan.
During pre-qualification, a borrower typically provides basic information about their income, assets, and debts to Farmview Mortgage. Based on this information, we can provide an estimate of the amount the borrower may be eligible to borrow and the potential interest rate for the loan.
A prepayment penalty is a fee that may be charged by a lender if a borrower pays off a mortgage loan before the end of the loan term. This is becoming less common today however it is important for borrowers to carefully review the terms and conditions of any mortgage contract before signing it.
A primary residence is the primary home where a person lives and spends most of their time. It is the place where a person's family resides.
To qualify as a primary residence for mortgage purposes, the borrower must generally occupy the property for a certain period of time each year, typically at least six months. The borrower must also be able to provide proof of their primary residency status, such as a driver's license or utility bills.
Principal has several meanings:
- The principal is the amount of money borrowed from a lender to purchase a property. It is the original loan amount that the borrower must repay, along with interest.
- In a mortgage payment, the principal is the portion of the payment that goes towards reducing the outstanding loan balance. Each mortgage payment typically includes both principal and interest, with the proportion of each varying over the life of the loan.
- In a mortgage loan agreement, the term "principal" can refer to the borrower, who is also known as the mortgagor. The borrower is the party who is responsible for repaying the loan.
The principal is a key component of a mortgage, as it determines the size of the loan and the amount of the borrower's monthly payments. The larger the principal, the higher the monthly payments and the total amount of interest that the borrower will pay over the life of the loan.
PMI stands for Private Mortgage Insurance, which is a type of insurance that a borrower may be required to pay if they have a conventional mortgage with a down payment of less than 20% of the purchase price of the property.
PMI protects the lender in the event that the borrower defaults on the loan. If the borrower defaults and the property is foreclosed upon, the PMI policy can help cover the lender's losses.
Property taxes are taxes imposed on real estate by local governments, including cities, counties, and school districts. These taxes are typically based on the assessed value of the property, which is determined by the local government.
A purchase contract, also known as a purchase agreement or sales contract, is a legal document that outlines the terms and conditions of a real estate transaction between a buyer and a seller. The purchase contract is typically prepared by the buyer's real estate agent, attorney, or title company and is signed by both the buyer and the seller.
R
Rate lock, also known as a rate commitment or a lock-in, is a guarantee from a lender to a borrower that a specific interest rate will be available for a specified period of time, typically between 30 and 60 days. The borrower typically pays a fee to the lender for the rate lock, which can vary depending on the lender and the length of the lock.
A real estate agent is a licensed professional who helps people buy, sell, or rent real estate properties. They are typically employed by a real estate brokerage or agency and work on behalf of their clients to navigate the complex process of buying or selling a property.
S
SAH Grants stands for Specially Adapted Housing Grants. These are grants provided by the Department of Veterans Affairs (VA) to eligible disabled veterans to help them purchase or modify a home to accommodate their disabilities. The goal of the SAH Grants program is to provide financial assistance to disabled veterans who require a specially adapted home that is designed to meet their specific needs.
A secondary home, also known as a second home, is a property that is not a person's primary residence but is used for personal use or vacation purposes. A secondary home is typically a vacation home, a place to escape from the stresses of everyday life, or a property that serves as a getaway from the primary residence.
A seller's market is a term used to describe a situation in the real estate market where there are more buyers than there are properties for sale. In a seller's market, properties tend to sell quickly, often above their asking price, as buyers compete for limited inventory.
Settlement costs, also known as closing costs, are the fees and expenses associated with finalizing a real estate transaction, typically when a property is sold or a mortgage is obtained. These costs can include a variety of expenses and fees, all of which will be outlined in your loan estimate.
