We have provided this Financial glossary to help de-mystify the jargon that often surrounds financial matter.
A full documentation loan. If you can provide the information and qualify,this is the least risky loan from a lenders perspective and therefore offers the best pricing. You need to be able to prove your income, have a good credit score. Any history of late payments can knock your eligibility.
Pay-off schedule or how long will it take to pay off the loan with a specific set payments.
Annual Percentage Rate
Adjustable Rate Mortgage
Where a loan is agreed as a backup. This sometime costs a little to cover documentation but provides the benefit of being in a strong position when negotiating a loan and keeping the loan provider 'honest'. If things go wrong, you can fall back on your 'backup' loan.
Where a loan is not paid off completely by the end of it's term, the final payment to clear the loan is known as a “Balloon Payment”.
Comprehensive Loan to Value (CLTV)
The ratio of the total of all loans against a property divided by the value of the property.
A loan that meets bank funding criteria. Fannie Mae and Freddie Mac each year set the limit on what constitutes a conforming loan, based on the October-to-October changes in mean home price, above which a mortgage is considered a Jumbo Loan and typically has higher rates associated with it.
A period negotiated as part of the home purchase contract, at the beginning of the Escrow process when one party or the other can walk away without consequences or penalty. This can allow time for loan approval or other similar matters to be resolved.
Debt To Income Ratio (DTI)
Debt to income ratio is measured by dividing total monthly minimum payments to service debt into your gross monthly income. This ratio is broken into two discrete measurements, called front end ratio and back end ratio.
FICO stands for “Fair, Isaac and Company” (credit scoring model) . A FICO score places a value on the types of credit accounts a person holds or has held, and a credit history in maintaining those accounts. The FICO score scale ranges from 300 to 850, with the majority of people in the United States in the 600 - 850 range.
Home Equity Line Of Credit
Home Owner Insurance
Insures the home against damage or theft. This insurance will be structured to protect both you, as the owner, and the lender. There can be a good deal of variation in policies.
The Real Estates Settlement Procedures Act (RESPA) mandates that a lender completes a HUD-1 at the time of loan settlement to provide full disclosure of all charges imposed upon the borrower and seller.
Loan to Value (LTV)
Ratio of the loan divided by the value of the property.
Mello-Roos Districts are limited time property tax districts assessed to pay for things like municipal water and sewer service for new developments. Most newer developments here in California have them, and the equivalent districts are becoming more and more prevalent in newer developments elsewhere.
No Income, No Assets.
How long the loan lasts.