1 Compliments of Natalie and Randall Filbert Real Estate Pros at Mountain Realty Mortgage 101 For New Home Buyers Our Commitment Buying a home is probably the biggest purchase of a lifetime. It s a big deal to you and it s a big deal to us! That s why we are committed to making the process as enjoyable as possible. Natalie and Randall Filbert Mountain Realty ph: Equal Housing Opportunity.
2 Compliments of Natalie and Randall Filbert Real Estate Pros at Mountain Realty What to Look For In a Lender.. 3 Mortgage Defined Common Loan Options.. 5 Purchase and Sale Agreement... 7 Pre-Qual and Pre-Approval.. 8 Key Factors for Loan Approval.. 9 Credit Scores Overview of Loan Process.. 11 Closing Costs Explained Other Terms and Concepts Resources 15 Glossary Notes
3 Compliments of Natalie and Randall Filbert Real Estate Pros at Mountain Realty Because most buyers require a mortgage to purchase a property, their lender plays a vital role in the success of the property purchase transaction. No matter how good a real estate agent is, a bad lender can easily ruin a deal. No real estate agent wants that to happen. Therefore, it is extremely important for a real estate agent to work with a lender that they can trust to successfully close real estate transactions. There are many traits that make up a good lender. The following are some of the most important. Communicative: A good lender keeps in continual contact with everyone involved in the purchase process, including both real estate agents, the title/escrow officer and the borrower. They continually update the appropriate people about the status of the loan. Available: A good lender is responsive to the needs of real estate agents and borrowers. While a lender can t be available 24/7, they should be available outside of the standard 9-5 work week. Real estate agents do a large amount of their business on weekends, and therefore lenders should be available when they need them most. And they should promptly return their phone messages and s. Organized: A good lender is organized and does not miss important steps in the loan process. An unorganized lender can cause a deal to fall through by no fault of the real estate agent s or the borrower. Proactive: A good lender anticipates problems and avoids them, rather than just reacting to issues once they arise. And if a problem does occur, they are quick to solve it. Honest: A good lender is honest with their clients and real estate agents. They should provide the borrower a competitive rate and should not charge any unnecessary fees. A positive reflection of the real estate agent: Perhaps most importantly, a good lender understands that when a real estate agent refers a client to a lender, the lender s actions are a reflection of the real estate agent. If the client has a negative experience with a lender, they probably will not use the real estate agent again or refer them to other potential clients.
4 A mortgage is a loan that uses real estate as security/collateral to guarantee repayment if the borrower defaults on the terms of the loan. A mortgage loan has two key components: Promissory Note: The written evidence of the debt (i.e. an IOU ). It specifies exactly how much money was borrowed as well as the terms and conditions under which the borrower promises to repay the loan. Deed of Trust: The written agreement pledging the property as security for the debt. If the borrower doesn t pay the promissory note, the lender has the right to take the necessary steps to have the property sold in order to satisfy the debt (foreclosure). The key terms of a mortgage include: Loan Amount: The dollar amount of the loan (versus the purchase price). Rates: o Interest Rate: The percentage of an amount of money that is paid for the use of that money over a period of time. o Annual Percentage Rate (APR): The cost of credit expressed as a yearly percentage. It includes up-front costs (pre-paids) and finance charges associated with obtaining the loan. Therefore, it is usually a higher rate than the interest rate on the note. Term: The amount of time (typically 15 or 30 years) a lender gives a borrower to repay the loan. PITI: The acronym for Principal, Interest, Taxes and Insurance, usually the four parts of a monthly mortgage payment.
