Adjustable Rate Mortgage (ARM) – A loan in which the mortgage rate has the ability to change after a set, fixed time period.

Amortization – The period of time which the loan payments are based upon to fully repay the loan.

Amortization Schedule – A table showing the scheduled amounts of principal and interest due at regular intervals, and the resulting unpaid balance of the loan after each payment is made.

Application – The first step in the loan approval process that records important information the lender must have about the potential borrower.

Appraisal / Appraiser - Determination of a property's market value performed by a qualified professional for lenders to use when making lending decision.

APR (Annual Percentage Rate) – The actual percent of the loan that is paid in interest per year (i.e. the cost of credit on a yearly basis); this includes costs/fees that are rolled into the loan.

Assets - Any investments that can be accessed by the borrower (e.g. 401k, stocks, bonds, mutual funds, savings or checking accounts); these could determine the program for which the borrower can qualify.

Balloon Mortgage – A mortgage with periodic installments of principal and interest that do not fully amortize the loan before its due date, the balance of the mortgage is due, in generally a lump sum, at the end of the term of the note.

Bankruptcy – A term used to describe when a company, corporation or individual files for relief of their debts from the courts:

• Chapter 7 – all debts are written off;
• Chapter 11 – a form of bankruptcy associated with business; or
• Chapter 13 – a payment plan is arranged through the courts to pay off all of the debts.

Chargeoff – A term referring to an unsuccessful attempt by a lending institution to collect money owed to them by a borrower; these debts may be written off by the company.

Closing Costs - The costs associated with processing the loan (e.g. points, application fee, title search, commitment fee, processing fee); these costs are incorporated into a refinance, but must be prepaid by the borrower on a purchase loan.

Collateral – The property which the loan is being secured against.

Collection Account – After an account has been charged off, a collection company may take ownership in attempts to recover money owed.

Combined Loan to Value (CLTV) – The total of all outstanding mortgages on a property in comparison to its value.

Comparable – A home used by the appraiser to assess the value of the subject property; some attributes include: homes which sold recently, are within ½ mile to 1 mile from the subject property, or are similar size and style.

Contract of Sale - Agreement between the buyer and seller on the purchase price, terms and conditions to convey the title to the buyer.

Credit / Credit Report – An individual’s record of all past and present debts and the timeliness of their repayment.

Debt to Income Ratio - Comparison of gross income to expenses.

Deed - Document that transfers ownership of a property.

Down Payment - Part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. Gifts from related parties are sometimes acceptable as down payments for certain loan programs.

Equity – the difference between the market value of the home and the combination of all liens on that property.

Escrow Account – an account established to incorporate a borrower’s taxes and insurance into a monthly payment.

First Mortgage – The mortgage that is in first lien position, taking priority over all other liens.

Good Faith Estimate (GFE) – a letter sent by the lending institution detailing the interest rate and closing costs of the loan.

Homeowner’s Insurance - Insurance protection against damage to a dwelling.

Home Equity Line of Credit (HELOC) – a loan allowing a borrower to advance funds up to a specified amount by using checks against the equity of the property.

HUD-1 Settlement Statement – A document which itemizes all closing costs and must be given to the borrower at or before closing.

Lien - Legal claim against a property that must be paid off when the ownership of the property is transferred.

Loan-to-Value Ratio (LTV) - Relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage of the appraised value (i.e. with an appraised value of $100,000 and a mortgage loan of $80,000, the LTV is 80%).

Lock - Commitment obtained from a lender guaranteeing a particular interest rate or feature for a definite time period.

Mortgage Banker – a company that provides mortgage financing with its own funds and actually lends money to the customer; Castle Point Mortgage is a mortgage banker.

Mortgage Broker – someone who will serve as a third party and find another party to lend money to the borrower; a broker cannot approve a loan.

Negative Amortization Loan – A loan which payments are only a portion of the interest owed on a monthly basis, although payments are being made.

Note – A legal document that obligates a borrower to repay a mortgage loan at a certain interest rate by a specified period of time.

PITI – An acronym used when disclosing the customer’s payment based upon Principal, Interest, Taxes, and Insurance.

Points – Prepaid interest on a loan; this is a one-time charge that is assessed when the loan funds.

Prepayment Penalty – A fee imposed by a lender for the prepayment of a mortgage; this fee is usually a percentage of the mortgage balance.

Private Mortgage Insurance (PMI) – additional payment on a loan that is generally required when the LTV is more than 80%.

Refinance – Paying off an existing mortgage with a new mortgage.

Rescission Period – A three day (business days, also including Saturday) waiting period frm the time the final loan papers are signed to the receipt of the actual loan money.

Stipulation – Information that is required as a provision on a loan.

Stated Income – A loan program which exists when a lender does not verify all of a borrower’s income by documentation.

Title - Legal evidence of property ownership.

Title Search - Detailed examination of public records to make sure the seller is the recognized owner of the real estate and there are no unsettled liens or other claims against the property.

Title Insurance — Insurance that protects lenders or homeowner’s against financial loss resulting form legal defects in the chain of title.

Underwriting - Process of analyzing a loan application to determine the amount of risk involved in making the loan including a review of the potential borrower's credit history and a judgment of the property value.