A short sale is a real estate transaction in which the proceeds from the sale of a property fall short of the outstanding mortgage debt on the property. In a short sale, the lender agrees to accept less than what is owed on the mortgage in order to avoid the lengthy and expensive foreclosure process. The property is typically sold to a third party, who pays the lender the agreed-upon sale price, and the remaining debt is forgiven or settled by the lender. Short sales can be a complex and time-consuming process, and typically require the involvement of the homeowner, the lender, and a real estate agent or attorney.
A mortgage survey is a type of survey conducted on a property that is being financed through a mortgage loan. The survey is typically ordered by the mortgage lender or title company to confirm the boundaries of the property, identify any encroachments or easements, and check for any other issues that could affect the value or marketability of the property. A mortgage survey typically includes a detailed drawing or map of the property, along with a written description of any boundary lines, encroachments, or other relevant features. The survey is intended to provide the lender with a clear understanding of the property and help identify any potential issues or concerns that may need to be addressed before the mortgage is approved and the property is transferred to the new owner.
T
A termite letter, also known as a termite inspection report or wood-destroying insect report, is a document that outlines the results of a termite inspection conducted on a property.
Third-party fees are charges associated with a real estate transaction that are not paid directly to the mortgage lender or title company, but rather to outside parties that provide various services related to the sale or purchase of a property. These fees are typically itemized on the closing disclosure statement.
Title refers to legal ownership of a property or real estate. It is the right to use and occupy the property, as well as to sell or transfer it.
A title company is a business that specializes in researching and verifying the legal ownership of real estate properties.
Title insurance is a type of insurance that protects a property owner and their lender against any losses that may result from disputes over the ownership of the property. A buyer will typically purchase title insurance at the time the property is purchased and is valid as long as the owner or their heirs maintain an interest in the property.
Title vesting is the way in which a property's title is held or owned. It specifies who has legal ownership of the property and how the property can be conveyed or transferred. There are several types of title vesting.
Transfer tax is a tax imposed by state and/or local governments on the transfer of real estate property from one person or entity to another. The tax is typically based on a percentage of the property's value.
U
An underwriter is an individual or company that assesses and evaluates the financial risk of a loan or investment. In the context of mortgage lending, an underwriter is responsible for reviewing a borrower's financial information, such as their credit history, income, and assets, to determine their creditworthiness and ability to repay the loan.
The underwriter also reviews the property being financed to ensure that it meets the lender's requirements and standards. They may request additional documentation or information from the borrower to complete their assessment.
Underwriting is the process of evaluating and assessing the creditworthiness and risk associated with a loan or investment. In the context of mortgage lending, underwriting is the process by which a lender determines whether to approve a borrower's loan application.
V
A VA loan is a type of mortgage loan that is backed by the U.S. Department of Veterans Affairs (VA) and is designed to help military service members, veterans, and eligible surviving spouses become homeowners.
Verification of employment (VOE) is a process in which a lender or other authorized third party verifies a borrower's employment status and income in order to determine their ability to repay a loan. The VOE process typically involves contacting the borrower's employer directly to confirm details such as job title, length of employment, and current salary or hourly wage.
W
A walk-through, also known as a final walk-through or a buyer's walk-through, is a visual inspection of a property that takes place shortly before closing on a real estate transaction. The purpose of a walk-through is to ensure that the property is in the same condition as it was when the buyer and seller agreed on the terms of the sale, and to identify any issues that may have arisen since the initial inspection.
A wire transfer is a method of electronic funds transfer in which funds are transferred from one bank account to another bank account, usually across different financial institutions. Wire transfers are initiated by the sender through their bank or a third-party wire transfer service provider, who transmits the funds to the recipient's bank account. Wire transfers are often used for large and time-sensitive transactions, as they can be processed and settled quickly, usually within the same business day.
Y
A year-end statement is a document prepared by financial institutions, such as banks or investment firms, at the end of a calendar year. The statement summarizes the account holder's financial transactions over the year, including deposits, withdrawals, interest earned, and fees charged. The year-end statement is an important record-keeping tool for the account holder, who may use it for tax purposes or to reconcile their account balance.
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