5 Many different loan programs exist, but most of them fall into the following categories: Government or Conventional: Government Insured: Loans such as FHA and VA are backed by the U.S. government. Also included in this are Bond Loans issued by the state (IHA). If the borrower does not repay the debt, the government will. These loans are typically designed for first-time homebuyers and buyers qualified for special financing assistance. Conventional: A mortgage loan that is NOT insured or guaranteed by the government. Portfolio Loans: Banks loan depositor s money to borrowers and service in-house. Private Investors (Sub-Prime/Non-Conforming): Large pension funds, insurance companies, and niche banks. These loans bridge gap left by conforming and government loans. Conforming or Jumbo: Conforming: Mortgages that fall within Fannie Mae and Freddie Mac s loan limits. The loan limits for 2008 are: o 1 Unit - $ 417,000 o 2 Units - $ 533,850 o 3 Units - $ 645,300 o 4 Units - $ 801,950 Jumbo (or nonconforming): Mortgages that exceed the above limits. Borrowers typically pay a higher interest rate for nonconformity. Interest Only or Principal and Interest: Interest Only: A loan that requires payment on the interest of the debt only, rather than requiring additional payments to lower the principal of the loan. A five or ten year interest-only period is typical. After this time, the principal balance is amortized for the remaining term. For example, if a borrower had a 30-year mortgage and the first 10 years were interest only, then the payments for the first 10 years would just be for interest, and the principal balance would be amortized over the remaining twenty years. Principal and Interest: The method of repayment whereby the amount borrowed is repaid gradually through regular blended monthly payments of principal and interest. The first few years of payments is mostly applied toward the interest owed. In the final years of the loan, payment amounts are applied mostly to the remaining principal. Fixed or Adjustable Rate:
6 Fixed Rate: The interest rate is fixed for the full term of the loan. It will not change. Adjustable Rate Mortgage (ARM): Loans that start with a fixed interest rate for a set number of years, and then the interest rate adjusts periodically based upon changes to a financial index plus a margin or yield. Payments will increase or decrease accordingly. Documentation Types Doc Type Full Doc Alt Doc Reduced Doc Other Common Loan Types: Definition The borrower s income and assets are documented via a Verification of Employment (VOE) form that is received directly from the employer and a Verification of Deposit (VOD) that is received directly from the depository. The borrower s income and assets are a verified by documents obtained directly from the borrower, such as bank statements, paystubs and canceled checks. The borrower s employment is verified, but the income amount is not verified. Assets are disclosed and verified. One Time Close: Construction and permanent financing in one loan. One application, one qualification process, one closing, and one set of closing costs Reverse: A loan that enables elderly (62 yrs or older) homeowners to tap into their home s equity without selling their home or moving from it. (see for more details) Refinance: A loan to the current owner of a home to replace an existing loan. The loan itself is just like a purchase loan and is secured by the property. Refinances are used to either provide cash ( cash-out ) or to improve the rate and/or term of the loan. They can also be used to remove someone from the previous mortgage note. Home Equity Line of Credit (HELOC) or Loan: A line of credit that gives the borrower the ability to borrow funds at any time, and in the amount they choose, up to their maximum credit limit. A loan provides a lump sum cash payment to the borrower up front, versus a line of credit allows them to withdraw funds as needed.
7 While all parts of a purchase and sale agreement are important, the accuracy of the following sections will make the loan process much smoother. Listing/Selling Agency: Please fill in all contact information. Knowing how to contact either agent can save a significant amount of time if a problem arises. It also helps the lender know how to keep both agents informed of the loan progress. Finance Terms: Make sure to check the appropriate loan type. This is particularly important for a VA or FHA loan because they have additional requirements on a seller and the deal could be broken if the borrower secures a VA or FHA loan and the seller wasn t aware. Other Terms: Check with your client s lender before putting allowances, such as a carpet or roof allowance, in the contract. Most lenders will prefer that you either change the sales price or the buyer can be compensated by stating something similar to the seller will pay $XXX of buyer s pre-paid and closing costs. Lead Paint Disclosure: If the property is a targeted property, and the buyer is using a government loan (FHA, IHFA, VA, etc.), an inspection will be required unless the buyer waives their right to an inspection. Note: Most targeted homes will fail inspection, and therefore if they don t waive their rights then the deal will probably fail. Subdivision Homeowner s Association: As a monthly housing expense, HOA dues are a factor in a borrower s loan approval. It is very possible that a borrower may be approved to purchase a property when HOA dues are not included, but then not be approved once they are included. Not including this information in the beginning could result in a deal being broken much later in the process than necessary. Occupancy: Be sure to ask your client what their intent is and check the correct option. If the contract does not match the loan, the deal could fall through very late in the process. Closing: Listing the name of the escrow company and the escrow officer ensures the lender knows who to contact to coordinate the closing. Signatures: A contract signed by all parties is necessary before the lender can draw the funding documents, and therefore the lender needs a copy in advance of the closing.
8 The terms pre-qualification and pre-approval are often mixed up and can lead to a borrower believing they are able to purchase a property that they cannot actually purchase. To save yourself and your clients from wasting time and energy, it is very important to have a pre-approval letter from a lender before making any offers.. An offer with a preapproval is much stronger than one without. Also, by having your clients meet with a lender first you can be sure of what price range they can afford, and if they can even qualify for a loan. Pre-qualification: Pre-qualification is an informal way to determine how much money a client may be able to borrow. A person can be pre-qualified over the phone by telling a lender their income, their debts, and how large a down payment they can afford. This helps the client arrive at a ballpark figure of the amount they may have available to spend on a house. CAUTION: The lender is not obligated to provide the client a loan. Because prequalification is based on a small portion of the total information needed to actually approve a loan, often times a person who pre-qualifies will not be approved for a loan. For example, a client claims that they make $3,000 a month in salary and they believe they ve provided an accurate answer. But after reviewing their W-2 the lender realizes they only make that high of a salary during the summer months and therefore their average monthly salary (based on their yearly income) is only $2,000. Pre-Approval: Pre-approval is a lender s conditional commitment to lend to a borrower. It involves gathering their credit scores and reviewing their financial records. Pre-approval gives a more definite idea of how much a client can borrow from the lender. CAUTION: While pre-approval is a much better sign of a client s ability to borrow funds, and the best you can usually expect to receive prior to the close, it is a conditional offer and therefore not a guarantee. For example, a client with a 680 credit score may be preapproved in March but then be unable to get approved for a loan in July because their credit score dropped to 580 in May. While there are many factors that lenders consider when approving a loan and determining the loan s interest rate, the two most important components are: 1. Borrower s Ability To Repay The Mortgage Credit Score: Lenders use the mid-score of the 3 credit repositories. The following is a generalization of credit scores: Great = 720+ Good = Average = Sub-prime = < 580 Credit/Payment History: Lenders also look at credit history, such as on-time rent/mortgage payments for the last year, bankruptcies discharged with that past four years (two for government), or outstanding judgments, tax liens or collections. Sub-prime loans are often the only option when any of these factors exist.
