Amortization: Amortization is a financial concept that refers to the gradual repayment of a loan over time through regular payments. These payments are typically made monthly and include principal and interest components.

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APR (Annual Percentage Rate): APR is a comprehensive measure of the cost of borrowing money, expressed as an annualized percentage. It represents the total annual cost of a loan or credit product, including the interest rate and any additional fees or charges. Other Fees may include – origination, discount points, administrative, title insurance, and other costs imposed by the lender.

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Appraisal: A professional assessment of a property's market value conducted by a licensed property appraiser. This process provides an objective estimate of a property's worth based on various factors such as location, condition, features, and recent comparable sales in the area.

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Appreciation: Appreciation of a home refers to the increase in a property's value over time.

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Assessed Value:  Assessed value is the valuation of a property by a government or municipal assessor to calculate property taxes. This value is often lower than the property's market value and is used to determine how much the property owner will owe in annual property taxes. In Florida, this is the County Property Appraiser's office.

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Buydown of the Interest Rate: The borrower pays an upfront fee or discount points to reduce the interest rate on their loan for a specified period or the entire loan term. This technique can lower monthly mortgage payments, making it an attractive option for borrowers who want to save money on interest costs.

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Cash to Close: Cash to Close refers to the amount of money a homebuyer needs to bring to the closing table to complete the purchase of a property. This amount includes the down payment, closing costs, and any other fees required to finalize the real estate transaction.

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Certificate of Title:  The Certificate of Title identifies the legal owner(s) of the property.

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Closing: Closing is the final step in the home-buying process where the property is officially transferred from the seller to the buyer. It involves the completion of all legal and financial transactions necessary to finalize the purchase.

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Closing Costs: Closing Costs are the expenses and fees associated with finalizing a real estate transaction and transferring ownership of a property from the seller to the buyer. They vary based on loan type and how the home was paid for cash or loan.

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Closing Disclosure: The Closing Disclosure is a key document in the home-buying process, provided by the lender to the borrower at least three business days before closing on a mortgage. It outlines the final terms of the loan and details the actual costs of the transaction, allowing borrowers to review and confirm all financial aspects before the closing meeting.

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Contingency: In real estate, a contingency is a condition that must be met for a home purchase to proceed. Contingencies are used to protect both buyers and sellers by allowing them to back out of the transaction or negotiate terms if certain conditions are not satisfied.

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Conventional Loans: Adhere to the loan limits and guidelines set by Fannie Mae and Freddie Mac, two government-sponsored enterprises (GSEs) that buy and securitize mortgages.

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Credit Report: A Credit Report is a detailed record of an individual's credit history, compiled by credit bureaus. It provides information about a person's creditworthiness and financial behavior, which lenders use to assess the risk of lending money or extending credit. The three credit bureaus utilized in the mortgage industry are Experian, TransUnion, and Equifax.

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Credit Report Differences:  Mortgage companies utilize a FICO report that is provided by the 3 credit bureaus. It has a range of 300 – 850 and has a different scoring model than the credit reports an individual can receive on their own. It usually has stricter criteria and focuses on elements important to a mortgage lender. The credit report that is offered free to individuals is typically meant for educational purposes and can vary greatly from the credit report used for the mortgage.

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Debt-to-Income Ratio: (DTI) compares an individual's total monthly debt payments to their gross monthly income, expressed as a percentage. There a different ratio guidelines based on the loan type utilized.

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Deed: A Deed is a legal document used in real estate transactions to convey ownership or interest in a property from one party to another. It serves as a formal written agreement that provides evidence of the transfer and outlines the specific details of the transaction. Deeds are essential in establishing and proving property ownership, and they must meet certain legal requirements to be valid and enforceable. In Florida, they are done in the county in which they reside.

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Deed In Lieu of Foreclosure:  A Deed in Lieu of Foreclosure is a legal process where a homeowner voluntarily transfers the ownership of their property to the lender to avoid foreclosure. This option is often considered when the homeowner is unable to continue making mortgage payments and wants to avoid the lengthy and damaging foreclosure process.

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Down Payment: Down payment is the initial upfront payment made by the buyer when purchasing a home. It is identified as a percentage of the purchase price.  For instance, 20% down on a $200,000 home purchase is $40,000, which would make the loan amount $160,000.

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Down Payment Key Aspects:

1. Initial Equity in the Home:  The down payment provides the buyer with immediate equity in the property. Equity is the difference between the property's market value and the outstanding loan balance.

2. Reduced Loan Amount: The down payment reduces the amount of the loan on the property. The higher the down payment the lower the loan amount and therefore the monthly payment is less.

