Adjustable-Rate Mortgage (ARM), A mortgage with an interest rate that can increase or decrease at specified intervals based on changes in a financial index, subject to the loan's terms and rate caps., Annual Percentage Rate (APR), The annual cost of borrowing money expressed as a percentage, including the interest rate and certain loan fees and charges. It helps borrowers compare the overall cost of loans., Assignment of Mortgage, The legal transfer of a lender's interest in a mortgage from one party to another, often when a mortgage loan is sold to a different lender or investor., Assumable Mortgage, A mortgage that allows a qualified buyer to take over the seller's existing loan balance and terms, subject to the lender's approval or applicable loan rules., Automated Underwriting, The use of computer software to evaluate a borrower's credit, income, assets, and other financial information to help determine mortgage loan eligibility., Balloon Mortgage, A mortgage with periodic payments that do not fully repay the loan by the end of its term, requiring a large final payment called a balloon payment., Before-tax Income, The amount of money earned before income taxes are deducted. Also called gross income., Biweekly Payment Mortgage, A mortgage payment arrangement in which payments are made every two weeks rather than monthly, typically resulting in 26 half-payments, or the equivalent of 13 monthly payments, per year., Bridge Loan, A short-term loan used to provide temporary financing, often allowing a homeowner to purchase a new home before selling their existing home., Certificate of Eligibility, A document issued by the U.S. Department of Veterans Affairs confirming that an applicant meets the military service eligibility requirements for a VA home loan benefit. It does not guarantee loan approval., Co-borrower, An additional person who applies for and shares legal responsibility for repaying a loan, with their income, assets, and credit potentially considered during underwriting., Collateral, Property or another asset pledged as security for a loan, which the lender may have the right to seize or foreclose upon if the borrower defaults., Construction Loan, A loan used to finance the construction or major renovation of a property, often with funds disbursed in stages as construction progresses., Credit Bureau, A company that collects and maintains consumer credit information and provides credit reports to authorized lenders and other permitted users., Credit Report, A detailed record of a person's borrowing and repayment history, including credit accounts, balances, payment history, and certain public records, used to assess credit risk., Credit Score, A numerical estimate of a person's credit risk based on information in their credit report. Lenders use credit scores to help evaluate loan eligibility and interest rates., Creditworthy, Describes a borrower considered likely to repay debts based on factors such as credit history, income, existing obligations, and overall financial stability., Debt-to-income Ratio, The percentage of a borrower's gross monthly income used to pay monthly debt obligations, including housing expenses. DTI = Total Monthly Debt Payments ÷ Gross Monthly Income × 100., Deed of Trust, A legal document used in certain states to secure a real estate loan by placing legal title or a security interest with a trustee for the benefit of the lender until the debt is repaid., Default, Failure to fulfill a legal obligation under a loan agreement, such as failing to make required payments or violating other mortgage terms., Delinquency, The status of a loan when a borrower fails to make a required payment by its due date. Continued delinquency may eventually lead to default., Discount Point, An upfront fee paid to a lender, commonly at closing, to obtain a lower mortgage interest rate. One discount point equals 1% of the loan amount., Down Payment, The portion of a property's purchase price paid by the buyer from their own funds or other permitted sources rather than financed through the mortgage loan., Due-on-Sale Clause, A mortgage provision allowing the lender to require repayment of the outstanding loan balance if the borrower sells or transfers the property, subject to legal exceptions., Equal Credit Opportunity Act (ECOA), A federal law prohibiting discrimination in credit transactions based on protected characteristics, including race, color, religion, national origin, sex, marital status, age, or receipt of public assistance., Equity, The difference between a property's current market value and the outstanding debts or liens secured by it. Equity = Property Value − Outstanding Mortgage and Other Secured Debts., Fair Credit Reporting Act (FCRA), A federal law regulating the collection, use, and accuracy of consumer credit information and providing consumers rights to access and dispute information in their credit reports., Federal Housing Administration (FHA) Mortgage, A mortgage insured by the Federal Housing Administration and originated by an FHA-approved lender, designed to expand access to homeownership for qualifying borrowers., FHA-Insured Loan, A mortgage insured by the Federal Housing Administration, protecting the lender