Mortgage terminology is an entirely different language. But don’t fret! Here are the most commonly used mortgage terms.
Also known as an ARM Loan. This is a home loan with an interest rate that changes.
Annual Percentage Rate
The annual rate charged for borrowing funds, also known as the APR. It reflects the mortgage interest rate & other charges.
Also referred to as the CD. This is the form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). The lender is required to give you the CD at least three business days before you close on the mortgage loan. After signing it – just stand by patiently during this required 3-day waiting period. Be calm and carry on!
Your monthly debt divided by your gross monthly income. It’s a key ratio lenders use to determine your ability to manage mortgage payments.
This is a financial arrangement where a third party holds and regulates payment of funds.
Final loan approval
This means your loan has gone through! Start your party planning!
This is simply another term for “Homeowner’s Insurance.”
You have “impounds” when you have chosen to make your property taxes and homeowner’s insurance paid along with your monthly mortgage payment. These funds will be held and dispersed when due by Escrow.
This is the document with your preapproval information. You will sign this and provide updated documentation as requested.
Also referred to as the LE. This form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future.
Mortgage insurance (also known as MI) reimburses the lender if you default on your home loan. You, the borrower, pay the premiums. When sold by a company, it’s known as private mortgage insurance, or PMI. In most cases, when less than 20% of the purchase price of a property is put down MI is required.
Paid Outside of Closing
Fees that the borrower pays, usually before closing, such as appraisal or inspection fees.
You have provided financial documentation to your lender for them to prepare a preapproved letter to accompany your offer. This is different from and MUCH stronger than a prequalification.
You have talked with a lender to review your financial situation and understand your buying power.
This is the process where we review and verify all documentation. Hold tight.
This is the report that verifies the value of the property.
Signing & closing
Signing will typically happen one to two days before closing – which is the day your loan funds and the home is yours. Do a happy dance, you’re a homeowner!
This is the second (and sometimes third) review of the documentation. Keep holding tight!
Verification of Employment
Sometimes referred to as a VOE. This is the process lenders use to review a homeowner’s employment history.