3. Lender Confidence: A higher down payment is one factor that reduces the risk to the lender and improves the likelihood of loan approval.

4. ImpactsPrivate Mortgage Insurance: A down payment of 20% or more will not require mortgage insurance. In addition, if the down payment is less than 20%, the amount of mortgage insurance is less if an individual puts down 15% versus 10% or 5%.

 

Private Mortgage Insurance: A down payment of 20% or more will not require mortgage insurance. In addition, if the down payment is less than 20%, the amount of mortgage insurance is less if an individual puts down 15% versus 10% or 5%.

 

Earnest Money Deposit: Earnest Money Deposit is a sum of money paid by a buyer to demonstrate their serious intent and commitment to purchase a property. It serves as a good faith gesture to the seller that the buyer is earnest about moving forward with the purchase and helps to secure the property while the transaction is being finalized.

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Escrow: Escrow is where lenders hold money for your property taxes or homeowners’ insurance. Throughout the year, the lender will set aside a portion of your monthly payment for property taxes and home insurance. When these bills are due, the funds will come out of your escrow account when the lender makes the payment.

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Fannie Mae: or the Federal National Mortgage Association (FNMA), is a government-sponsored enterprise (GSE) that plays a crucial role in the U.S. mortgage market. Its primary function is to provide liquidity, stability, and affordability to the housing market by purchasing and guaranteeing mortgages.

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Federal Housing Administration (FHA): - is a U.S. government agency that provides mortgage insurance on loans made by approved lenders to borrowers with low to moderate incomes. The FHA’s mission is to make homeownership more accessible by providing insurance that protects lenders against losses if a borrower defaults on their mortgage.

 

Fixed or Adjustable Rates:

• Fixed-Rate Mortgages (FRMs): Interest rates remain constant throughout the loan term, offering predictability in monthly payments.

• Adjustable-Rate Mortgages (ARMs): Interest rates can fluctuate based on market conditions, often starting with a lower initial rate before adjusting periodically. Also, can be called a floating rate.

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Forbearance: Forbearance is a temporary arrangement between a borrower and lender that allows the borrower to pause or reduce their mortgage payments for a specified period without facing foreclosure. When the forbearance period has ended, the borrower usually has to repay the payments missed.

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Foreclosure: Foreclosure is a legal process through which a lender seeks to recover the balance of a loan from a borrower who has defaulted on their mortgage payments by forcing the sale of the property used as collateral for the loan. The foreclosure process allows the lender to recoup the amount owed on the mortgage by selling the property at auction or through other means.

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Freddie Mac: Freddie Mac officially known as the Federal Home Loan Mortgage Corporation (FHLMC), is a government-sponsored enterprise (GSE) that plays a key role in the U.S. housing finance system. Like Fannie Mae, Freddie Mac helps to stabilize the housing market by providing liquidity, stability, and affordability through the purchase and securitization of mortgages.

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Home Equity:  Home Equity refers to the portion of a home's value that the homeowner owns. It represents the difference between the current market value of the property and the outstanding balance of any mortgage or other liens against it.

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Home Equity Line of Credit (HELOC):  HELCO is a revolving credit line that allows homeowners to borrow against the equity in their property. It functions similarly to a credit card, where the borrower has access to a line of credit and can withdraw funds as needed, up to a certain limit.

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Home Inspection: Home Inspection is a thorough examination of a property's condition conducted by a professional inspector. It typically occurs during the home buying process to assess the current state of the property and identify any issues or potential problems that may need attention. The inspection helps buyers make informed decisions and negotiate repairs or adjustments with the seller.

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Homeowners Association (HOA):  HOA is an organization in a residential community or condominium that manages and maintains common areas and enforces community rules and regulations. The HOA is typically established by the developer of a community or condominium and is composed of homeowners who pay dues to fund its operations.

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Private Mortgage Insurance: (PMI) is a type of insurance that protects lenders against the risk of a borrower defaulting on a mortgage loan. It enables lenders to take on more risk by providing loans to borrowers who may not have the standard 20% down payment.

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Homeowner’s Insurance: Home Insurance is a type of property insurance that provides financial protection for homeowners against various risks associated with owning and living in a home. It covers both the structure of the home and the personal belongings inside, as well as providing liability protection.

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Interest Rate: Insurance Rate is the percentage of the loan amount that a lender charges a borrower for borrowing money. It is expressed as an annual percentage of the principal (the amount borrowed) and determines the cost of the loan over time.

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Investment Property:  Investment Property is a property purchased to generate income or capital appreciation rather than for personal use. These properties are typically bought by individuals or businesses to earn rental income, benefit from property value appreciation, or both.

