Mortgage Terminology Flashcards

Amortization

periodic payments on a loan requiring payment of enough principal and interest to ensure complete repayment of the loan by the end of the loan term

Closing Cost

expenses incurred during the purchase of a property, including fees for services such as appraisal, title insurance, and loan origination.

Debt to Income Ratio

the relationship expressed as a percentage between a borrower’s monthly obligation on the long term debts and his or her gross monthly income

Discount Point

a fee paid in exchange for a reduction in the interest rate

Earnest Money

money paid by a buyer to a seller at the time of entering a contract to indicate intent and ability of the buyer to carry out the contract

Equity

the difference between the fair market value of a property and the current balances of any mortgages and other liens against the property

Escrow Account

held by lenders on behalf of the borrower. into which the borrower deposits money for taxes and or insurance payments. they may also hold other funds related to a real estate transaction

Federally Related Mortgage Loans

any loan secured by a first or subordinate lien on residential property for occupancy for 1-4 families. Proceeds are used to pay off existing loans

Fees

any kind of money paid in conjunction with a mortgage loa, other than the actual loan amount and interest. These can affect the real cost of credit when obtaining a loan

Finance Charge

the cost of credit, expressed as a dollar amount

Lien

a legal claim against property that was used as collateral to secure a debt

Negative Amortization

a method in which the minimum monthly payments are not large enough to pay all the accrued interest due on the loan. This unpaid interest is added to the balance of the loan

PFC

Prepaid finance charge

POC

Paid Outside of closing

Prepayment Penalty

fees charged for an early repayment of debt. subject to laws that restrict the amount of the penalty and that limit the imposition of prepayment penalties to the early years of the loan

Rate Lock

stops the rate from undergoing any further changes during a specific period of time prior to closing

Sales Contract

a legally binding agreement between two or more parties detailing the terms and conditions of the sale of real estate

Seller Carry-Back

a purchase transaction, often involving an assumable mortgage, in which the party selling the property provides all or part of the financing

Service release premium

fees in which the lenders or services may receive for selling or transferring their right to service a mortgage loan

servicer

an individual or entity that services a loan by performing responsibilities such as sending statements to borrowers, accepting payments, issuing late payment notices and managing escrow accounts

Subordination

changes the priority of liens secured by a property, dictating the other in which they would be paid off in the event of a foreclosure

Tolerance

Range or margin of error for accuracy

Adverse Action

the term used to describe a decision by a lender not to extend credit to a consumer on the terms that consumer requested

Affiliated Business Arrangement

a person who is in a position to refer a consumer to a settlement service provider that has an affiliate relationship with or a direct or beneficial ownership interest of more than 1% in the provider of settlement services