When you’re in the mortgage process it can feel a little overwhelming and especially if you feel like everyone is speaking in a foreign language using words you may have never heard before or don’t truly understand. To help, here is a list of some of the key words that you may hear related to the mortgage and real estate industry that we hope will demystify the process. Each word gives a very short definition and the words that are hyperlinked I’ve written (or made other resources) to give even more information to explain how it fits into the process.
A
Abstract – a summary of facts relied on as evidence of title on a property from the time of statehood until the most recent transaction.
Adjustable Rate Mortgage (ARM) – a home loan which has an interest rate that will change periodically corresponding to the financial index associated with it.
Amortization – loan payment schedule spread out over the term of the loan.
APR – the annual percentage rate on a loan. Represents the actual cost of the loan each year expressed as a percentage. The costs include not just the interest rate but also the fees.
Appraisal – Document that shows an independent assessment of how much a property is worth using recent comparable sales in the area and/or price to rebuild.
As-Is – when the seller of a property requires that the property be sold without any repairs before closing. This can often limit the type of financing and sometimes excludes financing at all requiring a cash transaction.
Asset – money or something that has value and can be sold for money. This can be money in your bank accounts, stocks, bonds, retirement funds, and your home, cars and other items of value.
Automated Underwriting System (AUS) – computer program that analyzes data in a loan application and gives the lender a loan decision.
B
Balloon Payment – large payment due at the end of a loan term.
Broker – individual (or firm) that is a facilitator between investor or seller and the buyer. They are in most cases an agent for the buyer (or the seller) and charge a commission.
Budget – an estimate of income vs expenses over a set period of time.
Buyer’s Agent – licensed realtors that specialize in the buyer’s side of a real estate transaction.
C
Cash to Close – the total amount of money needed on closing day. Typically includes: down payment, fees, pre-paid taxes and homeowner’s insurance, and HOA dues if applicable.
Closing Costs – expenses paid to lender and any third parties for services/invoices incurred on the transaction. Title, appraisal, and attorney fees are typical. Taxes and prepaid escrow items like insurance and property taxes also make up closing costs.
Closing Disclosure (CD) – document sent at the end of the loan process to compare with the loan estimate given at the beginning of the loan process. This is a statement of final loan terms and closing costs. It will point out what has changed from the original loan estimate, and you are required to get a preliminary CD at least 3 days before closing (changes can be made to CD without extending 3 day window as long as lenders aren’t changing loan program, adding any penalties, and the APR doesn’t change more than 1/8 of a percentage point.)
Collateral – an item of value used to secure a loan. In the case of home mortgage, the home itself stands as collateral.
Commission – a fee or percentage paid to parties acting inside the transaction (real estate agents, brokers, originators, etc) for the work they have done.
Concessions – contributions made by seller to the benefit of the buyer. These are specified in the contract negotiation and included in closing costs. Most loan programs have a set limit to the amount of concessions that a seller is allowed to contribute.
Construction Loans – a short term loan (usually no longer than 12 months) used to finance the purchase of land and building of home (or just building home if land is already owned). This loan will finance the two projects and its parts to cover construction to completion and then will be financed long term at the end.
Contingency – dependent on certain circumstances. For instance a contract might be contingent on another property selling first or some other criteria which is central to the party’s position to the outcome.
Conventional Loan – a mortgage not secured by a government agency, but instead guaranteed by private investors or one of 2 government sponsored enterprises (GSE) Fannie Mae and Freddie Mac.
Cosigner vs Coborrower – Cosigner and coborrower are both responsible for the repayment of the mortgage and it will be included as a liability on your credit until it is paid. There is no difference between borrower and co-borrower in terms of who is “more” responsible for repayment and this is also true for co-signers. The terms are generally used interchangeably, however, there is a distinction between coborrower and cosigner and that is occupancy. Co-signers may not necessarily live in the home. Not every loan program or lender will allow cosigners, but some will allow parents, or family members if there are generally no other risk factors.
Contract (aka Purchase Agreement) – legally binding agreement that governs the transaction between seller and buyer for the purchase of a property.