9 Income and Job Security: Lenders typically look for 2+ consecutive years in the same field. This is especially important for borrowers that are self-employed or paid on a commission/ bonus basis. If a borrower has less than 2 consecutive years in the same industry, they may pay a higher interest rate to offset the additional risk to the lender. Reserves Lenders typically want a borrower to have liquid reserves to cover the total monthly payment for 2-6 months. The number depends on several factors, including the loan program, the intended use of the property and the other factors listed here. Debt Ratios: Below are the two most important ratios. The acceptable percentage differs by each loan program and borrower. The percentages listed below are an approximate limit (over that percentage the likelihood of approval decreases). Housing Expense-to-Income: (House Payment) / (Monthly Income) = 28% Total Debt-to-Income: (House Payment + Other Debts) / (Month Income) = 36% 2. Lender s Ability to Recover the Value of the Loan in the Case of a Default Property Appraisal: Provides an unbiased opinion of the market value and condition of the property. Lenders require this to ensure a borrower is not asking for more money than the home is worth, and to determine what the house would be worth in case of default. Loan-to-Value (LTV): The ratio of the loan amount / appraised value of the home determines how much equity the borrower has in the property. Lenders prefer an LTV of 80% or less (i.e. the loan equals 80% or less of the value of the home). At that rate the lender can usually foreclose on the house and still recover the loan amount after paying all the costs associated with foreclosure. Loans with an LTV over 80% usually require mortgage insurance or a 2 nd mortgage. Good credit scores are essential to qualifying for mortgage loans and obtaining favorable interest rates. The following is an overview of the major factors considered in Fair Isaac s FICO score, the method most lenders rely on to determine your credit risk, as well as some useful credit tips. Credit Score Composition Payment History (35%) Late payments, public records, collections, account types Amounts Owed (30%) Total owed, credit utilization ratio, number of accounts with balances, installment loan pay downs Length of Credit History (15%) Age of accounts, last use Types of Credit in Use (10%) Credit mix, total number of accounts
10 New Credit (10%) New accounts, recent inquiries, recovery from past problems. Credit Tips Always pay bills on time, especially rent or mortgage payments Don t exceed 50% of the line of credit (revolving credit lines) Keep revolving accounts open don t open and close rapidly Avoid finance company credit (such as furniture stores) Don t apply for credit unless it s needed Don t close unused credit cards to raise credit score Make sure all paid collections or closed judgments are accurately reflected in credit report Stop pre-approved credit cards ( Review free credit report (
11 The following is high level overview of the loan process. Prospective Buyer or Borrower Loan Officer Realtor Pre- Approval Accepted Purchase Agreement Looks for a New Home Lender Requests Additional Info and Documents Complete Application, Lock or Float Rate, Select Loan Program Lender Orders Title And Appraisal Documents Returned From Buyer File Goes Through Final Underwriting Yes Appraisal/Title Acceptable? Paperwork Processed, Verifications Received, File Sent to Underwriting Docs Sent to Escrow Company No Resolve Issues Closing Table
12 Closing on a real estate transaction requires many prior transactions and involves many parties. As a result there are many fees charged to a buyer. Below is a brief summary of the most frequent fees associated with a loan. CAUTION: Some lenders will provide a low-ball interest rate quote but then make up the difference (or more) by charging unnecessary fees. Loan Origination Fee: A fee charged by a lender to cover the cost of the process of making a mortgage loan. It is usually a percentage of the loan amount (1% = 1 point). Loan Discount Points: A one-time charge that changes the interest rate on the loan. The more points the borrower pays, the lower their rate. Conversely, negative points raise the interest rate but provide funds that can be used to offset closing costs. This is how a loan can seem to have zero closings costs. There are closing costs, but it is zero out of pocket costs. Appraisal Fee: Covers the cost of evaluating the fair market value of the home. Appraisals typically run from $300 - $600, depending on the complexity of the appraisal. For example, multi-family properties require more time and effort to appraise, and therefore cost more. Credit Report Fee: Covers the cost of obtaining a credit report. The fee typically ranges from $20-$40. Processing Fee: Also known as Document Preparation or Underwriting Fee. This fee covers the administrative costs of the loan process, including processing, underwriting and closing the loan. These fees are reasonable and justifiable, to a degree. Typical charges range from $300 - $500. This is where many lenders will pad unnecessary and unfair charges. Tax Service Fee: A fee paid to set up a service which identifies the payment due date of local taxes for the servicer of the loan. This should cost less than $100. Flood Certification Fee: Covers the cost of obtaining a report from FEMA that indicates whether or not the property is in a flood zone. If the home is located in a flood zone, the borrower will need to get flood insurance (in addition to homeowners insurance). This only covers the report and not the insurance if needed. Should cost less than $30.