against certain losses if the borrower defaults. FHA loans often allow lower down payments than some conventional loans., Good-Faith Estimate, A mortgage disclosure form estimating settlement costs and certain loan terms. It was replaced by the Loan Estimate for most mortgage applications beginning in 2015 but remains in use for reverse mortgages., Government Mortgage, A mortgage insured or guaranteed by a federal government agency, such as FHA, VA, or USDA, to help eligible borrowers obtain financing., Gross Annual Income, The total income earned by an individual or household during one year before taxes and other deductions. Lenders generally consider qualifying borrower income rather than automatically counting every household member's income., Gross Monthly Income, The amount of income earned in one month before taxes, insurance, retirement contributions, and other deductions are taken out., Growing-Equity Mortgage (GEM), A fixed-interest-rate mortgage with scheduled increases in monthly payments, with the additional amounts applied toward principal to pay off the loan faster., Home Equity Line of Credit (HELOC), A revolving line of credit secured by the equity in a home, allowing borrowers to withdraw funds up to an approved limit, usually during a designated draw period., Hybrid Loan, An adjustable-rate mortgage that begins with a fixed interest rate for a specified number of years and then adjusts periodically based on market conditions., Index, A published financial benchmark used to determine interest rate adjustments on an adjustable-rate mortgage. The lender generally adds a margin to the index to calculate the new rate., Initial Interest Rate, The interest rate charged at the beginning of a loan, particularly an ARM, before any scheduled adjustments occur. It may be lower than later rates., Interest, The amount a lender charges a borrower for the use of borrowed money, usually expressed as an annual percentage of the outstanding principal., Jumbo Loan, A mortgage that exceeds the conforming loan limits established for purchase by Fannie Mae and Freddie Mac, generally requiring different underwriting standards., Junior Mortgage, A mortgage with a lower lien priority than another mortgage on the same property, meaning senior liens generally receive payment first in a foreclosure., Lease-Purchase Option, An arrangement in which a tenant leases a property and has the option to purchase it under specified terms within an agreed period. A true lease-purchase contract may instead obligate the tenant to buy., Lifetime Cap, The maximum amount an adjustable mortgage's interest rate may increase over the entire life of the loan, regardless of how much the underlying index changes., Liquid Asset, Cash or an asset that can be quickly converted into cash with little loss of value, such as money in checking or savings accounts., Loan Origination, The process of creating a new mortgage loan, including application, processing, underwriting, approval, and funding., Loan-To-Value (LTV) Ratio, The percentage of a property's value represented by the mortgage loan amount. LTV = Loan Amount ÷ Property Value × 100. Lenders generally use the applicable appraised value or purchase price under their loan rules., Maturity Date, The date on which the remaining balance of a loan becomes due and must be fully repaid under the loan agreement., Mortgage, A legal instrument that creates a lien on real property to secure repayment of a loan. The borrower generally retains title while the lender holds a security interest., Mortgage Broker, An individual or company that connects borrowers with mortgage lenders and assists in arranging loans but generally does not provide the loan funds itself., Mortgage Insurance, Insurance that protects a mortgage lender against certain losses if a borrower defaults. It is commonly required on conventional loans with smaller down payments and on FHA-insured mortgages., Mortgagtor, The borrower or property owner who grants a mortgage lien on real estate as security for repayment of a debt., Negative Amortization, A situation in which loan payments are insufficient to cover accrued interest, causing unpaid interest to be added to the principal and increasing the loan balance., Net Monthly Income, The amount of money a person receives each month after taxes and other payroll deductions, commonly called take-home pay., Origination Fee, A fee charged by a lender or loan originator for arranging and originating a mortgage loan, often expressed as a percentage of the loan amount., Owner Financing, A real estate financing arrangement in which the seller provides some or all of the financing to the buyer, who makes payments directly to the seller under agreed terms., Partial Payment, A mortgage payment that is less than the full amount currently due. The lender or servicer may hold, return, or apply it according to applicable law and loan servicing rules, PITI, An acronym for Principal, Interest, Taxes, and Insurance, the four common components of a homeowner's monthly mortgage housing payment., Point, A mortgage lending fee equal to 1% of the loan amount. For example, one point on a $200,000 loan equals $2,000., Pre-Approval, A lender's conditional