Counter/Counteroffer – when the original offer is rejected, but the receiving party replaces it with another.
Credit – in the broadest sense, credit is the overview of the relationships and history that a borrower has had with any lender or creditor. They are given a score, and certain criteria is tracked and reported.
Credit History – record of how someone has handled money and debt including loans and credit cards. History tracks when and for how long accounts are open, if and when they were late, when they close and if they go into collection or are charged off. The history can be even more important than the score in many cases.
Credit Freeze – restricts access to your credit report and can be a good tool to protect against unauthorized use or identity theft. Credit freezes are free with all three bureaus. It takes 24 hours to freeze after request and must thaw within 1 hr from a lift request. Make sure if you freeze your credit that you “thaw” it BEFORE requesting authorized credit applications.
Credit Score – numerical rating meant to predict how likely you are to be a good credit risk and user of merchant/creditor services based on the credit history and other information in your credit file.
D
Debt-to-Income Ratio (DTI) – ratio used by lenders to measure the ability to manage monthly payments. Ratio is comprised of all monthly debt payments (liabilities) divided by gross monthly income. Each loan product/program has different DTI limits/allowances.
Debt Service Coverage Ratio (DSCR) – this is a metric used to compare cash flow vs debt. In terms of DSCR loans, we look at DSCR to determine eligibility using investment properties or business cash flow instead of personal income.
Deed – The deed is the legal document that states who owns a subject property. A deed represents the right of the owner to claim the property and is recorded in that county’s courthouse.
Down Payment – the percentage of a home’s purchase price paid out of pocket to bring “DOWN” the principle balance. This money is not due upfront but at closing. The percentage can be from 0%-20% requirement based on the program, or the amount can be strategically higher than regulation to offset mortgage insurance and/or escrow requirements.
Down Payment Assistance – programs made to help borrowers cover down payment and sometimes closing costs provided by government agencies or private organizations.
E
Earnest Money – a deposit paid upfront and put into escrow by the borrower to show good faith. The amount of earnest is negotiated in the purchase contract and the buyer generally has a set amount of days to deposit to stay in contract after all parties have signed.
Equity – the simple definition is the value of the asset if it were liquidated and after all liabilities paid, whatever is left over is the equity. In home terms, it’s the estimated value (appraised value) minus balance on the mortgage. Because property generally appreciates in value, and the principal is reducing, home equity is one of the reasons that real estate is such a good investment.
Escrow Account – arrangement, generally by contract, in which a third party receives and disburses money on behalf of the transacting parties. In the real estate transaction, escrow is usually held by the title company. It will hold the earnest money and any other funds that are paid before closing, or to be used after closing with stipulations (repairs for example) Then, in the mortgage process after the closing, the escrow account is held by the mortgage company to pay those annual bills that were established and prepaid at closing such as homeowners insurance, and property taxes. This is a hefty subject, read article for more detail.
F
FHA Loan – government insured mortgage backed by the Federal Housing Administration. FHA loans are geared towards borrowers with credit issues, or who might not qualify for a conventional loan.
Fixed-Rate Mortgage – mortgage loan where the interest rate is the same throughout the term (time to be paid back) of the loan. Adjustable rate mortgage (ARM) is where the interest rate adjusts periodically.
For Sale By Owner (FSBO) – the process of selling real estate without the agent on the seller side. Sometimes this can be done with no realtors on either side, but the buyer side IS eligible to have representation by a realtor to negotiate on their behalf. This is usually done by sellers to avoid paying realtor commissions, but caution should be used as the valuation experience of a realtor may easily make up for the commission if the home brings more money and it can be a lot of work for a person without realtor experience.
Forbearance – an agreement to delay payment without foreclosure in context of mortgage loans. In other cases (student loans, etc) it is an agreement to delay payment without collection. The literal meaning is “to hold back.”
Foreclosure – a legal process in which a lender attempts to recover the balance of the loan by taking back and selling the collateral (the home the mortgage is secured by.)