13 In addition to fees associated with processing and closing the loan, money is collected at closing to cover future expenses. Below is a summary of the most common pre-paid items. Interest: Lenders require borrowers to pre-pay the interest due on their mortgage from the close date to the first day of the following month. For example, if they close on the 11th of March, they will pay 21 days interest (3/11-3/31), assuming their first payment is May 1st. Mortgage interest is always collected in arrears. Therefore, using this example, they will pay the April interest in the May payment. Mortgage Insurance: Insurance purchased by borrowers to insure the lender or the government against loss if the borrower defaults. Lenders may require that a borrower pays their first year s mortgage insurance premium or a lump sum premium that covers the life of the loan. Hazard Insurance: Hazard insurance protects the borrower and the lender against loss due to fire and other natural hazards (not floods). Since the property is collateral for the loan, lenders require hazard insurance. Typically, the lender will require the borrower to pay three months of premiums at closing, and then the remaining payments are included in their monthly payments. Lenders also require the borrower to pay the first year s premium at closing or prove that the first year s premium has been paid. Note: If the property is a condominium then the association probably covers the unit and hazard insurance will not be necessary. Property Tax: Lenders usually require that two to three months of estimated property taxes are pre-paid. Since any tax liens take precedence over a mortgage lien, lenders want to ensure that property taxes are always paid. Note: The following expenses CANNOT be paid by the buyer for VA and FHA loans: Item VA FHA Closing Escrow Fee NO Lender Documentation Preparation Fee NO Tax Service Fee NO NO Lender Required Inspections NO Inspections NO Flood Certification NO
14 The following are other important terms and concepts: Lock: The commitment obtained from a lender guaranteeing a particular interest rate and/ or feature for a definite time period. Provides protection against rising interest rates between the time of loan application, loan approval and the closing of the loan. Mortgage Banker vs. Mortgage Broker o Banker: Originates (initiates) mortgage loans, lends their funds and closes the loan in the name of the business. o Broker: Like mortgage bankers, mortgage brokers initiate and process the loan application. However, they don t fund the loan with their own money, and usually work as an agent on behalf of other mortgage investors. Down-payment vs. Closing Costs o Down-payment: The difference between the purchase price and the part of the purchase price being financed. Most lenders require the down payment to be paid from the buyer s own funds. Gifts from related parties are sometimes acceptable, but must be disclosed to the lender. o Closing Costs: Fees the borrower or seller pays at the closing of the mortgage loan. These include but are not limited to the origination fee, discount points, attorney or escrow fees, title insurance, survey, recording fee, plus other items which must be prepaid, such as taxes and hazard insurance escrow amounts. First Mortgage vs. Second Mortgage o First Mortgage: The mortgage that is the first lien on the title, taking priority over all other junior liens (which are financial encumbrances). o Second Mortgage: A mortgage that ranks after a first mortgage in priority of recording. In the event of a foreclosure, the proceeds from the sale of the home are used to pay off the loans in the order they were recorded. ARM Terms o Interest Caps Annual limit that an ARM can adjust in any single year. o Lifetime Caps Limit that an ARM can adjust over the life of the loan o Index and Margin ARM interest rates are based on a financial index, such as LIBOR or Treasury, plus a margin (such as 2% above the index)
15 Title Insurance and Escrow o Title: Written evidence that proves the right of ownership of a specific piece of property. o Title Insurance: Protection for lenders or homeowners against financial loss resulting from legal defects on the title. o Escrow: The holding of important documents and money related to the purchase/sale of real estate by a neutral third party prior to the close of the transaction. Also a period when contingencies have to be met or waived exist. During this period, the escrow service holds the down payment and other buyer and seller documents related to the sale. Closing escrow means that the deal is completed. Amortization and Negative Amortization o Amortization: The method of repayment whereby the amount borrowed is repaid gradually through regular blended monthly payments of principal and interest. The first few years of payments is mostly applied toward the interest owed. In the final years of the loan, payment amounts are applied mostly to the remaining principal. o Negative Amortization: Amortization whereby the payment is insufficient to fund complete repayment of the loan at the end of its term. Often occurs when an increase in the monthly payment is limited by a ceiling or cap. The part of the payment which should be paid is added to the remaining balance. As a result, the balance owed may increase, rather than decrease, over the life of the loan. Randall is always available and willing to answer questions. The following resources also provide more details. TV: Fox News Bloomberg Business Report Nightly News CNBC Internet: Bloomberg.com Yahoo Finance
