Mortgage Terms and Glossary

A
Absorption Rate An estimate of the expected annual sales or new occupancy of a particular type of land use.

Acceleration Clause A provision in a mortgage that gives the lender the right to demand payment of the entire principal balance if a monthly payment is missed.

Additional Principal Payment A payment by a borrower of more than the scheduled principal amount due, in order to reduce the remaining balance of the loan.

Adjustable Rate Mortgage An adjustable rate mortgage, commonly referred to as an ARM, is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes, up or down, are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.

Amortization A loan repayment plan, which enables the borrower to reduce his debt gradually through monthly payments of principal and interest.

Amortization Schedule A timetable for payment of a mortgage loan. An amortization schedule shows the amount of each payment applied to interest and principals and shows the remaining balance after each payment is made.

Amortization Term The amount of time required to amortize the mortgage loan. The amortization is expressed as a number of months. For example, for a 30 year fixed rate mortgage, the amortization term is 360 months.

Annual Percentage Rate (APR) To make it easier for consumers to compare mortgage loan interest rates, the federal government developed a standard format called an "Annual Percentage Rate" or APR to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.

Application The process of applying for a mortgage. The term "application" generally refers to a form that is used to collect financial information from a borrower by a lender.

Appraisal An analysis performed by a qualified individual to determine the estimated value of a home. This professional does not work for the lender, but instead is considered an outside expert.

Appraisal Fee In order to verify that the value of your home supports the loan amount you request, an appraisal will be ordered by the lender. The appraisal is generally performed by a professional who is familiar with home values in the area and may or may not require an interior inspection of the home. The fee for the appraisal is commonly passed on to the borrower by the lender. For our comparison purposes, the appraisal fee is a third party fee.

Appraised Value An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience and analysis of the property.

Appreciation An increase in the value of a property due to changes in market conditions and other causes. The opposite of depreciation. APR To make it easier for consumers to compare mortgage loan interest rates the federal government developed a standard format, called an "Annual Percentage Rate" or APR, to provide an effective interest rate for comparison shopping purposes. Some of the costs that you pay at closing are factored into the APR for ease of comparison. Your actual monthly payments are based on the periodic interest rate, not the APR.

ARM An ARM (adjustable rate mortgage) is a loan type that allows the lender to adjust the interest rate during the term of the loan. Generally, these changes are determined by a margin and an index so that the interest rate changes, up or down, are based on market conditions at the time of the change. Most often these interest rate changes are limited by a rate change cap and a lifetime cap. If you apply for an adjustable rate mortgage, the lender is required to provide you with an ARM Program Disclosure which spells out the terms of the loan.

Assessed Value The valuation placed on property by a public tax assessor for purposes of taxation.

Assessment The process of placing a value on property for the strict purpose of taxation. May also refer to a levy against property for a special purpose, such as a sewer assessment. Assumption The transfer of the seller’s existing mortgage to the buyer. See assumable mortgage.

B
Balloon Mortgage A short-term fixed-rate loan which involves smaller payments for a certain period of time and one large payment for the entire balance due at the end of the loan term.

Balloon Payment The final payment that is made at the maturity date of a balloon mortgage and pays the loan in full.

Bankrupt A person, company, or corporation that, through formal court proceeding, is relieved from the payment of all debt after the surrender of some or all assets to a court-appointed trustee.

Bridge Loan A loan that is secured by a borrower's current residence to obtain the funds needed to purchase a new home if the current residence will not be sold prior to the purchase of a new home.

Broker A state-licensed agent who, for a commission or a fee, represents property owners in real estate transactions.

C
Cap Refers to a provision of an adjustable rate mortgage (ARM) that limits how much the interest rate or payment can increase or decrease.

Cash Out Refinance A refinance loan that provides the borrower with cash that exceeds the amount required to pay off existing mortgages on the home. This additional cash can be used by the borrower for any purpose.

Certificate of Eligibility A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) loan.

Certificate of Reasonable Value (CRV) A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA loan.

Close of Escrow A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, the close of escrow usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the close of escrow involves the borrower and the lender. Sometimes referred to as the settlement or closing.

Closing A meeting of the parties involved in a real estate transaction to finalize the process. In the case of a purchase, a closing usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the closing involves the borrower and the lender. Sometimes referred to as the settlement or the close of escrow.

Closing Costs The total of all the items that must be paid at closing related to your new mortgage.

Commitment Letter A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. Also called a loan commitment.