G
Gift Funds – money given (usually by a family member) to the borrower to help afford the down payment or closing costs. The money must be given as a gift and not a loan that has any kind of contract to be paid back.
H
HOA – Home Owners Association, which is a private entity comprised of members of a community or subdivision with it’s own agreed upon set of rules, or covenants and may have amenities like shared spaces or services. HOAs often come with dues for membership, but not always.
Home Equity Line of Credit (HELOC) – a line of revolving credit secured as a 2nd mortgage to a home that is still repaying the first mortgage. Like a 1st mortgage, the HELOC will use the property as collateral but this loan works similar to a credit card where the balance can be tapped into and repaid. It’s often used for home improvement or debt consolidation.
Home Inspection – visual assessment of a home’s condition done by a trained and licensed inspector. This may let the homeowner, or potential homeowner know any issues or problems that could be problems or create expenses down the road. This is often confused with the appraisal. The main difference being the home inspection is for the borrower/buyer and the appraisal is for the lender to properly value the property and any problems regarding safety, or foundation/construction issues.
Home Owners Insurance – aka hazard insurance, this is the insurance that covers the property and its contents in a private residence. This is paid either directly by the homeowner or through an escrow account linked to the homeowner’s monthly mortgage payment.
HUD 184 Loan – A type of FHA loan made specifically to Native Americans or Alaska Native tribal members of federally recognized tribes. Section 184 gives a lower down payment, and mortgage insurance rate and has it’s own set of underwriting guidelines.
I
Income – money received on a regular basis from work (wages, salary, commissions, etc), investments, or regular payments from entities such as social security, disability, VA, etc. Read more about the types of income in the article HERE.
Interest/Interest Rate – the rate of interest due per period expressed as a percentage/proportion of the amount borrowed. Simply put, the price paid to borrow money.
Investment – any asset acquired or ventured into whose purpose is to make money or provide an income. An investment property would not be the primary residence where you live, but might be a home that plan to rent, or resell. It would provide revenue in some way.
Irregular Income – income that does not have a regular rate of pay or pace of time. Hourly work with irregular hours, commissioned work or jobs with irregular frequency may have irregular income. Some good examples would be a short term by contract worker who may have gaps between jobs. See the article on INCOME for more information on how it may apply to you.
J
Jumbo Loan – a type of mortgage which exceeds the maximum for “conforming” loans. This usually applies to luxury homes and the amount/range that qualifies as “jumbo” changes each year as set by Federal Housing Financing Agency for conforming loans and those amounts vary by the county in which the property is located. Jumbo loans are financed by private investment groups and not backed by Fannie Mae or Freddie Mac.
L
Liability – a person’s debt, or financial obligations owed.
Listing Agent – the realtor or real estate agent that represents the sellers and property being sold. Also known as the “seller’s agent” They list the house being sold and market it to prospective buyers.
Loan Amount – the principal balance that is to be repaid on the mortgage, the amount on the face of the note. This is the amount being borrowed (on a purchase, the price minus down payment.)
Loan Assumption – when a mortgage is taken over from the current borrower by another party. The repayment period (term) and interest rate remain the same and this can be a selling point, if the rate is low. The new borrower must meet the lender’s criteria for approval, and not all loans are assumable.
Loan Estimate – the 3 page standardized form required as part of the disclosure process at the beginning of the loan process. When a person has applied for a mortgage and been pre-qualified, the lender must send the loan estimate within 3 days of receiving all the required information to produce it.
Loan to Value (LTV) – This is a ratio that compares the value of the property as determined by the appraisal, to the amount of the prospective mortgage. This value is expressed as a percentage. There are specific LTV criteria for the different loan programs. Example: $80,000 mortgage on $100,000 value is 80%LTV
Lock/Rate Lock – the lock is a set period of time where the interest rate will not change from the offered rate that was locked as long as you close before the lock expires. Mortgage rates change daily and sometimes hourly, but the rate when locked will not change during that “locked” amount of time. A limited number of “lock extensions” can be made available at a separate cost.
