Home Loan Workbook

Orgination Fee - A fee paid to a lender for processing a loan application. The orgination fee is stated in the form of points. One point is equal to one percent of the mortgage payment. Owner Financing - A property purchase transaction in which the party selling the property provides all or part of the financing. Periodic Payment Cap - A limit on the amount that payments can increase or decrease during any one adjustment period. Periodic Rate Cap - A limit on the amount that the interest rate can increase or decrease during any one adjustment period, regardless of how high or low the index might be. PITI Reserves - A cash amount that a borrower must have on hand after making a down payment and paying all closing costs for the purchase of a home. The principal, interest, taxes, and insurance (PITI) reserves must equal the amount that the borrower would have to pay for PITI for a predefined number of months (usually three). Points - A point is equal to one percent of the principal amount of your mortgage. For example, if you get a mortgage for $165,000; on point means $1,650 to the lender. Points usually are collected at closing and may be paid by the borrower of the home seller, or be split between them. Prepayment Penalty - A fee that may be charged to a borrower who pays o a loan before it’s due. Pre-Qualification - The process of determining how much money you will be eligible to borrow before you apply for a loan. Prime Rate - The interest rate that banks charge to their preferred customers. Changes in the prime rate influence changes in the other rates, including mortgage interest rates. Principal - The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage. Principal, Interest, Taxes, and Insurance (PITI) - The four components of a monthly mortgage payment. Private Mortgage Insurance (PMI) - Mortgage insurance provided by a private ,ortgage insurance company to protect lender against loss if a borrower defaults. Most lenders generally require MI for loan-to-value (LTV) percentage in excess of 80 percent. Qualifying Ratios - Calculations used to determine if a borrower can qualify for a mortgage. They consist of two seperate calculations: a housing expense as a percent of income ratio and total debt obligations as a percent of income ratio. Rate Lock - A commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate and lender costs for a specified period of time. Real Estate Agent - A real estate broker of an associate who is an active member in a local real estate board that is aliated with the National Association of Realtors. Recording - The noting in the registrar’s oce of the details of a properly executed legal document, such as a deed, a mortgage note, a satisfaction of mortgage, or an extension of mortgage, thereby making it part of the public record. Refinance - Paying o one loan with the proceeds from a new loaan using the same property as security. Revolving Liability - A credit arrangement such as a credit card, that allows a customer to borrow against a pre-approved line of credit when purchasing goods and services. Secondary Mortgage Market - Where existing mortgages are bought and sold. Security - The property that will be pledged as collateral for the loan. Seller Carry-back - An agreement in which the owner of a property provides financing, often in combination with an assumable mortgage. Servicer - An organization that collects principal and interest payments from borrowers and manages borrowers escrow accounts. The servicer often services mortgages that have been purchased by an investor in the secondary market. Survey - The process by which a parcel of land is measured and it’s area ascertained.

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