Glossary

• Adjustable Rate Mortgage (ARM):

  A mortgage having an interest rate which is usually initially lower than that of a mortgage with a fixed rate but is adjusted periodically according to the cost of funds to the lender.

• Amortize:

  To liquidate (a debt, such as a mortgage) by installment payments or payment into a sinking fund. Part of your payment is applied to principal and some to interest until your debt is paid in full.

• Appraisal:

  A valuation of property by the estimate of an licensed appraiser.

• APR (Annual Percentage Rate):

  Describes the interest rate for a whole year (annualized), rather than just a monthly fee/rate, as applied on a mortgage. It is a finance charge expressed as an annual rate.

• Bi-Weekly Payments:

  Thirteen payments per year made every two weeks. The net result is that your mortgage will be paid before the end of the term.

• Clear To Close:

  The step in the mortgage process when the borrowers can schedule their closing and all commitment conditions have been reviewed and accepted by the lender.

• Closing:

  Or settlement, is the final step in executing a real estate transaction. Transfer of title occurs at this time.

• Commitment Letter:

  A Loan Commitment Letter is the document an underwriter sends to the borrower once a loan is approved.

• Conventional Mortgage:

  A type of mortgage in which the underlying terms and conditions meet the funding criteria of Fannie Mae and Freddie Mac.

• Debt Ratio:

  Calculated by dividing the total monthly debt payments by the total gross monthly income.

• Deed:

  A formal legal document signed, witnessed, and delivered to effect a conveyance or transfer of property or to create a legal obligation or contract.

• Fixed Rate:

  An interest rate that does not change over the life of a loan.

• FHA (Federal Housing Administration) Mortgage:

  loan which is provided by an FHA approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford.

• Loan To Value (LTV):

  Ratio expresses the amount of a first mortgage lien as a percentage of the total appraised value of real property. For instance, if a borrower borrows $130,000 to purchase a house worth $150,000, the LTV ratio is $130,000/$150,000 or 87%.

• Mortgage:

  A loan secured by real property. Note- A written promise to pay a specific sum of money on a certain date. Also called promissory note.

• Pre-qualification:

  The act or process of determining the approximate amount a borrower will be able to borrow before he/she actually applies for a loan. Prequalification looks at the borrower's current income and debt to make this determination.

• Pre-Approval:

  A commitment by a mortgage lender to provide a loan with a certain monthly payment to a borrower. A lender offers pre-approvals in hopes that the borrower to whom it is offered will use that lender in securing a mortgage.

• PMI (mortgage insurance):

  An insurance policy that a mortgage holder buys on behalf of a lender, protecting the lender in the event of default on the mortgage. Most lenders require their mortgage borrowers to purchase PMIs if the mortgage's loan-to-value ratio is more than 80%.

• SONYMA:

  The State of New York Mortgage Agency (SONYMA) is a public authority created in 1970 by the state government of New York to provide affordable homeownership to low- and moderate-income New Yorkers. It offers affordably priced fixed-rate mortgages through several mortgage programs for eligible homebuyers. Each program offers competitive interest rates, low down payments, down payment assistance and no prepayment penalties. SONYMA offers its programs through a network of participating lenders throughout New York state who contract with the agency to offer SONYMA's programs to their customers.

• USDA:

  USDA stands for United States Department of Agriculture. USDA mortgages provide low-cost insured home mortgage loans. Income and property price limits apply as well as geographical restrictions.

• VA:

  Department of Veteran Affairs provides mortgages for qualified veterans and spouses.