M
MAP Program – (Mortgage Assistance Program) this term is used provincially to refer to a specific mortgage assistance program offered by the Cherokee Nation inside the 14 county. This program gives a specific amount of money to qualified candidates that can be used for down payment and closing costs.
Mortgage – legal agreement between borrower(s) and a lender allowing them to borrow money to purchase or refinance a home using the property as the collateral to secure the loan.
Mortgage Broker – a person or company who acts as intermediary to broker a mortgage loan on behalf of the borrower with a lender. There are many lenders who sell products; some originators only sell inside products, others will only broker to 3rd party lenders, and there are other originators who do both. They can originate both inside products and also broker to lenders outside of the organization they are licensed with.
Mortgage Credit Certificate (MCC) – a certificate issued by the state during the purchase process that allows a taxpayer to claim a tax credit for some portion of the mortgage interest they pay throughout the year.
Mortgage Inspection Certificate or Report (MIC/MIR) – this document is a drawing of the property that is sometimes used in lieu of a pin and stake survey. It can show easements and encroachments and lays out the structures per the legal description, but it cannot show property lines as an actual survey does.
Mortgage Insurance (MI) – an insurance policy that protects the lender from losses if the borrower defaults on the loan. Private Mortgage Insurance (PMI) is required if the down payment is less than 20% on conventional loans, and MI is always required on FHA, USDA and HUD 184 loans. This is paid by the borrower as part of their escrow and collected through the monthly payment on the loan.
Mortgage Lender – the financial institution that offers and underwrites the loan. The lender sets the terms, interest rate, and repayment schedule along with other aspects of the mortgage.
Mortgage Originator – a person who is licensed or registered to complete the process of a mortgage transaction between the borrower and the lending institution resulting in a mortgage loan.
Mortgagor vs Mortgagee – parties of the loan transaction. Mortgagor is the borrower who is getting the loan. The Mortgagee is the lender who is providing the mortgage money.
N
Non-QM Loans – This is a type of loan that DOESN’T meet guidelines for regular insurance or lender guarantees. It therefore carries a higher risk for investors that offer the program. This type of loan opens opportunities for borrowers with non-traditional income, like self employed borrowers (tax returns not needed) or those who have fluctuating income or who are paid in lump sums. These programs calculate income differently (10-99s, profit & loss statements, bank statements or other assets, etc) These loans usually carry an interest rate from .25-1% higher than other programs to mitigate investor risk, and they require better credit scores from the borrowers overall. This is a terrific option for someone with great income who cannot qualify with a standard program. “Non Qualified” does not mean the LOAN doesn’t qualify and carries a risk to the BORROWER, it means that the lender carries more risk as the loan cannot be insured or guaranteed by the normal government agencies. (see QM loans for comparison)
O
Occupancy – the act of living in and taking possession of a property.
Origination Fee – a fee charged to the borrower for making the mortgage loan. Not every loan includes an origination fee and sometimes origination fees include processing, underwriting and other fees.
P
Payment Shock – a term used to refer to the sudden increase in a monthly financial obligation. This term is used in mortgage when the old payment increases drastically. When there is payment shock the loan application will receive additional scrutiny and there may be additional steps to get the approval.
PITI – acronym meaning: Principal, Interest, Taxes and Insurance. These are the four basic elements of the monthly mortgage payment.
Points – a mortgage point, aka discount point is a one-time fee to lower the interest rate over the term of your loan. Each point equals 1% of the loan amount. Ex: $100,000 loan amount, 1 point costs $1,000.
Preapproval – aka prequalification, this means that the borrower currently meets all the criteria required to meet regulations with the information available, and they are approved to make full application for a certain loan amount. If nothing changes in their circumstances and they meet underwriting conditions for the borrower and the property, the loan is highly likely to be approved and funded.
Prepaids – expenses that are part of the closing costs and paid at closing. They are called “prepaids” because the borrower is paying ahead. The most common prepaids are: homeowners insurance, property taxes, and mortgage interest.