16 Fannie Mae/Freddie Mac.com CNBC.com Magazines: Fortune Money Wall Street Journal Barron s Mortgage Originator Books: Mortgages for Dummies Handbook of Mortgage Lending (by the Mortgage Bankers Association) Real Estate Finance in a Nutshell (by Jon W. Bruce) Websites: - Mortgage Bankers Association - Idaho Association of Mortgage Brokers - Department of Housing and Urban Development
17 Glossary of Terms ABSTRACT OF TITLE - A written history of the property title from its origin to the present. ACCRUED INTEREST - The amount of interest due since the last payment. ADJUSTABLE RATE MORTGAGE LOAN (ARM) - A mortgage in which the interest rate changes periodically according to a predetermined index. AGREEMENT OF SALE (PURCHASE CONTRACT, PURCHASE AGREEMENT, SALES AGREEMENT) - A written document by which a Buyer agrees to buy and a Seller agrees to sell a property. AMORTIZATION - The payment of a debt in equal installments that results in the retirement of the debt. AMORTIZATION SCHEDULE - A list of each payment due on a mortgage loan, which shows the amount applied to the principal, the amount applied to interest, and the remaining principal balance. ANNUAL PERCENTAGE RATE (APR) - A percentage of the amount of the home loan that represents the total annual cost of the loan, including finance charges. APPLICATION - The forms used and the process of asking for a home loan. APPRAISAL - The report made by a qualified person, in which he gives his opinion as to the value of a property. APPRECIATION - An increase in the value of real estate (property). BALLOON MORTGAGE - A mortgage with monthly payments that are made for a certain period of time, at the end of which, the remaining balance is due. CAP - A limit on the maximum that interest rates can rise on a variable-rate mortgage (ARM) during a specified period and over the life of the loan. CLOSING/SETTLEMENT - The conclusion of the transfer of ownership on a property. CLOSING COSTS - Costs associated with the transfer of ownership of a property. CONFORMING - Mortgages that fall within Fannie Mae and Freddie Mac s loan limits CONVENTIONAL - A mortgage loan that is NOT insured or guaranteed by the government. CREDIT REPORT - A report carried out by a credit reporting agency and used by the lender to determine whether an applicant qualifies for credit. At Countrywide, we want you to feel secure throughout each step of the homebuying process. Below you will find a list of the terms and definitions that will make it easier for you to understand the homebuying process. DEED OF TRUST - The written agreement pledging the property as security for the debt. DEPRECIATION - The loss of value in real estate (property). DISCOUNT OR DISCOUNT POINTS OR POINTS - A single charge imposed by the lender to adjust the interest rate of the loan to the required yield.
18 DOWN PAYMENT - The portion of the amount for the purchase of real estate that is given in cash and in advance by the borrower. EARNEST MONEY OR GOOD FAITH DEPOSIT - The deposit made by the person buying a property to a third party agency, which is held in escrow until the transaction is completed. ESCROW - In some Western states, the use of a third person or institution who will carry out the wishes of the Buyer and Seller in a way that is neutral, in a real estate closing. FIRST MORTGAGE - A mortgage having priority over all other liens. FIXED RATE - The interest rate is fixed for the full term of the loan. It will not change. GOVERNMENT INSURED - Loans such as FHA and VA are backed by the U.S. government. If the borrower does not repay the debt, the government will. HOMEOWNER S (OR HAZARD) INSURANCE - An insurance policy whereby, for a premium, an insurer agrees to insure a property in case of a loss. HUD-1 SETTLEMENT STATEMENT - Itemizes the charges to the buyer and the seller, and shows how the money gets paid out. INTEREST ONLY - A loan that requires payment on the interest of the debt only, rather than requiring additional payments to lower the principal of the loan. INTEREST RATE - The percentage of an amount of money that is paid for the use of that money over a period of time. JUDGMENT LIEN - A judgment by the court and placed as a lien against a property. JUMBO OR NON-CONFORMING - Mortgages that exceed the conventional limits. LOAN TO VALUE (LTV) RATIO - The relationship between the value of property and the loan amount. LOSS PAYEE CLAUSE - The clause in an insurance policy indicating who is to be paid in the event of a loss. MARGIN - The percentage a lender adds to the index rate to determine the new interest rate. MATURITY - The due date of a note. MORTGAGE - A legal document that transfers interest in a property and serves as a security for payment of a debt. MORTGAGE BANKER - A firm dedicated to real estate loans. MORTGAGE BANKING - The packaging of mortgage loans to be sold to a permanent investor. MORTGAGE INSURANCE - Insures the lender against loss caused by the borrower s failure to make the payments. MORTGAGE NOTE - A written promise to repay a stated amount of money at a stated interest rate over a stated period of time. ORIGINATION FEE - A fee charged by a lender to cover the cost of the process of making a mortgage loan.