Compound Interest Interest paid on the original principal balance, and on the accumulated and unpaid interest.

Conforming Loan A loan that does not exceed the maximum loan amount allowed for the most common mortgage investors. Loans that exceed this amount are referred to as "jumbo mortgages". The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage.

Construction Loan A short term loan that is used to finance the construction of a new home. During the term of the loan the lender makes payments to the builder as the work progresses and the borrower makes interest payments on only the funds that have been disbursed to the builder. Typically, the construction loan is refinanced into a permanent loan after the home is completed.

Contingency A condition that must be met before a contract is legally binding. For example, a lender's commitment to provide financing to a borrower may be contingent on receipt of an acceptable appraisal.

Conventional Mortgage A mortgage that is not insured or guaranteed by a government agency.

Convertibility Clause A provision in some adjustable-rate-mortgages (ARM’s) that allows the borrower to change the ARM to a fixed-rate-mortgage at a specified period within the term of the loan.

Convertible ARM An adjustable rate mortgage (ARM) that allows a borrower to convert their mortgage to a fixed rate loan for the remainder of the loan term if certain conditions are met.

D
Deed The written instrument that conveys a property from the seller to the buyer. The deed is recorded at the local courthouse so that the transfer of ownership is part of the public record.

Delinquency The failure to make payments on debts when they are due.

Department of Veterans Affairs (VA) An agency of the federal government that provides services and guarantees residential mortgages made to eligible veterans of the military services

Deposit Funds required by a lender in advance of the processing of a loan request. Generally a deposit is collected to cover the costs of an appraisal and credit report and may or may not be refundable.

Depreciation A decline in the value of real or personal property. The opposite of appreciation.

Disclosures Information given to consumers about their financial dealings.

Discount Points Fees that are collected by the lender in exchange for a lower interest rate. Each discount point is 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up-front cost of the points to the monthly savings that result from obtaining the lower rate. Sometimes referred to as "points".

Discount Rate The interest rate that the Federal Reserve charges member banks for loans, using government securities or eligible paper as collateral. This provides a floor on interest rates, since banks set their loan rates a notch above the discount rate.

Document Preparation Lenders will prepare some of the legal documents that you will be signing at the time of closing, such as the mortgage, note, and truth-in-lending statement. This fee covers the expenses associated with the preparation of these documents. For our comparison purposes, the document preparation charges are considered to be a lender fee.

Down Payment The portion of the purchase price of a property that the borrower will be paying in cash rather than included in the mortgage amount.

Draw Period Generally associated with home equity lines of credit, the draw period is the period of time that you can access funds from the line. After the draw period expires, a repayment period generally follows.

E
Endorsements Additions to a title insurance policy for special coverage such as surveys, environmental and state-particular endorsements that are not included in the standard insurance policy. For our comparison purposes, the fees for endorsements are considered to be a third party fee. Some lenders may include this fee in the cost of the title insurance.

Equity An owner's financial position in a property. Equity is the difference between the property's value and the amount that is owed on mortgages.

Escrow Funds paid by one party to another to hold until a specific date when the funds are released to a designated individual. Generally, an escrow account refers to the funds a mortgagor pays to the lender along with their principal and interest payments for the payment of real estate taxes and hazard insurance. The money is held by the lender to make payments when they are due.

An escrow can also refer to funds that are held by a third party to insure the completion of repairs or improvements that must be completed on the property but that cannot be done prior to closing.

F
Fair Credit Reporting Act A federal consumer protection regulation that controls the disclosure of credit information and establishes procedures for correcting mistakes in your credit file.

Fannie Mae FNMA (Federal National Mortgage Association) One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.

Federal Housing Administration (FHA) An area of the U.S. Department of Housing and Urban Development (HUD) that insures low down payment mortgages granted by some lenders. The loan must meet the established guidelines of FHA in order to qualify for the insurance.

Finance Charge The total dollar amount credit will cost.

Fixed Installment The monthly payment due on a mortgage loan which includes both principal and interest.

Fixed Rate Mortgage A mortgage in which the monthly principal and interest payments remain the same throughout the life of the loan. The most common mortgage terms are 30 and 15 years. With a 30-year fixed rate mortgage your monthly payments are lower than they would be on a 15 year fixed rate, but the 15 year loan allows you to repay your loan twice as fast and save more than half the total interest costs.