Principal – the amount of money borrowed and that must be paid back. Interest is charged on the outstanding balance of the principle, so any additional money applied towards principle will save money on the overall interest paid.
Private Mortgage Insurance (PMI) – mortgage insurance required on conventional loans when the down payment is less than 20% of the purchase price. This protects the lender if you stop making payments on the loan. This has a monthly payment that is rolled into your mortgage payment as part of the escrow account.
Processing/Processor – this is the act (or the person who does the act for processor) of collecting and organizing the documents required for a loan application. This team member is not licensed like your loan officer, but they help the team by managing the documents, putting them in the right format for the underwriter to review and helping the loan officer with the associated tasks, required for the loan to be processed and eligible for approval by underwriting. They help collect documents, request verifications, flood certifications, run checks on the parties in the transaction and other various tasks to move the file forward for the team.
Property Tax – the tax levied on real property (land and structures attached to the land, This does not include vehicles.) Property tax is an ad valorem tax based on the value of the property. In Oklahoma, this tax is levied by the county in which the property is located. Learn more about property taxes from this podcast interview.
Purchase Agreement (Contract) – This is the legal contract entered into by the buyer and seller that governs the purchase process and sale of the property. The contract will describe the property being purchased, what is included and excluded, the price, what earnest deposit is required, and other terms of that are negotiated or agreed upon. Supplements to the contract may be added during the purchase process when the agreement is amended as required by appraisal, title, or lending requirements that may affect the transaction.
Purchase Price – the agreed upon price that the property is to be sold for according to the real estate contract/purchase agreement.
R
Realtor vs Real Estate Agent – Realtor™ is a trademarked term that refers to a licensed real estate agent who is a member of the National Association of Realtors (NAR). A real estate agent is anyone who is licensed to help people buy and sell property (commercial or residential) in the states they are licensed in. A licensed agent is eligible to join NAR, but it isn’t a requirement, though most do. The terms are used interchangeably to those who don’t understand the difference, but there are some key differences (explained in article) but the biggest differences are additional training requirements for Realtors™ and that a realtor has access to MLS (multiple listing service) which is a database and tool where properties are listed that are for sale to buyers. Realtors™ are also bound to a code of ethics, and may lose membership privileges if they are found in violation.
Real Estate Owned (REO) – REO is a list of the real property that you currently own or are on the deed to. This can be important in the loan process as it will be catalogued as an asset, and a liability if there is any associated debt. Owning property may also affect the type of loan programs that you are eligible for, so it is important information to provide to your lender.
Redlining – a term used in lending or real estate to describe a discriminatory practice where certain geographic areas are identified, where certain ethnic groups or other marginalized groups have a high population. The term describes the illegal practice where people living in these areas are not given the same access to lending as people in other neighborhoods. Reverse redlining is a similar (and also illegal) practice where these communities are targeted by predatory lenders. All people in all neighborhoods are required to be given equal access to lending based on credit, income, assets, etc and the standards remain the same regardless of race. The Fair Housing Act (FHA) and Equal Credit Opportunity (ECOA) protect borrowers from the illegal practices and all lenders are required to abide by those guidelines and rules.
Regular Income – a term used in lending to describe, regular and not variable income sources and amounts. Regular income is the base pay, salary, wages and either full time or part time income (with certain amount of time in the job) can be included in this category. Other types of income CAN be included as “regular income” if documented that it is a “regular” income source and has been received for specific time and will continue for specific time. Read more about INCOME
Refinance – the act of replacing a current mortgage with a new mortgage. The new mortgage will have a new principal amount, interest rate and payment. The new loan will include the payoff for the original mortgage and the lender will pay this off at closing. Refinances can be rate/term, to get more favorable interest rate, or can be used strategically as a cash out option to make home repairs, pay off other debt or use the equity in the home for other reasons.