19 PITI - The acronym for Principal, Interest, Taxes and Insurance, usually the four parts of your monthly mortgage payment. POINTS - See DISCOUNT PRE-APPROVAL - Pre-approval is a lender s conditional commitment to lend to a borrower. PRE-QUALIFICATION - Pre-qualification is an informal way to determine how much money a client may be able to borrow. PRINCIPAL - The amount of a debt. PRIVATE MORTGAGE INSURANCE (PMI) - See MORTGAGE INSURANCE PURCHASE CONTRACT - See AGREEMENT OF SALE RELEASE OF LIEN - An instrument that discharges a lien. RESPA - Real Estate Settlement and Procedures Act. A law that requires the lender to disclose information to the borrower, including a Good Faith Estimate (GFE) of the borrower s closing costs. SECURITY INSTRUMENT - The mortgage or deed of trust of the property. SUBORDINATION - The act of acknowledging that a lien will have a position after a mortgage loan. This is accomplished by recording a Subordination Agreement. TAX LIEN - A lien against a property for unpaid taxes. TERM - The amount of time (typically 15 or 30 years) a lender gives a borrower to repay the loan. TITLE DEED/DEED - A legal document evidencing ownership of a property. TITLE INSURANCE POLICY - A policy that protects the lender in the event of a loss due to a defect in the Title. The owner s policy protects the owner in this same way. TRUTH-IN-LENDING (TIL) DISCLOSURE - Outlines the costs of a loan and discloses the APR and other terms of the loan, including the finance charge, the amount financed, the payment amount, and the total payments required. The lender is required to present the final version of a TIL disclosure at or prior to the closing meeting. UNDERWRITING - The risk analysis of a borrower s loan application.
Mortgage Terms Glossary Adjustable-Rate Mortgage (ARM) A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see
MORTGAGE TERMS Acceleration Clause This is a clause used in a mortgage that can be enforced to make the entire amount of the loan and any interest due immediately. This is usually stipulated if you default
Glossary A Adjustable Rate Mortgage - An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally,
Glossary Adjustable Rate Mortgage (ARM) a mortgage with a variable interest rate, which adjusts monthly, biannually or annually. Amortization the way a loan is paid off over time in installments, detailing
Report 4 Eight Mistakes Borrowers make when applying for a mortgage Free Mortgage Information Copyright 1997 2007 - vlender.com Licensed Content Eight Mistakes Borrowers make when applying for a mortgage
Mortgage Terms Accrued interest Interest that is earned but not paid, adding to the amount owed. Negative amortization A rise in the loan balance when the mortgage payment is less than the interest due.
Fifth Third Home Buying Guide A Guide to Residential Home Buying. Important Contacts and Numbers. Use this page to record important information as you move through the homebuying process. Realtor/Builder
Homebuyer Education: What You Need to Know Today s Objectives Prepare your finances for home ownership Steps to mortgage prequalification Shopping for a home- who are the major players? Choosing the correct
GLOSSARY COMMONLY USED REAL ESTATE TERMS Adjustable-Rate Mortgage (ARM): a mortgage loan with an interest rate that is subject to change and is not fixed at the same level for the life of the loan. These
Your Mortgage Guide: The Process, Meet Your Team, Definitions, and Frequently Asked Questions Getting Started The first step begins by completing your mortgage application. You may hear this referred to
Your home financing process checklist As you prepare to purchase a home or refinance your loan, it s important to know what to expect along the way. Here, we ve outlined some of the general steps in the
Mortgage Glossary 203(b): FHA program which provides mortgage insurance to protect lenders from default; used to finance the purchase of new or existing one- to four family housing; characterized by low
Your Own Home Building: Knowledge, Security, Confidence FDIC Financial Education Curriculum TABLE OF CONTENTS Page To Rent or Own 1 Steps Involved in Buying a Home 2 Am I Ready to Buy a Home? 3 Patricia
Information for First-time Home Buyers An overview of the mortgage process, from application to closing. Derek Haley, Senior Loan Officer SunTrust Mortgage, Inc. 919.426.5023 Derek.Haley@SunTrust.com NMLSR#
203(b) 203(k) Adjustable Rate Mortgage (ARM) Adjustment Date Adjustment Period Amenity Amortization FHA program which provides mortgage insurance to protect lenders from default; used to finance the purchase
Mortgage Terms Acceleration The right of the mortgagee (lender) to demand the immediate repayment of the mortgage loan balance upon the default of the mortgagor (borrower), or by using the right vested
A mortgage is a loan that is used to finance the purchase of your home. It consists of 5 parts: collateral, principal, interest, taxes, and insurance. When you agree to a mortgage, you enter into a legal
HOMEPATH BUYERS GUIDE WWW.HOMEPATH.COM Buyers Guide Buyers Guide For a Fannie Mae-owned Home Whether you re buying your first home or your fifth, the experience can be exciting, confusing, overwhelming
PLANNING AND DEVELOPMENT DEPARTMENT HOUSING AND COMMUNITY DEVELOPMENT DIVISION CALHOME MORTGAGE ASSISTANCE PROGRAM GUIDELINES PROGRAM OVERVIEW The CalHome Mortgage Assistance Program is a program funded
Guide to Mortgages BUYING A HOME BUILDING A HOME REFINANCING Trust People First For Your Mortgage Needs People First is committed to providing our members with quality mortgage products that are both competitive
TALK with an Associate in Capitol Federal s Customer Service Center 888-8CAPFED. EMAIL your questions to Capitol Federal securely online at capfed.com/contact. VISIT any one of Capitol Federal s convenient
Chapter 13 Outline / Page 1 Chapter 13: Residential and Commercial Property Financing Understanding the Mortgage Concept - secured vs. unsecured debt - mortgage pledge of property to secure a debt (See
Broker Chapter 12 Financing Real Estate Copyright Gold Coast Schools 1 Learning Objectives Describe the difference between a note and a mortgage Explain the benefits of having the first recorded lien on
SHOPPING FOR A MORTGAGE The Traditional Fixed-Rate Mortgage Key characteristics: Level payments, fixed interest rate, fixed term. This mortgage is the one which most of us know, and it is still the loan
Glossary of Terms Here are some helpful definitions to common terms. 1003 Loan application 4506 IRS form requesting copy of tax return Abstract of title A historical summary provided by a title insurance
Glossary of Foreclosure Fairness Mediation Terminology Adjustable-Rate Mortgage (ARM) Mortgage repaid at the rate of interest that increases or decreases over the life of the loan based on market conditions.
