Mortgage Terms

Acceleration mortgage clause
This is rare and does not usually happen. The bank can demand payment in-full. The most common reason is due to default on payments.

Adjustable-rate mortgage (ARM)
This is a mortgage rate that can change and is usually tied to some index.

Adjustable Rate mortgage cap
This is the maximum that an Adjustable Rate Mortgages can increase over the life of the loan.

Adjustment date
The date your mortgage rate and payment will change.

Amortization mortgage schedule
This is a chart of how much of a payment will go to principal and how much goes to interest. Remember if you do not make your payment on the same day every month this schedule will not be accurate.

Annual percentage rate (APR)
This is how banks and mortgage companies are regulated. Your note rate will typically be lower then the annual percentage rate. Your APR is higher because it typically is calculated with mortgage insurance and closing costs. If you want a true analysis on a loan look and compare the APRs you are being quoted. This will give you a very good idea of what your total cost of the money you are borrowing is.

Application and 1003
This is a form that is used to document your employment, income, address and assets. This is the information gathering form and is used on all mortgages.

Appraised value
This is the fair market value of a property based on an appraiser’s opinion. They take into consideration sales in the neighborhood and square footage of similar properties.

Appreciation
The increase in the value of a property from the time you purchased it to the current date.

Assumable mortgage
This is typically found on an FHA type mortgage. This means that someone can take over your current payments after qualifying through the bank. If you let someone assume your payments you can still be held liable if they do not make their payments. Make sure to read all the guidelines if you are considering this.

Balloon mortgage and payment
This is when the due date of the payoff of a balance is shorter then the amortization of the note. You can take out a loan that has payments calculated over 30 years but it must be paid off in 15 years.

Biweekly mortgage
A mortgage in which you make payments every two weeks instead of once a month. This means that you make 26 payments overt the year. Since you are paying every two weeks you can see your mortgage balance decrease at an accelerated rate.

Cash-out Mortgage
When you refinance your home and take cash out. This includes paying off bills too.

Chain of title
This will show all people that have taken title on a property.

Co-borrower
This is any individual that signs the loan agreement with another party. Both are obligated on the loan and are on title to the property.

Collateral
What ever asset is being used for security on the note. A mortgage is secured by your home.

Contingency
A contract that can not be completed until something is completed.

Contract
An oral or written agreement to do or not to do a certain thing.

Credit
This is when you are advanced money or property with the intention to repay at a later date. This will also show if you have paid debt back in a timely manner.

Debt
Monies owed to someone.

Deed of trust
The legal document filed with the county to secure real estate for a mortgage loan.

Default
When you do not make payments on items you have borrowed.

Depreciation
When the value of property declines after you have purchased it.

Down payment
The difference in the purchase price and the loan amount.

Earnest money
By putting money down with a contract you make the document legally binding.

Equal Credit Opportunity Act (ECOA)
A federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs.

Equity
The difference in the appraised value and the loan balance.

Escrow account
This is an account that is audited and collects for your taxes and insurance on your home. This is done so the bank knows that these payments are being made.

Escrow disbursements
When the bank pays your taxes this is called a disbursement.

Fair Credit Reporting Act
A consumer protection law that regulates the disclosure of consumer credit reports by consumer/credit reporting agencies and establishes procedures for correcting mistakes on one’s credit record.

FHA mortgage
A mortgage that is insured by the Federal Housing Administration (FHA). This is often referred to as a government loan.

First mortgage
The lien that is position based on recording dates.

Fixed-rate mortgage
The interest rate does not change.

Flood insurance
Insurance that can be required by the lender if the property is in a flood zone.

Foreclosure
The legal process a bank must follow to take procession of real property.

Hazard insurance
The insurance on your home that protects it from damage and theft.

Home equity line of credit
Similar to a credit card that is secured by your home. You can borrow against it for a specified amount of time.

Home inspection
An independent company is hired to verify the condition of a property you may be buying.

HUD median income
The income that deems to be the average for a certain county.

HUD settlement statement
A final statement that is usually prepared by the title company. This is an audit of all costs on the transaction. All costs are itemized out so the consumer can verify the accuracy of the costs. The bottom line will show the cash to or from you.

Judgment
When a creditor that you owe money to receives a court order in their favor for the collection of funds from you.

Jumbo loan
This is when a loan exceeds Fannie and Freddie Mac’s loan limits. The current Fannie and Freddie loan limit is at $417,000.

Legal description
A property description, recognized by law that is sufficient to locate and identify the property without oral testimony.

Lender
A term which can refer to the institution making the loan or to the individual.

Liabilities
Monies owed.

Lien
A legal claim filed against a property.

Liquid asset
CASH

Loan-to-value (LTV)
A ratio used by banks to help underwrite a property. The loan balance divided by the appraised value or purchase price.

Lock-in
When you choose to protect your rate.

Lock-in period
The amount of time the rate is secured.

Modification
When a lender agrees to change the terms of your mortgage without requiring you to refinance.

Mortgage
A loan that uses real estate for security.

Mortgage broker
A person who people get a mortgage loan with banks that they usually have a relationship with.

Mortgage insurance premium (MIP)
The amount paid by a borrower to protect and reduce the risk for banks in the case of a fore-closure.

Mortgage note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.

PITI
Principal, interest, taxes and insurance. This I typically how your payment is broken down.

PITI reserves
The amount of money a borrower must have saved and in the bank after the transaction is complete.

Point / origination
A point is 1 percent of the loan amount typically paid by the seller.

Power of attorney
A legal document that gives another party to act on the part of you or someone else.

Prepayment penalty
A penalty that could be assessed to a borrower if a loan was paid of before a specified time. You rarely see these in today’s market.

Pre-qualification
A letter written on your behalf for a real estate agent explaining the purchase price of a home you may qualify for.

Prime rate
The rate that banks typically borrows their money at.

Principal balance
The balance owed on a loan excluding interest and late charges.

Principal payment
The dollar amount that goes directly to paying down your loan amount. Excluding interest and late charges.

Private mortgage insurance (MI)
This protects the bank for 15 – 20 5 of the outstanding balance if you were to default on a loan.

Promissory note
A written contract out lining the terms of repayment of a loan.

Purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.

Purchase money transaction
Buying property.

Qualifying ratios
Ratios that are set by banks to out line if people qualify for a loan based on income and monthly debt payments. Quitclaim deed Legal document transferring ownership from one person to another and that is filed with the respective county.

Real estate agent
A licensed individual that can negotiate the sale of real estate.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Revolving simple interest
The way that interest is calculated on a credit card or a line of credit. This typically is calculated using the average daily balance vs. the actual balance. You typically pay more in interest on this type of program.

Second mortgage
A lien that is in 2nd position.

Secured loan
A loan that is tied to property.

Security
The property that will be pledged as collateral for a loan.

Survey
A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Sweat equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than.

Title Company
A company that verifies and exams a history of liens and ownership on a property.

Title insurance
An insurance policy that protects the owner and the lender from any liens that did not appear prior to the closing of a transaction.

Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.

Veterans Administration (VA)
An agency of the federal government that guarantees residential mortgages made to eligible veterans of the military services. The guarantee protects the lender against loss and thus encourages lenders to make mortgages to veterans.

5280 magazine top mortgage professionalContact Colorado Mortgage Guy

Plum Creek Funding, Inc.
303-818-0699 (Cell)
303-840-0966 (Office)
877-840-0965 (Fax)
vince@coloradomortgageguy.com
10952 S. Pikes Peak Dr., Parker, CO 80138