Reverse Mortgage – this is a type of loan where the borrower can borrow money using the home as collateral as done in a traditional mortgage, HOWEVER, the borrower does not make monthly payments, the loan is repaid when the property is sold or no longer lives in the home. This is a type of loan that (in my opinion) is only the best option in very specific situations. I caution clients to consider that the loan amount goes UP not down over time, as interest accrues, but no payments are being made. The borrower is making their property tax and insurance payments, but not making payments on principle or interest, and that continues to accrue for the life of the loan. Homeowners or their heirs will be required to pay this money back (usually by selling the home) or allow the home to go back to the bank. I CAUTION my clients and will only do this type of loan for certain situations where it may be an elderly person with NO heirs. If this is a way for them to remain in the home, but what happens later isn’t an issue is the ONLY way I will offer this option. In the right situation it can be an amazing program, but most of the time, the fine print makes other options better for most people.
Right of Rescission – applicable to refinance loans, this term gives the right to the borrower(s) to “change their mind” up until midnight of the third day after closing on a refinance loan. The right to rescind (cancel) starts when the closing documents are signed and continues until midnight of the third day. If the rescind happens, the original mortgage is not paid off, and payments will continue. If the loan is a cash-out refinance, cash out is not received until after the rescission period is completed.
Risk – the lender’s potential for financial loss if the borrower were to default on the loan. Interest rates received and loan approval is based on this risk factor. Borrowers who have less risk (excellent credit, income, assets, etc) will pay a lower rate than a person who carries a higher risk and it is easier for them to get approval on the loan.
S
Seasoning – term referring to the amount of time. Usually seasoning refers to the amount of time that funds have been in a bank account. In the mortgage process deposits must be explained if they are in a statement, and may need to have 30-60 days of seasoning to be used for closing costs or down payment. Seasoning can also apply to the amount of time since a certain event like bankruptcy or foreclosure.
Second Mortgage – is a mortgage/lien on a home that takes second position over the primary mortgage/lien. Sometimes these are called by different names: Jr. lien, home equity mortgage, etc, but the important part is that they take second position AFTER the primary loan. They can be standalone, or they can piggyback with a current mortgage.
Seller Financing – a loan provided by the seller of the property (or business) to the borrower without using a lender. Sometimes referred to as bond-for-title or “owner-financing” This is not to be confused with FSBO (for sale by owner) as seen defined above.
Servicer (Mortgage Servicer) – this is a company that takes care of the loan after it has closed. Some lenders also own a servicing company, though that is more rare over the past many years and in the current lending climate. Most loans are sold onto the secondary market to a company that exclusively services the mortgage, which means they take the payments and handle the escrow account as applies.
Sourcing Funds – a term used to describe the action of tracking the origins of money. When a bank statement shows deposits (sometimes any deposit made, sometimes deposits over a certain amount, depending on the loan program) the underwriter may request a letter and/or documentation to show where the money came from. If the sourcing is unacceptable and the borrower needs to use the funds for closing, then seasoning of funds may be required. (see seasoning above)
Survey (Pin & Stake Survey) – a comprehensive report on the subject property where surveyors physically mark the boundaries of the property and provide a detailed legal description of the property lines, location of existing structures and addresses any easements or encroachments. This is a more detailed report than the mortgage inspection report (MIR) discussed earlier.
T
Term – in context of mortgage vernacular, the “term” is the length of time that you have to repay the loan. The loan may be amortized in various lengths of repayment periods (depending again on loan program.) The loan term dictates your monthly payment and total amount of interest over the life of the loan. Setting the right term, when it’s an option can be a strategy that helps you to pay less interest over time and should be part of the conversation, when applicable.
Title – “Deed” as defined before is the document that is evidence of property ownership, but title is the term used to refer to that ownership AND the title process which insures that the title held is clear when title is transferred during the sell of real estate. Titles are transferred by deeds from one person (or company) to another. Before the deed can be transferred in a transaction where there will be a mortgage, the “title work” is completed to make sure the title is free and clear from encumbrances such as back taxes owed, liens on the property, outstanding creditor bills, conveyances and any legal actions done in the past. You can read more about the process HERE.