Flood Certification An inspection to determine if a property is located in an area prone to flooding also known as a flood plain. The federal government determines whether an area is in a flood plain. Lenders generally rely on the flood certification to determine if flood insurance will be required in order to obtain a mortgage. For our comparison purposes, the cost of the flood certification is considered to be a third party fee, though you may find that all lenders do not pass this fee on to the borrower.

Flood Insurance Insurance that protects a homeowner from the cost of damages to a property due to flooding or high water. It is required by law that properties located in areas prone to flooding have flood insurance. The federal government determines whether an area is prone to flooding and considered to be in a flood plain.

Foreclosure The legal process in which a borrower's ownership of a property is dissolved due to default. Typically, the property is sold at a public auction and the proceeds are used to pay the loan in full.

Forfeiture The loss of money, or anything else of value, due to a breach of legal obligation or contract.

Freddie Mac FHLMC (Federal Home Loan Mortgage Corporation) One of the congressionally chartered, publicly owned companies that is the largest source of home mortgage funds.

Fully Amortized ARM An adjustable-rate mortgage (ARM) with monthly payments that are sufficient to liquidate the remaining principal balance over the amortization term.

G
Gap Loan Short-term financing, usually to cover a gap in time between a person’s purchase of a home and that person’s later receipt of funds, usually from the sale of their previous home. Sometimes called a bridge loan or swing loan.

Good Faith Estimate Often referred to as “GFE” this is a written estimate of the closing costs the borrower will have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.

Growing Equity Mortgage (GEM) A fixed-rate mortgage that involves scheduled payment increases over a specified period of time. The increase amount of the monthly payment is applied directly to the remaining principal balance.

H
Hazard Insurance Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as homeowner's insurance.

Home Equity Line of Credit (HELOC) A loan secured by real property, usually in a subordinate position, that allows the borrower to receive the loan proceeds in the form of multiple advances up to a limit that represents a maximum percentage of the borrower's equity in a property.

Home Equity Loan A loan secured by one's principal residence, generally to be used for some non-housing expenditure. A traditional home equity loan provides lump-sum proceeds at the time the loan is closed.

Home Inspection A complete and detailed inspection that examines and evaluates the mechanical and structural condition of a property. A complete and satisfactory home inspection is often required by the homebuyer. Compare with appraisal.

Homeowner's Insurance Insurance that protects a homeowner against the cost of damages to property caused by fire, windstorms, and other common hazards. Also referred to as hazard insurance.

HUD HUD, also known as the U.S. Department of Housing and Urban Development, insures home mortgage loans made by lenders meet minimum standards for such homes.

I
Implied Contract A contract created by actions, but not necessarily written or spoken.

Income Property Real estate developed and improved to produce steady income.

Initial Interest Rate The original, starting interest rate of a loan at the time of closing. This rate changes for an adjustable-rate mortgage (ARM). Sometimes called a teaser rate

Installment Loan Borrowed money that is repaid in equal periodic payments. Cars and furniture are often paid for with installment loans.

Insurance A form of contract that provides compensation for specific losses in exchange for a periodic payment. An individual contract is known as an insurance policy. The periodic payments are known as insurance premiums.

Insured Mortgage A mortgage that is protected by the Federal Housing Administration (FHA) or by private mortgage insurance (PMI). If the borrower defaults on the loan, the insurer must pay the lender the lesser of the loss incurred or the insured amount.

Interest Rate The cost of borrowing a lender's money. Interest takes into account the risk and cost to the lender for a loan. The interest rate on a fixed rate mortgage depends on the going market rate and how many discount points you pay up-front. An adjustable rate mortgage's interest is a variable rate made up of the index and the lender's margin.

Interest Rate Ceiling The maximum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.

Interest Rate Floor The minimum interest rate for an adjustable-rate mortgage (ARM), as specified in the mortgage loan note.

Investment Property A property that is not occupied by the owner.

J
Joint Tenancy A form of co-ownership that gives each tenant equal undivided interest and equal rights in the property, including the right of survivorship.

Joint Venture An agreement between two or more parties who invest in a property or business.

Judgment Lien A lien on the property of a debtor resulting from a judgment.

Jumbo Mortgage A loan that exceeds the maximum loan amount allowed by the most common mortgage investors. The cost of obtaining a jumbo mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a non-conforming loan.

K
Kicker A payment sometimes required by a mortgage loan in addition to normal principal and interest.

L
Late Charge The penalty a borrower must pay when a payment is made after the stated due date.

Late Payment A payment made later than agreed upon in a credit contract and on which additional charges may be imposed.

