Annual
Percentage Rate/APR: APR
includes the origination fee and other finance charges in
addition to the interest on the mortgage for the annual interest
rate. The APR will be higher than the "Locked-In"
Interest Rate due to the additional fees included in this
calculation. The APR is a good "apples-to-apples"
comparison tool for evaluating the annual cost per loan with the
different mortgage program types.
Appraisal: An appraisal is used
to determine the value of a home. The appraiser utilizes
comparable homes sold in a particular area to help determine the
value. Types of appraisals include: Full Appraisal, Tax Record
Appraisal, Drive-by Appraisal.
Brain-damage:
What prospective borrowers will avoid if they get all of the
documentation requested by their mortgage professional organized
and delivered in a timely manner.
Closing: The
meeting between Buyer, Seller, Title Company's Escrow Agent,
Real Estate Agents and Mortgage Lender Professional to finalize
sale of real estate between Buyer and Seller.
Closing Costs: Costs
for transferring the title and deed of a real estate from the
Seller to the Buyer for proper recording of real estate
ownership.
Credit Report: Reflects
the payment history of a person, referenced/filed by their full
name, address and Social Security Number. This will also reflect
Public Records for any bankruptcy, liens or judgments. It's not
unusual for credit reports to contain outdated or incorrect
information, and it's important that prospective mortgage
borrowers scrutinize all three of their own reports at least 90
days prior to beginning the actual application process. See
Equifax, Experian and TransUnion for more information.
DTI or Debt
to Income Ratio: Projected house payment
(principle, interest, taxes & insurance) plus all
installment and revolving debts, divided into the borrower's
gross income.
Escrow: An account set up
during the mortgage lending process (to hold for future
distribution) the Buyer's monies for payment of future property
taxes and one year's worth of (projected) homeowner's insurance
premiums.
Equifax: One of the world's
largest credit reporting agencies, headquartered in Atlanta, GA.
Consumers/prospective home buyers need to review their personal
credit reports on file with the company at least 60-90 days
prior to starting the home buying/financing process to allow
ample time to correct incorrect or outdated information. Equifax
provides two types of credit reports, their
basic
report and an
enhanced
version that contains the consumers actual credit score, also
known as a
FICO score.
The basic report costs $8-$9 on average; the enhanced version in
the $13 range. Consumers would be wise to spend the extra money
and buy the credit score enhanced version. Go to their
website
and order on-line directly:
or call:
(800)
685-1111.
Also worth noting...you might get a
freebie! If you've been declined credit, insurance,
housing or employment based on information contained in your
credit report, you're eligible under federal law to obtain a
free copy of your credit report. The "turn down"
letter must state which credit reporting agency provided them
with the information on which they based their decision, as well
as a phone number or website to contact to get your free report.
Equity: The value of the net
worth in a particular property. For example...a house is
appraised for $100,000 and the total loans/liens against the
property total $60,000, the remaining $40,000 difference is the
amount of equity on that property.
Experian: One of the world's
largest credit reporting agencies, headquartered in Orange, CA
with a major consumer data outpost in the Dallas, TX suburb of
Allen. Consumers/prospective home buyers need to review their
personal credit reports on file with the company at least 60-90
days prior to starting the home buying/financing process to
allow ample time to correct incorrect or outdated information.
Experian provides two types of credit reports, their
"basic" report and an
enhanced
version that contains the consumers actual credit score, also
known as their "Scorecard" score. The basic report
costs $8-$9 on average; the enhanced version in the $13 range.
Consumers would be wise to spend the extra money and buy the
credit score enhanced version. Go to their
website
and order on-line directly:
or call:
(800)
787-6864
Also worth noting? You might get a
freebie! If you've been declined credit, insurance,
housing or employment based on information contained in your
credit report, you're eligible under federal law to obtain a
free copy of your credit report. The "turn down"
letter must state which credit reporting agency provided them
with the information on which they based their decision, as well
as a phone number or website to contact to get your free report.
Interest: The cost paid to
the Lender for the financing of the purchase of the real estate.
Loan Origination: The fees
for mortgage financing services.
LTV or Loan To Value Ratio:
The amount of the Loan in relation to the appraised value of the
property. Example: Loan Amount of $80,000 vs. Appraised Value of
the home $100,000 = LTV of 80%
Points (Discount): Prepaid
interest on the mortgage loan charged by the Lender. The points
charged are usually in the 1% (of the total loan amount) range,
but can be higher for specialty loans, such as Reverse Mortgages.
Brokers or lenders may charge excessive points on deals if you
have a checkered credit past; be wary of dealing with companies
that attempt to penalize you by loading up in this area.
Prepaids: These are the
property taxes, homeowner's insurance and interest paid outside of
the closing or included in the fees of the mortgage loan.
Principal: The actual
balance (amount) of the mortgage owed, not including the interest.
Private Mortgage Insurance (PMI): Insurance
provided (benefiting the Lender) protecting them from potential
non-payment of the mortgage loan. PMI is utilized when the
mortgage loan exceeds 80% [or the buyer has less than 20% cash or
equity in the deal].
Survey: This is a
measurement of the real estate reflecting the point, dimensions,
easements, gas lines and standing structure(s) on the land or lot.
Title Commitment:
Analysis from the Title Company showing the following:
- Amount of Proposed
Loan
- Legal Description
of Property
- Schedule A -
Vesting - Name listed on Title, Prospective Lender
- Schedule B - Survey
Exceptions, etc.
- Schedule C -
Existing Liens of Record, Easements, etc.
Title Insurance:
Insurance policy issued to protect both the Buyer and the Lender
against errors in legal ownership of the real estate.
TransUnion:
World's third-largest credit reporting agency, the
privately-owned company is headquartered in Chicago, IL, with a
major consumer report processing outpost located in Wichita, KS.
Consumers/prospective home buyers need to review their personal
credit reports on file with the company at least 60-90 days
prior to starting the home buying/financing process to allow
ample time to correct incorrect or outdated information.
TransUnion provides two types of credit reports, their
"basic" report and an "enhanced" version
that contains the consumers actual credit score, also known as
their
Credit
Score Plus FICO Score version. The basic
report costs $8-$9 on average; the enhanced version in the $13
range. Consumers would be wise to spend the extra money and buy
the credit score enhanced version. Go to their
website
and order on-line directly: or call:
(800)
888-4213
Also worth noting? You might get a
freebie! If you've been declined credit,
insurance, housing or employment based on information contained
in your credit report, you're eligible under federal law to
obtain a free copy of your credit report. The "turn
down" letter must state which credit reporting agency
provided them with the information on which they based their
decision, as well as a phone number or website to contact to get
your free report.
Underwriting: The
review process of a prospective mortgage borrower's financial
situation and credit history; also analyzes the underlying value
of the actual property being purchased/financed.