 

Jumbo Loans: Jumbo Loan is a type of mortgage that exceeds the conforming loan limits set by government-sponsored enterprises (GSEs) like Fannie Mae and Freddie Mac. Because jumbo loans are not eligible for purchase by these GSEs, they are considered riskier for lenders and therefore have stricter credit requirements and higher interest rates.

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Loan Origination: Loan Origination creates a new loan agreement between a borrower and a lender. It involves several key steps from the initial application through to the closing of the loan. The process is crucial as it determines the terms of the loan and ensures all necessary documentation is in place.

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Loan Term: Loan Term refers to the length of time over which a borrower is obligated to repay a loan. It is a critical factor in determining the size of the monthly payments and the total interest paid over the life of the loan.

 

Loan-to-Value Ratio: (LTV) is a financial metric used in the mortgage industry to assess the risk involved in lending money to purchase a property. It is expressed as a percentage and represents the ratio of the loan amount to the appraised value or purchase price of the property, whichever is lower.

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Manufactured Home:  Manufactured Home is a type of prefabricated home that is built in a factory and then transported to its intended site. Unlike traditional site-built homes, manufactured homes are constructed on a steel chassis and are usually delivered in one or more sections. Manufactured homes are built according to the Federal Manufactured Home Construction and Safety Standards (HUD Code), which ensures quality, safety, and durability. These standards cover aspects like structural design, energy efficiency, and fire safety.

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Mortgage Insurance: Mortgage Insurance is a type of insurance designed to protect the lender if a borrower defaults on their mortgage loan. It is typically required when the borrower has a smaller down payment and, therefore, poses a higher risk to the lender.

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Mortgage Points: Mortgage Points (also known as discount points) are fees paid directly to the lender at closing in exchange for a reduced interest rate on the mortgage. Essentially, one point equals 1% of the loan amount. Paying points can lower the interest rate on the loan, which can reduce the monthly mortgage payments and the total amount of interest paid over the life of the loan. FYI – One discount point will not lower the interest rate by one percentage point.

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Non-Qualified Loan: A non-qualified loan (non-QM loan) is a type of mortgage that does not meet the criteria set forth by the Consumer Financial Protection Bureau (CFPB) under the Qualified Mortgage (QM) rules. Non-QM loans are designed for borrowers who may not fit the standard income or credit verification molds used in traditional mortgage lending but are nonetheless creditworthy.

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Owner Financing: Owner Financing (also known as seller financing) is a real estate arrangement where the property seller provides a loan to the buyer to purchase the property, instead of the buyer obtaining a traditional mortgage from a bank or other financial institution. This arrangement allows the buyer to make payments directly to the seller, typically with agreed-upon terms and conditions.

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Payoff Amount: Payoff Amount is the total amount required to fully repay a loan or mortgage at a specific point in time. It includes the remaining principal balance, any accrued interest, and potentially additional fees or charges.

 

Preapproval: Preapproval is a process in which a loan originator evaluates a borrower's financial information to determine the amount of mortgage they are likely to be approved for before the borrower formally applies for the loan. This includes reviewing documents that validate the borrower's financial capability. This process gives buyers an idea of how much they can afford to borrow and strengthens their position when making an offer on a home.

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Prepayment Penalty: Prepayment Penalty is a fee charged by a lender to a borrower who pays off their loan or mortgage early, either partially or in full. This penalty compensates the lender for the loss of expected interest income that would have been earned over the full term of the loan.

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Principal: Principal refers to the original sum of money borrowed or invested, excluding interest or other charges. In the context of loans and mortgages, it represents the amount of the loan that must be repaid, not including the interest.  

 

(Additional) Principal Payment:  An additional payment against the principal on the loan. The benefit is that the principal is reduced, therefore the amount of interest accrued is less than scheduled. It also pays off the loan sooner.

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PITI: -  PITI stands for Principal, Interest, Taxes, and Insurance. It represents the total monthly mortgage payment that a borrower makes, encompassing all of these components. Each element of PITI contributes to the overall cost of homeownership and is typically included in the monthly mortgage payment.

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Property Taxes: Property Taxes are local taxes imposed on real estate by municipal or county governments. They are based on the assessed value of the property and are used to fund various public services and infrastructure, such as schools, police and fire departments, road maintenance, and public facilities. In Florida, there are two parts to the tax bill. Ad Valorem and Non-Ad Valorem.

Ad Valorem is a Latin term meaning "according to value." In the context of taxation, it refers to taxes based on the assessed value of property or goods. The amount of the tax is proportional to the value of the property or goods being taxed.

Non-ad valorem refers to taxes or assessments that are not based on the value of property or goods. Instead, these taxes are based on other factors such as property size, usage, or a fixed fee. Non-ad valorem taxes are often used to fund specific services or infrastructure projects.