LeaseA written contract between a property owner and a tenant that expresses the conditions under which the tenant may possess the real estate for a specified period of time and rent.

Lease-purchase Mortgage Loan A creative financing option that allows homebuyers to lease a home with an option to buy. Each month's rent payment consists of principal, interest, taxes and insurance, plus an extra amount that is deposited into a savings account created for a down payment.

Legal Description A legal property description that is sufficient to locate and identify the property without verbal testimony.

Lender The bank, mortgage broker, or financial institution providing the loan funds to a borrower.

Liabilities A person's financial obligations including both long-term and short-term debt, as well as any other amounts that are owed to others.

Lien A loan secured by real estate. An encumbrance against a property for money due. The lien can be voluntary such as a mortgage or involuntary such as a judgement.

Lifetime Interest Rate Cap On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase or decrease over the term of the loan.

Lifetime Payment Cap On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase or decrease over the term of the loan.

Liquid Asset An asset that is easily converted into cash.

Loan Commitment A written offer from a lender to provide financing to a borrower. The commitment letter states the terms under which the lender agrees to provide financing to the borrower. Also called a commitment letter.

Loan Origination The process by which a mortgage lender creates a mortgage secured by real property.

Loan Term The number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.

Loan to Value Ratio (LTV) A ratio used by lenders to calculate the loan amount requested as a percentage of the value of a home. To determine the loan to value ratio, divide the loan amount by the home's value. The LTV ratio is used to determine what loan types the borrower qualifies for as well as the cost and fees associated with obtaining the loan.

Lock Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.

Lock Period The number of days that the lender will guarantee the interest rate offered for a loan. In order to hold the guaranteed interest rate for a loan, the loan closing must occur during the lock period.

Lock-in Written agreement in which a lender guarantees a specific interest rate if a loan closes within a set period of time. The lock-in may also specify the number of discount points to be paid at closing.

M
Maturity The date on which the principal balance of a financial instrument becomes due and payable.

Mortgage The legal document used by a borrower to pledge their property as security in order to obtain a loan. In some areas of the country, the mortgage is called a "deed of trust".

Mortgage Insurance Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The borrower usually pays the cost of the insurance and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as private mortgage insurance.

Mortgage Insurance Premium (MIP) Amount paid by a borrower for mortgage insurance, either to a government agency such as the Federal Housing Administration (FHA) or to a private mortgage insurance (PMI) company

Mortgage Tax A tax charged by some state or local governments that is paid to the state when a mortgage is obtained. For our comparison purposes, the mortgage tax is considered to be a tax and other unavoidable fee.

N
Negative Amortization A gradual increase in mortgage debt that occurs when the periodic monthly payment is not sufficient to cover the monthly principal and interest due. The amount of the deficit is added to the remaining principal balance to create negative amortization.

Net Cash Flow The income that remains for an investment property after the monthly operating income is reduced by the monthly housing expense, which includes principal, interest, taxes, and insurance.

Net Closing Costs For our comparison purposes, the net closing costs are the total closing costs quoted by a lender, less any credit or rebate that is offered.

Net Worth The total value of all of a person's or company's assets, minus all liabilities.

New Payment Your new payment is the sum of principal, interest and PMI.

No Cash Out Refinance A refinance loan is an amount that pays off the existing mortgage balance on the property and does not provide the borrower with any cash at closing.

Non-Conforming Loan A mortgage that exceeds the maximum loan amount for the most common mortgage investors. The cost of obtaining a non-conforming mortgage is generally higher than the cost of obtaining a conforming mortgage. Also known as a jumbo loan.

Non-liquid Assets Any assets that cannot easily be converted into cash

O
Original Principal Balance Total amount of principal owed on a loan before any payments are made.

Origination Fee Often called a Lender Fee, it’s a fee charged by a lender as a way to cover processing expenses for originating a mortgage loan. For comparison purposes, know that at AmericanWest Bank we charge a flat fee for any mortgage loan, although many other lenders charge a percent of the loan amount.

Owner Financing A real property purchase transaction in which the seller provides the financing

P
P&I The monthly principal and interest payment required when repaying a mortgage in accordance with its terms.

Periodic Payment Cap On an adjustable-rate mortgage (ARM), a limit on the amount that payments can increase during a single adjustment period.

Periodic Rate Cap On an adjustable-rate mortgage (ARM), a limit on the amount that the interest rate can increase during a single adjustment period.