Title Insurance – There are two types of title insurance, “lender title insurance” and “owner title insurance.” This insurance is a one-time payment made at closing usually paid by the borrower as part of the closing costs. The “lender” insurance protects the lender’s interests against loss or damage occurring from mistakes made by human error from the date of closing or before regarding defects in title work, missed liens or encumbrances and conflicts. The “owner” policy protects the owner’s interest in the same way. The owner policy is discounted if purchased with the lender policy at time of closing. The lender policy is required.
Q
QM loan (Qualified Mortgage) – QM loans are loans within standard loan programs that meet specific criteria. If a loan is “QM” it provides certain legal protection to the lender and means that the loan went through strict guidelines regarding the allowed debt to income ratio, and other bench marks. The type of income, and assets allowed has a set standard. If a loan is “qualified” it can be insured or guaranteed and backed by FHA, VA, Fannie Mae or Freddie Mac to insure against lenders loss if the borrower defaults. (see non-qm loans)
U
Under Contract – This is a term used in real estate meaning that your real estate contract on the subject property has been accepted by the seller. This milestone is hit when all parties (buyer(s), seller(s) and real estate agents) have all signed the contract listing the terms of the contract such as price, earnest money, closing date, and other negotiable options to the sale. The contract is then sent to the lender to finalize the loan estimate and begin the disclosure process.
Underwriting – the process the lender uses to examine the mortgage application and its supporting documents to determine if all regulations have been met for the chosen loan program, and to determine the risk to offering a mortgage to that borrower is acceptable.
USDA Loan – The USDA/RD loan is a zero down mortgage program for borrowers who are eligible based on income guidelines AND property eligibility. Properties eligible for the USDA loan are located in rural areas. Lenders usually issue a slightly lower rate for these loans, because they are guaranteed (against lender risk) by the US Dept of Agriculture Rural Development program. USDA loans include an upfront and monthly mortgage insurance paid by the borrower which funds the guarantee program.
V
VA Loan – The VA loan is a loan for eligible veterans, service members and their surviving spouses that is backed the the US Dept of Veteran’s Affairs. VA loans have no down payment requirement in most instances and no mortgage insurance requirement at all. Instead there is a VA funding fee for some veterans, if they are not exempt. VA loans carry lower credit score requirements as well as having other benefits. The veteran will need to supply their DD214 and Certificate of Eligibility in order to apply for this loan.
Vesting/Title Vesting – Title Vesting gives light to who owns or will own the property and their relationship to each other. There is a slight difference between title and vesting. The title refers to the actual ownership of the property and vesting refers to how the title is held by the owner(s). What vesting impacts the most is what will happen to the property if an owner dies. Properly vesting the property can mean the difference between going through probate or not if one of the owners die. Vesting categories include the marital status of each owner, and the two most common types are Joint tenancy or tenancy in common. Read the article on Title Vesting for more information.
W
Walk Through/Final Walk Through – this is done just before closing, many times on the same day or just before closing with the real estate agent and the buyer(s). This walk through confirms that the home is still in good shape, any promised repairs have been completed and that the home is in good condition to complete your purchase.
Wire Transfer – an electronic way to move money from one person (or entity) to another. This is often done with closing funds (cash to close) or used to receive gift funds in a purchase transaction. The wire sender gives the wiring information to their bank and the bank should call to verify that the information is correct. The receiving party (in mortgage this is usually the title company) will hold the funds in escrow until the time of closing. **Because wire fraud can be a risk, ALWAYS get the wire instructions from the entity that will be receiving the wire and make sure your financial institution calls to verify.** When these precautions are followed, this is a very safe and convenient way to transfer funds and one of the easiest ways to “source” funds for the lender.
I hope these definitions will help you to navigate the real estate and mortgage world. I will be adding terms to know as I get questions, or think of topics that I haven’t defined. These definitions are my own words and I’ve tried to use clear language for each term. You will find definitions here that are hard to find elsewhere as “local” terms and terminology is included (example: MAP program.) This list has been given to my borrowers for some time, but putting it on the website makes it easy for anyone who is trying to learn. Please reach out if you would like a term defined that is not included.
Email: lisa@lisadoesloans.com