Actual Rate: The Actual Rate is the annual interest rate you pay on your loan (sometimes referred to as the note rate ), and is the rate used to calculate your monthly payments. Adjustable Rate Mortgage:
Mortgage Types and Borrower Decisions: Overview Role of the secondary market Chapter 10 Residential Mortgage Types and Borrower Decisions Mortgage types: Conventional mortgages FHA mortgages VA mortgages
Paragon 5 Financial Calculators User Guide Table of Contents Financial Calculators... 3 Use of Calculators... 3 Mortgage Calculators... 4 15 Yr vs. 30 Year... 4 Adjustable Rate Amortizer... 4 Affordability...
Your Own Home Building: Knowledge, Security, Confidence FDIC Financial Education Curriculum TABLE OF CONTENTS Page Module Overview 1 Purpose 1 Objectives 1 Time 1 Materials and Equipment Needed to Present
Preparing for homeownership What we ll cover 1. Getting ready for homeownership 2. Mortgage basics 3. What you need to buy a home 4. Finding the right home 5. Resources 2 Getting ready for homeownership
Your Own Home Welcome 1. Agenda 2. Ground Rules 3. Introductions Your Own Home 2 Objectives If you are a pre-homebuyer: Explain the advantages and disadvantages of renting versus owning a home Identify
Fin 5413: Chapter 8 Mortgage Underwriting Some Basic Mortgage Underwriting Questions Who should you grant a loan to? How do we determine the appropriate interest rate for a loan? What is the maximum dollar
We ll help you open the door. The Citizens Guide to Home Financing Lori Customer Table of Contents Before you look 4 The costs of purchasing a home 4 Getting a head start: Pre-approval 6 Choosing a mortgage
Chapter 6 Conventional Financing 1 Chapter Objectives Identify the characteristics of a conventional loan. Define amortization. Identify different types of conventional loans. Discuss the use of private
1 Real Estate Principles of Georgia Lesson 13: Applying for a Mortgage Loan 2 Choosing a Lender Types of lenders Types of lenders include: savings and loans commercial banks savings banks credit unions
Mortgage Glossary A B C D E F G H I J K L M N O P Q R S T U V W X Y Z adjustable-rate mortgage (ARM) A mortgage that changes interest rate periodically based upon the changes in a specified index. adjustment
A GUIDE TO HOME EQUITY LINES OF CREDIT Call or visit one of our offices today to see what products in this guide we have to offer you! TABLE OF CONTENTS Introduction What is a home equity line of credit
Additional Principal Payment A payment by a borrower in excess of the scheduled principal amount due, in order to reduce the remaining balance of the loan. Adjustable-Rate Mortgage (ARM) An ARM is a type
adjustable-rate mortgage (ARM) A mortgage whose interest rate changes periodically based on the changes in a specified index. View a list of common indices. adjustment date The date on which the interest
MORTGAGE TERMINOLOGY DEFINED 1-year Adjustable Rate Mortgage Mortgage where the annual rate changes yearly. The rate is usually based on movements of a published index plus a specified margin, chosen by
A Glossary of Bank Terms Below you will find key words and definitions to help you better understand the terms used in the financial services industry. ABA American Bankers Association. Account Ownership
Illinois Association of REALTORS 522 S. Fifth Street Springfield, IL 62701 www.illinoisrealtor.org www.yourillinoishome.com HOMEOWNERSHIP: Understanding What You Can Afford, Mortgages, and Closing Costs
Home Buying Educational Seminar The WU Employer Assisted Housing Program Agenda WU Employer Assisted Housing Program Program highlights Neighborhoods Home Financing Benefits of homeownership Preparation
GENERAL TIPS FOR BUYING/SELLING A HOME Office of the Staff Judge Advocate, MacDill Air Force Base, Florida (813) 828-4422 TYPES OF HOMES Buying a house will be one of the biggest investments one will ever
The following breaks down the Loan Estimate by section with examples from Encompass followed by official commentary. Also attached, is a copy of a completed Loan Estimate form provided by the Encompass..