PITI (P)rincipal, (I)nterest, (T)axes, and (I)nsurance is a reference to the total monthly payment required to repay a mortgage in accordance with its term as well as monthly escrow payments for taxes and insurance.

Points Fees that are collected by the lender in exchange for a lower interest rate. Commonly called discount points, each point is equal to 1% of the loan amount. For our comparison purposes, a discount point is considered to be a lender fee. To determine if it is wise to pay discount points to obtain a lower rate, you must compare the up front cost of the points to the monthly savings that result from obtaining the lower rate.

Pre-qualification Procedure to determine how much money a potential homebuyer will be eligible to borrow prior to actually applying for a loan.

Prepaids Expenses of property ownership or expenses incurred while obtaining a mortgage that must be paid in advance. Prepaids typically include real estate taxes and hazard insurance.

Principal The actual balance, excluding interest, of a mortgage loan. Also refers to the amount of the monthly mortgage payment that will be applied to the actual balance.

Principal & Interest The payment required to repay a mortgage in accordance with its terms. Sometimes referred to as "P&I".

Principal Balance The outstanding balance of principal on a loan. Principal does not include interest or fees.

Private Mortgage Insurance (PMI) Insurance provided by a private company to protect the mortgage lender against losses that might be incurred if a loan defaults. The cost of the insurance is usually paid by the borrower and is most often required if the loan amount is more than 80% of the home's value. Sometimes referred to as mortgage insurance.

Property Taxes Taxes based on the assessed value of the home, paid by the homeowner for community services such as schools, public works, and other costs of local government. Sometimes paid as a part of the monthly mortgage payment.

Q
Qualified Veteran To officially determine if you are a qualified veteran, you or AmericanWest Bank must request a Certificate of Eligibility (COE) from the VA. This certificate indicates that the VA has determined you are eligible for a VA home loan and shows the amount of available entitlement or guaranty. To obtain a certificate of eligibility, complete the “Request for a Certificate of Eligibility for VA Home Loan Benefits Form” (VA Form 26-1880) and submit it to the VA. This form, as well as additional information about VA home loan eligibility requirements, are available on the VA website (www.homeloans.va.gov).

Qualifying Ratios Calculations performed by lenders to determine your ability to repay a loan. The first qualifying ratio is calculated by dividing the monthly PITI by the gross monthly income. The second ratio is calculated by dividing the monthly PITI and all other monthly debts by the gross monthly income.

Quitclaim Deed A deed that transfers, without warranty, whatever interest or rights a grantor may have at the time the transfer is made. Often used to remove a possible cloud on the title.

R
RAM Reverse annuity mortgage. Rate The annual rate of interest for a loan. Also called the interest rate.

Rate Change Cap The maximum amount that an interest rate can change, either at an adjustment period or over the entire life of the loan. Commonly associated with an adjustable rate mortgage (ARM).

Rate Lock An agreement by a lender to guarantee the interest rate offered for a mortgage provided that the loan closes within the specified period of time.

Reconveyance Fee This fee is charged by title companies or attorneys in some states and covers the cost of removing your current lender's lien from your property title when you refinance. For our comparison purposes, a reconveyance fee is considered to be a third party fee and may be included in the title insurance fee by some lenders.

Recording Fees A fee charged by the local government to record mortgage documents into the public record so that any interested party is aware that a lender has an interest in the property. For our comparison purposes, a recording fee is considered to be a tax or other unavoidable fee.

Refinance The process of paying off any existing mortgages on a home with a new mortgage loan.

Remaining Term The number of payments left to be made on a loan before it is fully amortized (paid in full).

Reverse Mortgage Also called a Home Equity Conversion Mortgage (HECM).

Rural Housing Service (RHS) An agency within the United States Department of Agriculture that provides financing to farmers and other qualified borrowers buying property in rural areas, who are unable to obtain loans elsewhere.

S
Safe Harbor A set of rules and regulations that will guarantee compliance with the law, if followed.

Second Mortgage A loan that has a lien position subordinate to the first mortgage.

Secured Loan A loan that is backed by collateral.

Security The collateral offered to a lender in exchange for a loan. When a lender provides a mortgage, you provide your home as the security. This means that if payments are in default, the lender has the right to take title to the property.

Servicer A company that collects principal and interest payments from borrowers and manages borrowers' escrow accounts. The servicer may or may not be the original lender.

Settlement A meeting of parties involved in a real estate transaction to finalize the process. In the case of a purchase, the settlement usually involves the seller, the buyer, the real estate broker and the lender. In the case of a refinance, the settlement involves the borrower and the lender. Sometimes referred to as the closing or the close of escrow.