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Purchasing Agreement: Purchasing Agreement, also known as a sales contract or buy-sell agreement, is a legally binding document that outlines the terms and conditions of a sale between a buyer and a seller. In the context of real estate, a purchase agreement details the terms of the sale of a property and is essential for completing the transaction.

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Rate Lock: A rate lock is an agreement between a borrower and a lender that guarantees a specific interest rate on a mortgage loan for a set period. This protects the borrower from interest rate fluctuations during the lock period, ensuring that they will receive the agreed-upon rate regardless of market changes before closing.

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Real Estate Agent: A real estate agent is a licensed professional who represents buyers or sellers in real estate transactions. Their role is to facilitate the buying, selling, or renting of properties and provide expertise and guidance throughout the process.

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Real Estate Settlement Procedure Act (RESPA):  RESPA is a federal law designed to protect consumers during the home buying and settlement process. Enacted in 1974, RESPA requires disclosure of settlement costs, prohibits certain practices, and ensures that consumers receive fair and transparent information about their real estate transactions.

 

Refinancing: Refinancing refers to the process of replacing an existing loan with a new one, typically to obtain better terms, such as a lower interest rate, a different loan term, or to access home equity. The new loan pays off the existing loan, and the borrower then repays the new loan under its terms.

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Repayment Period:  Repayment Period refers to the length of time over which a borrower agrees to repay a loan. It is a critical component of the loan terms and impacts the size of the monthly payments and the total interest paid over the life of the loan.

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Reverse Mortgage: Reverse Mortgage is a type of loan available to seniors aged 62 or older that allows them to convert a portion of their home’s equity into cash. Unlike traditional mortgages, where the borrower makes payments to the lender, with a reverse mortgage, the borrower does not make any payments on principal and interest. They continue to pay taxes, home insurance, and any HOA/other fees associated with the property. The loan is repaid when the borrower moves out of the home, sells the property, or passes away.

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Right Of Rescission: Right of Rescission is a legal right that allows borrowers to cancel or "rescind" a loan or credit agreement within a specific time frame after signing the contract. This right provides a cooling-off period for borrowers to reconsider their decision and is primarily applicable to certain types of loans.

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Seller Concessions: Seller concessions are incentives or contributions provided by a seller to help the buyer with the costs associated with purchasing a home. These concessions can make the property more attractive to buyers by reducing their out-of-pocket expenses or covering certain costs.

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Short Sale: Short Sale is a real estate transaction in which a property is sold for less than the amount owed on the mortgage. This typically occurs when the homeowner is facing financial difficulties and cannot continue to make mortgage payments, and the property’s market value has fallen below the remaining mortgage balance.

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Title:  A title, In real estate, title refers to the legal right of ownership and control over a property. It represents the bundle of rights and interests a person has in a property, including the right to use, sell, lease, or otherwise transfer ownership. The concept of title is essential in real estate transactions, as it ensures that the seller has the legal authority to transfer ownership and that the buyer receives clear and undisputed ownership.

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Title Insurance: Title Insurance is a type of insurance that protects property buyers and lenders from financial losses due to defects or issues with the title of a property. It provides coverage for problems that may arise after the property purchase, which were not discovered during the title search process.

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Truth in Lending Act (TILA): TILA is a federal law designed to protect consumers in credit transactions by requiring clear and accurate disclosure of loan terms and costs. Enacted in 1968 and enforced by the Consumer Financial Protection Bureau (CFPB), TILA aims to promote informed borrowing decisions and ensure transparency in lending.

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Underwriting: Underwriting is the process used by lenders and financial institutions to evaluate the risk of lending money to a borrower. It involves assessing the borrower’s financial stability, creditworthiness, and the overall risk associated with the loan application. The goal is to determine whether to approve or deny the loan request based on the borrower’s ability to repay and the property’s value.

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Unsecured Loan: An unsecured loan is a type of loan that is not backed by collateral, meaning the borrower does not need to provide any specific asset (like a car or house) as security for the loan. Instead, unsecured loans are granted based on the borrower's creditworthiness and ability to repay.

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USDA Loan:  U.S. Department of Agriculture loan is a government-backed mortgage designed to help low- to moderate-income individuals and families purchase homes in rural and suburban areas. The USDA loan program, administered by the U.S. Department of Agriculture, aims to promote homeownership and community development in areas with low population density.

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VA Loan:  (US Dept of Veterans Affairs loan) is a government-backed mortgage designed to help veterans, active-duty service members, and certain members of the National Guard and Reserves, as well as some surviving spouses, purchase, build, or refinance a home.