determination that a borrower may qualify for a mortgage up to a specified amount after reviewing financial and credit information. It is not a final loan commitment., Pre-Qualification, A preliminary estimate of how much a borrower may be eligible to borrow, often based on self-reported income, debts, and other financial information with limited verification., Predatory Lending, Unfair, deceptive, or abusive lending practices that exploit borrowers, such as misleading loan terms, excessive fees, or loans designed without reasonable regard for repayment ability., Prepayment, Paying all or part of a loan's principal before it is scheduled to be due, potentially reducing interest costs and shortening the loan term., Prepayment Penalty, A fee charged under certain loan agreements when a borrower pays off a mortgage early or makes a substantial early principal payment. Such penalties are restricted or prohibited on many mortgage loans., Principal, The original amount of money borrowed or the remaining loan balance, excluding interest and other charges., Promissory Note, A legally enforceable written promise by a borrower to repay a specified debt according to stated terms, including the interest rate, payment schedule, and maturity date., Purchase Money Mortgage, A mortgage used to finance the purchase of real estate, secured by the property being purchased. The term may also refer specifically to seller-financed purchase debt., Qualified Mortgage, A mortgage that meets federal consumer protection standards designed to support the borrower's ability to repay, including restrictions on risky loan features and certain points and fees., Qualifying Guidelines, The standards lenders use to determine mortgage eligibility, including credit history, income, employment, assets, debt-to-income ratio, and property requirements., Qualifying Ratios, Percentages comparing a borrower's housing expenses or total debt payments to gross monthly income, used by lenders to evaluate repayment ability., Real Estate Settlement Procedures Act (RESPA), A federal law governing many residential real estate settlement transactions, requiring certain disclosures, prohibiting improper referral fees and kickbacks, and regulating aspects of mortgage servicing and escrow accounts., Redlining, An illegal discriminatory lending practice in which credit or mortgage services are denied or restricted in certain geographic areas because of the race, ethnicity, or other protected characteristics of their residents., Refinance, Replacing an existing mortgage with a new loan, often to obtain a different interest rate, change loan terms, or access property equity., Sales-Leaseback, A transaction in which a property owner sells the property and simultaneously leases it back from the buyer, allowing the former owner to continue occupying or using it., Second Mortgage, An additional mortgage secured by property that already has a first mortgage, with a lower lien priority than the first mortgage., Service Members Civil Relief Act, A federal law providing certain financial and legal protections to eligible military servicemembers, including interest rate limits on qualifying pre-service debts and protections against certain foreclosures., Servicer, A company responsible for administering a mortgage loan, including collecting payments, managing escrow accounts, providing statements, and handling certain borrower requests., Subordinate Financing, A loan or lien secured by property that has lower payment priority than an existing senior mortgage, such as a second mortgage or home equity loan., Subprime Loan, A loan made to a borrower with higher credit risk, often due to weaker credit history or other financial factors, and generally carrying less favorable terms or higher interest rates., Truth-In-Lending Act (TILA), A federal consumer protection law requiring lenders to disclose important credit terms and costs, including the annual percentage rate, finance charges, and repayment terms, so borrowers can compare credit offers., Underwritiing, The lender's process of evaluating a borrower's creditworthiness, income, assets, debts, and property information to determine whether a mortgage meets loan approval requirements., Uniform Residential Loan Application, The standardized mortgage application form, also known as Fannie Mae Form 1003, used to collect borrower, employment, income, asset, liability, and property information., VA Guaranteed Loan, A mortgage made by a private lender and partially guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, servicemembers, and certain surviving spouses., Veterans Affairs ( US Department of Veterans Affairs), The federal agency responsible for administering benefits and services for eligible veterans, service members, and their families, including the VA home loan guaranty program., Yield, The return earned on an investment, expressed as a percentage of the amount invested or its current value, depending on the calculation method., Mortgagee, The lender who receives a mortgage as security for a loan and has a legal claim against the property if the borrower fails to repay the debt.

Module Four: Financing

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