Settlement or Closing Fee A fee charged by a title company, closing agent or attorney to act as a representative and agent for the lender to perform the closing of a real estate transaction. No part of this fee is given to your lender.

Settlement StatementAlso referred to as the HUD-1 or the closing statement, this is the document that provides line by line detail of the financial details related to a specific real estate transaction such as the fees paid by the seller and the buyer for a purchase transaction or the fees paid by the borrower for refinances.

T
Tax Certificate A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee.

Tax Service Fee A fee charged to a borrower by a lender so that another company will assume responsibility for verifying the amount of real estate taxes due and that taxes have been paid over the life of the loan. For our comparison purposes, a tax service fee is considered to be a third party fee, however, some lenders may not charge for this service.

Taxes and Other Unavoidable Fees Fees that we consider to be taxes and other unavoidable fees include State/Local Taxes and recording fees. These fees will most likely have to be paid regardless of the lender you choose. If you see a tax or recording fee in the fee comparison table that is listed by some of the sites and not others, don't assume that you won't have to pay it. It probably means that the lender who doesn't list the fee hasn't done the research necessary to provide accurate closing cost information nationwide. Contact one of the sites directly for more information or talk to your real estate agent or attorney for guidance.

Term The loan term is the number of months that you will make monthly payments. If the loan term is the same as the payment calculation term, you will pay the loan in full during the loan term and no balance will be due. If the payment calculation term is greater than the loan term, a balance or "balloon payment" may be due at the end of the loan term.

Third Party Fees Third party fees are usually fees that the lender will collect and pass on to the person who actually performed the service. For example, an appraiser is paid the appraisal fee, a credit bureau is paid the credit report fee and a title company or an attorney is paid the title insurance fees.

Fees that we consider third party fees include the appraisal fee, the credit report fee, the settlement or closing fee, the survey fee, tax service fees, title insurance fees, flood certification fees, and courier/mailing fees.

Typically, you’ll see some minor variances in third party fees from lender to lender since a lender may have negotiated a special charge from a provider they use often or chooses a provider that offers nationwide coverage at a flat rate. You may also see that some lenders absorb minor third party fees such as the flood certification fee, the tax service fee or courier/mailing fees.

Title Company A company that specializes in examining titles to real estate and issuing title insurance.

Title Search An examination of the public title records to determine the legal ownership of a property, and to ensure that there are no liens, encumbrances or other claims outstanding.

Trade Equity Equity that results from a buyer giving an existing property as trade for all, or part of, the down payment on the subject property.

Transfer Tax A tax charged by some state or local governments at the time of transfer of real estate title from one owner to another. For our comparison purposes, these fees are considered to be a tax or other unavoidable fee. May also be referred to as an Intangible Tax.

Truth in Lending Act Also known as Regulation Z, this federal regulation requires a lender to provide borrowers with a disclosure estimating the costs of the loan including your total finance charge and the Annual Percentage Rate (APR) within three business days of the application for a loan. This act is designed to provide consumers with a standard method of comparing the financing costs from lender to lender.

U
Underwriting Detailed process of evaluating a borrower's loan application to determine the risk involved for the lender. Underwriting usually involves an in-depth analysis of the borrower's credit history, as well as an examination of the value and quality of the subject property.

Unsecured Loan A loan that is not backed by collateral.

Upfront Mortgage Insurance Premium FHA charges the borrower an Upfront Mortgage Insurance Premium (Upfront MIP) for most transactions to financially support the FHA program. This fee is a percentage of the principal loan amount and is due at closing. The full amount can be financed as part of the loan amount or paid in cash.

V
VA Funding Fee The Department of Veteran’s Affairs (VA) charges a Funding Fee to most veterans who obtain a VA mortgage loan to help sustain the VA home loan program. Only veterans receiving VA disability are exempt from paying this fee. The VA Funding Fee is a percentage of the principal loan amount and is due at closing. The amount of the VA Funding Fee varies depending on specifics of the transaction. The full amount can usually be financed as part of the loan amount or paid in cash.

VA Loan A mortgage for veterans and service persons. The loan is guaranteed by the Department of Veterans Affairs (VA) and requires low or no down payment.

WXYZ
Yield A measurement of the rate of earnings from an investment, usually expressed as a percentage.

Zoning The local government's specifications for the use of property in certain areas.