5+ Key Components To Most Adjustable Rate Mortgages 1. Index rate The rate to which the interest rate on an adjustable rate loan is tied. One of the more popular indexes used is the 1-year U.S. Treasury
Financing a Home in the United States PHH Home Loans relocation service guides you through the United States home financing process and we will work with you and your company s relocation department to
Bankrate, Inc Quality Control Program Bankrate, Inc ( Bankrate ) uses specific product criteria, extensive mystery shopping and rate verification process to ensure that the data that appears on Bankrate.com
Real estate terms and definitions Annual Percentage Rate (APR): The total yearly cost of a mortgage as expressed by the actual rate of interest paid. The APR includes the base interest rate, points and
Your Home Financing Process Checklist As you prepare to purchase a home or refinance your loan, it s important to know what to expect along the way. Here, we ve outlined some of the general steps in the
A good faith estimate is a document that estimates the total costs to get a loan when you are buying or refinancing a home. The good faith estimate details costs you will incur on all loan related fees
Home Buying Guide Dear Home Buyer: Kentucky Housing Corporation (KHC) is pleased to serve you through our home buying services with loans you can trust. As the state s housing finance agency, our mission
Important Information Regarding TILA-RESPA Integrated Disclosure (TRID) Rule Notice to students: If your course contains information on the Truth in Lending Act (TILA) and the Real Estate Settlement Procedure
U.S. Department of Housing and Urban Development Office of Housing Office of Single Family Housing The Guide to Single Family Home Mortgage Insurance www.hud.gov espanol.hud.gov Becoming a Homeowner Many
UMB Mortgage Solutions Home Buying 101 1 Agenda Are You Ready to Buy a Home? Selecting a Lender Mortgage Loans Getting Started Home Checklist Purchase Contract Questions 2 Home buying Terms Mortgage Lender
Point Loma Credit Union - Mortgage Rates Home loans are available on residential zoned properties located in California. All applications are subject to lending criteria approval including, but not limited
1 Applicants with a good credit report will be in a stronger position to negotiate best rate and terms Your credit report is used by banks and other lending institutions to determine your creditworthiness.
Information & Instructions: HUD 1 Settlement closing statement 1. Section 5 of the Real Estate Settlement Procedures Act of 1974 (Public Law 93-533), effective on June 30, 1976 (RESPA), requires certain
In this packet... Introduction... 2 TDHCA s Homebuyer Assistance Options... 2 My First Texas Home (MFTH)... 2 Texas Mortgage Credit Certificate (MCC)... 2 Features of TDHCA s Homebuyer Assistance Programs...
REAL ESTATE BASICS Affordability Analysis An analysis of a buyer s ability to afford the purchase of a home, reviews income, liabilities, and available funds, and considers the type of mortgage a buyer
Point Loma Credit Union - Mortgage Rates Home loans are available on residential zoned properties located in California. All applications are subject to lending criteria approval including, but not limited
Financing Your First Home A Guide for Homebuyers By Irene Moustakas www.loansbyirene.com Irene@LoansByIrene.com 408.257.1681 4/1/2014 Financing Your First Home Table of Contents The Basics of Underwriting...
5/5 ARM HOME LOAN RATES AND TERMS Effective October, 015 and subject to change. Get flexibility, stability and no closing costs 1 with SDCCU s 5/5 Adjustable Rate Mortgage Home Loan. Your rate can only
Different Types of Loans All loans, no matter what they are, are either secured or unsecured. Knowing the difference can better help you understand how they work and what to expect when applying for one.
FHA Financing - All You Need to Know 2 Hour Continuing Education Course Presentation by: Ashley Brint Patrick Axford Date: August 22, 2012 2012 Regions Bank. Member FDIC. Regions is a registered service
What s s New With FHA? Presented By: Bill Ladewig 866.204.9733 http://www.mortgage- FHA Calculator Calculates everything needed to quote or qualify FHA loans Click to Open: http://www.themtgmentor.com/fha_mortgage_calculator.html
Arkansas Development Finance Authority, a Component Unit of the State of Arkansas Combined Financial Statements and Additional Information for the Year Ended June 30, 2000, and Independent Auditors Report
HOMEBUYER S GUIDE Know what it takes to buy your first home homebuyer s guide If you re thinking about buying a home, we say congratulations. Most likely, it s the biggest purchase decision you ve made
Moreir a Team Mortgage s SIMPLE STEPS TO HOME LOAN READY CREDIT Written by: Alvaro R. Moreira CONTENTS 2 Click on a section to be immediately directed to that page Introduction... 3 Chapter 1: Credit Score
An Introduction to CalSTRS, CalPERS and CHDAP Loan Programs Homeownership Education Workbook and Notes Slide 1 An Introduction to CalSTRS, CalPERS & CHDAP Homebuyer Programs We will begin in a moment Homeownership
Welcome First-Time Buyers A Guide to Financing Your First Home Equal Housing Lender. Prospect Mortgage is located at 15301 Ventura Blvd., Suite D300, Sherman Oaks, CA 91403. Prospect Mortgage, LLC is a
Homebuyer s Handbook Understanding the home buying process Buying a home is one of life s most exciting events and is still one of the smartest investments you can make. But the process of finding, buying