Most Common Mortgage Terms

Mortgage : The charging of real property by a debtor to a creditor as security for a debt (esp. one incurred by the purchase of the property), on the condition that it shall be returned on payment of the debt within a certain period. A mortgage loan is a loan that a bank or lender gives you to help finance the purchase of a house. It is most advantageous to borrow approximately 80% of the value of the house or less. The house you buy acts as collateral in exchange for the money you are borrowing to finance the mortgage for a house. Home Loan: A loan advanced to a person to assist in buying a house or condominium. Government Loan: Loan insured by Government. FHA Loan : Loan insured by Federal Housing Administration. standard, 203(k) renovation loans, Energy Efficient mortgages and Reverse mortgages VA: Veterans Administration loans USDA: Loan Insured by US Dept. of Agriculture. rural home loans. "USDA loans" = "Rural Housing Loans" = "Section 502 loans" Conventional loan: Conventional loan is a term most lenders use when referring to loan types eligible for purchase by Fannie or Freddie. Technically, however, a conventional loan is any mortgage that is not a governmentguaranteed or insured FHA, VA or USDA loan. Conforming and Non-conforming loans The terms and conditions of a conforming loan meet Freddie Mac and Fannie Mae standards and are eligible for purchase by the GSEs. Non-conforming loans are conventional (not government-insured) loans that do not meet GSE guidelines. Examples are Jumbo, sub-prime, construction and portfolio loans. A good faith estimate, referred to as a GFE, must be provided by a mortgage lender or broker in the United States to a customer, as required by the Real Estate Settlement Procedures Act (RESPA). A good faith estimate, referred to as a GFE, gives you an estimate of your settlement charges and loan terms. and must be provided within 3 business days of applying for a loan. These mortgage fees, also called settlement costs or closing costs, cover every expense associated with a home loan, including inspections, title insurance, taxes and other charges. A good faith estimate is a standard form which is intended to be used to compare different offers (or quotes) from different lenders or brokers. The good faith estimate is only an estimate. The final closing costs may be different; however the difference can only be 10% of the third party fees. Once a good faith estimate is issued the lender/broker cannot change the fees in the origination box. Term of the mortgage: The length of time a homeowner has to repay his home loan. Terms for conventional mortgages can be as short as 15 years and extend up to 20 or 30 years. Mortgage terms depend largely on a. Borrower criteria established by private financial institutions and

b. borrower income and preferences. A mortgage payment : A mortgage payment is composed of four parts: principal, interest, taxes and insurance. It is normally paid on a monthly basis. California Down Payment Assistance Program, referred to as CHDAP. This is a California state programs that help First time Home Buyers with down payment assistance. http://www.under640ficoscoreloans.com/Pages/CHDAPLoans.aspx this website has an article about the CHDAP program. California Homebuyer's Downpayment Assistance Program (CHDAP) Eligibility for CHDAP 1. Borrower requirements 2. Property requirements. An adjustable-rate mortgage (ARM) is appealing when the homeowner expects to sell their home in less than 10 years or who plan to refinance in a few years when they can qualify for a better rate, possibly on a fixed-rate mortgage. FICO Score myFICO is the consumer division of FICO. Since its introduction 20 years ago, the FICO Score has become a global standard for measuring credit risk in the banking, mortgage, credit card, auto and retail industries. 90 of the top 100 largest U.S. financial institutions use the FICO Score to make consumer credit decisions. To get home purchase loans acquired by Fannie Mae with less than 20% down payments, FICO scores of 740 or higher are generally needed. Sales Price = Maximum mortgage + Downpayment Interest only mortgage option: An option attached to a mortgage, which allows the borrower to pay only the interest for some period. A mortgage is interest only if the monthly mortgage payment does not include any repayment of principal. So long as the payment remains interest only, the loan balance remains unchanged. One purpose is to increase affordability by reducing mortgage payments in the early years Another purpose of interest-only is to maximize investment leverage. A borrower earning 12% on investments wants to borrow as much at 6.25% as possible. Why pay down the mortgage to earn 6.25% when you can invest it to earn 12%? Borrowers who have other debt at high interest rates might rationally select an interest-only option on their first mortgage so they can accelerate repayment of the more costly debt. Amortization is the process of paying off a loan. The loan balance gradually decreases as you make interest and principal payments on the loan. Refinance: finance again, typically with a new loan at a lower rate of interest. To reduce interest costs with a lower mortgage interest rate. To reduce the risk from an adjustable-rate by switching to a fixed-rate loan To liquidate equity into cash (cash-out refinance) TO increase the loan term and reducing monthly payments Mortgage Loan Modification is a permanent change in one or more of the terms of a Borrower's loan, allows the loan to be reinstated, and results in a payment the Borrower can afford.

Homeowners facing a major financial hardship that could lead to a foreclosure may work with a lender to get a loan modification -- sometimes called a mortgage modification, workout plan or restructuring -which will change the terms of the mortgage loan so the borrower can afford the payments. Reduced Documention Loans - There are many programs available that are for people who may not qualify for the standard full documentation required by many different lenders. Some of reduced documentation loans compensate for the lack of supportive documentation that may need to be required. Some of the examples are as follows: Mortgage Lenders: The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing. There are basically three types of lenders; Direct Lender Correspondent Lender Lenders that broker the deal and work through the wholesale division of the lender. The mortgage lender look for three main things: a steady income, a down payment, and a solid credit history Conventional mortgage vs FHA mortgage(non conventional) # interest rate does not change for conventional mortgage. Mortgage insured by private insurers. Low interest rate, larger down payment. # FHA mortgage conforms to the lending standards established by the Federal National Mortgage Association (Fannie Mae), which change periodically. FHA mortgages are insured by the credit of the federal government. Higher interest rate, smaller down payment. IF YOU HAVE MORE MONY AND IF YOU CAN PAY 20% DOWNPAYMENT YOU CAN HAVE A CONVENTIONAL MORTGAGE. IF YOU DON'T HAVE MONEY TO PAY LARGER DOWNPAYMENT YOU STILL CAN HAVE MORTGAGE LOAN WHICH WOULD BE NON CONVENTIONAL. CalHFA VS FHA What is CalHFA? It stands for California Housing Finance Agency. CalHFA loans are funded from the sale of California bonds which makes it different from FHA and conventional loans. FHA stands for Federal Housing Administration Fixed rate mortgage vs adjustable rate mortgage Build equity faster instead of going for 30 years fixed price mortgage go for 15 years fixed price mortgage. No cost loan vs standard loan. Payable Fees In Connection with Home Loan Loan Origination Fee This fee is a charge for originating or creating the loan Loan Discount

This is an upfront charge paid to the lender to get a lower mortgage rate the same as buying the rate down Appraisal Fee This is the cost of the independent appraisal. It is usually paid by the buyer. Credit Report This is the cost of the credit report Lender's Inspection Fee This is the lender's cost of inspecting a property some may double check the appraisal provided by an independent appraiser Mortgage Broker Fee This is the upfront charge that a mortgage broker charges. Brokers can also earn a rebate from the lender which is not listed here Tax Related Service Fee Lender fee, usually small, for handling tax related matters Processing Fee This is the charge for processing the loan collecting the buyer's application, running credit, collecting pay stubs, bank statements, ordering appraisal, title, etc. Underwriting Fee This is the cost of the loan underwriter (approver) Wire Transfer Fee This is the cost of wiring the money around, which is usually done by escrow.

Source: 1. http://homeloansmortgage.wordpress.com/mortgage-terms/ 2. http://loancityhomeloans.com