Debt-to-Income Ratio (DTI): This ratio compares how much monthly debt payment you make to your gross monthly income.
Pre-qualiﬁcation: A Pre-qualiﬁcation is when a lender looks at your creditworthiness to evaluate how much house you can aﬀord. To get pre-qualiﬁed, all you need to do is let your lender know your income, assets and how much debt you have. Using that information, your lender will determine how much you will likely be approved for. Without actually verifying the information, there is no guarantee you will actually be approved for that amount.
Pre-Approval: A Pre-approval is when a lender veriﬁ es your income, assets and how much debt you have and determine how much you can borrow, how much you could pay each month and your interest rate. Being pre-approved does not guarantee you the loan. You will still need to go through the underwriting process and wait for the ﬁnal approval. Being pre-approved shows your intent to purchase and your realtor can begin showing you houses within your pre-approved loan amount.
Common Application Process Terms
Addendum: An additional document that is used to modify an original contract/purchase agreement.
Contract/Real Estate Purchase Agreement: A purchase agreement is a binding contract between the seller and a buyer, used to outline the terms and details of the sale of a home.
Closing Disclosure (CD): A form that provides the details about the mortgage loan including loan terms, projected monthly payments, and how much will be paid in fees and other cost to obtain the loan.
Funds to Close: Funds to close is a term referred to the amount of money required in order to close on your loan.
Earnest Money: A deposit made by a potential home buyer to show that they are serious about purchasing a property.
Escrow: Fees are paid to an Escrow company for being a neutral third party to handle the property transaction, exchange of money and other important documents.
Home Inspection: A thorough assessment by a professional inspector of the structural and mechanical condition of a property.
Home Ownership Education Course: An interactive online course to help homebuyers receive valuable tools that will help them successfully navigate through the home buying process. It includes ﬁnancial and credit management, shopping for a home, purchase procedures and maintaining the home.
Loan Estimate: A loan estimate provides a summary of the costs and terms associated with closing on a mortgage. It oﬀers data that helps compare loan oﬀers from multiple lenders including total costs of third-party services, annual percentage rate (interest rate including fees and the amount of interest that will be paid over the loan term, expressed as a percentage of your total loan amount)
Manufactured Housing: A dwelling that has been constructed oﬀ site, with a permanent chassis, to assure the initial and continued transportability of the home.
Mortgage: A mortgage is a type of loan that you utilize when you want to purchase or reﬁnance a home.
Rate Lock: Once a rate is locked, it means the interest rate won’t change between the oﬀer and the closing, as long as you close in the speciﬁed time frame and there are no changes to the application.
Real Property: All property of a ﬁxed, permanent, or immovable nature such as land and buildings.
Reconveyance: A Reconveyance is the transfer of a title to the borrower after the mortgage has been fully paid. The Reconveyance request, original deed of trust and original note are all sent to the title company to process the lien release with the county.
Reﬁnance: Reﬁnancing your home means that you are getting a new mortgage to replace the original one. Homeowners reﬁnance for multitude reasons including to get a lower interest rate, cash out their equity and more.
Programs We Oﬀer
Cash-Out Reﬁnance: cash-out reﬁnance is when you take out a new home loan for more than what you owe on your house. These funds can be used for debt consolidation, home improvements or other needs.
Conventional Loan: Conventional loan is a mortgage not backed by a government agency, but by a private lender.
FHA Loan: An FHA loan is a mortgage insured by the Federal Housing Administration that allows you to purchase a home with a down payment as low as 3.5%. FHA loans are helpful for buyers with limited funds or lower credit scores.
HELOC: A HELOC or Home Equity Line of Credit is a line of credit secured by your home and gives you access to cash during a draw period. Once your draw period ends, you must repay back what you borrowed based on the terms of your original agreement.
Home Equity Loan: A home equity loan is secured by the equity in your home and allows you to cash out a ﬁxed amount of money in one lump sum. The amount you can take out depends on the market value of your home, your income and creditworthiness. Home Ready Program: This program was designed for creditworthy, low-to-moderate income borrowers, with expanded eligibility guidelines.
USDA Loan: A government insured home loan that allows you to purchase a home with no money down (100% ﬁnancing of the purchase price). The home must be located in a designated USDA Rural area and there are income limitations for each county.
VA Loan: A Veterans Aﬀairs or VA loan is a mortgage backed by the U.S. Department of Veterans Aﬀairs and issued by private lenders. U.S. veterans, active duty service members and widowed military spouses are eligible to apply for this loan. Beneﬁts include 0% down payment option and no Private Mortgage Insurance.
Common Loan Terms
Amortization: Paying oﬀ a debt over time in equal installments. Part of the payment goes towards principal and part goes towards interest.
Combined Loan to Value (CLTV): The comparison of the amount owed on a mortgage, and any other loans secured by the collateral, to the market value of the asset.
Draw Period: A draw period refers to the amount of time you can withdraw funds from your home equity line of credit or HELOC, up to the maximum approved limit. Equity: Equity is the diﬀerence between your home’s current fair market value and how much you owe on the loan.
Loan To Value (LTV): The comparison of the amount owed on a mortgage to the market value of the asset.
Repayment Period: After your draw period ends, your HELOC transitions into the repayment period. You will no longer have access to funds and repayment of the loan starts depending on the terms and conditions of your HELOC.
Closing Costs Terms
Appraisal: An appraisal is typically required to conﬁrm the fair market value of your home.
Closing Cost: Closing costs are fees for the services and expenses required for you to ﬁnalize your mortgage/ close on your house.
Homeowners Insurance: Lenders require a homeowner policy to protect your home against damage and potential catastrophic losses.
Mortgage/Discount Points (buy down rate): Fees paid to the lender at closing to reduce the interest rate on your mortgage. Buying down your interest rate can be beneﬁcial if you want to lower your monthly mortgage payments.
Origination Fees: These are fees for processing and underwriting your loan.
Prepaids: Expenses or items that the buyer pays at closing before they are technically due. This is a way to “pre-fund” an escrow account to make sure the funds are available when the bill comes due (i.e., Property Taxes, Homeowners Insurance and Mortgage Interest).
Private Mortgage Insurance: PMI is a type of insurance required by mortgage lenders, if your down payment is less than 20% of your home’s purchase price. PMI protects the lender against potential losses if you are unable to repay your loan.
Property tax: A tax that is paid on property owned by an individual or legal entity.
Reserves: Savings/Asset balances that are available after the mortgage loan has closed. These are regarded as emergency funds in the event of income loss or unemployment that assures the lender you will be able to continue making the mortgage payment.
Title Insurance: Title Insurance helps protect you and your lender from ﬁ nancial loss if there is a problem or defect with the title.