Mortgage Dictionary

Words to Know

During your home-buying experience, you may come across terms that you’re not that familiar with. It’s a good idea to have a basic knowledge of these words because it could help your understanding of the process and make you feel less intimidated.

1003 form

commonly used mortgage loan application developed by Fannie Mae. Sometimes called the Uniform Residential Loan Application.

Amortization

Payment of debt in regular, periodic installments of principal and interest, opposed to interest-only payments.

Application Fee

This is the fee charged by the lender to cover a portion of the costs of processing a loan application.

Appraisal

An opinion of real estate value based upon a factual analysis. An estimation of value by a disinterested person of suitable qualifications.

Assessed value

a value determined by local government assessors and used to calculate annual property or real estate taxes.

Borrower

the individual or individuals extended a loan and mortgage for the purchase of a house and/or property. Borrower is responsible for making all payments and fees associated with the loan over the life of the loan.

Closing

Usually the last step in buying a home. Documents are signed, the balance of the loan costs is calculated, funds are disbursed, and the transaction is completed.

Closing Costs

Expenses incidental to a purchase of real estate, such as loan fees, title fees, appraisal fees, etc.

Closing statement

an itemized list of closing costs.

Co-borrower

a borrower with good credit that agrees to take on shared responsibility for a home loan so that the primary borrower may purchase property.

Commitment letter

a document from a lender to a borrower that officially lays out the terms of a loan.

Deed in Lieu

If the property has been listed for a period of time with no activity, a lender may accept the deed to the property as full or partial settlement for the debt, to avoid foreclosure proceedings. A deed in lieu may not be an option for borrowers who can still make their mortgage payments.

Earnest Money

A deposit of money accompanying an offer to buy property to show good faith, generally credited to the buyer at closing.

Equity

the measurable value of a home or property above and beyond that owed on a loan. A value upon which many homeowners often borrow.

Fixed rate mortgage

a conventional mortgage that has a fixed interest rate over the life of the loan. Monthly payments are the same from month to month.

Forbearance

The lender's postponement of legal action when a borrower is delinquent. It is usually granted when a borrower makes satisfactory arrangements to bring the overdue mortgage payments up to date.

Foreclosure

The legal process where a property may be sold and the proceeds of the sale applied to the mortgage debt. A foreclosure occurs when the loan becomes delinquent because payments have not been made or when the borrower is in default for a reason other than the failure to make timely mortgage payments.

Late Charge

If your mortgage payment is late, you may be charged a late fee. Most mortgage contracts include a grace period of fifteen days after which time DNH will assess the fee. Late fees can only be assessed in the amount specifically authorized by mortgage documents.

Loan-to-Value (LTV)

The loan amount as a percentage of the purchase price or, in the case of a refinance, appraised value. For example, a 95% LTV is the same as putting 5% down, or having 5% equity.

Mortgage Pre-Approval Service

A service offered by many lenders that allows you to get a preliminary approval for financing before finding a house to buy. Requires credit check and verification of employment, income, and assets.

Mortgage Pre-Qualification Service

A service offered by many lenders that allows you to pre-qualify for financing before finding a house to buy. This is based on a credit check and customer providing information and does not include a verification of employment, income, and assets.

Origination Fee

A fee charged by the lender for making a real estate loan—usually a percentage of the amount loaned, such as 1%. Not to be confused with an application fee.

Principal

the amount borrowed on a home loan.

Principal balance

the amount currently owed on a home loan.

PITI

The total amount of your monthly home loan payment including principal, interest, taxes, and insurance(s).

Refinance

Replacing an existing loan with a new one to get a lower rate, switch from one loan type to another, or convert equity to cash. A refinance loan will involve various loan fees, just as with any other mortgage.

Term

The number of years before a loan is paid in full; 15-, 20-, 25-, and 30-year terms are the most common for home mortgages.

Title

The evidence of ownership of a property.

Title Insurance

An insurance policy that insures the quality of the title and insures the lien priority of the mortgage.

Title Search

A review of all recorded documents affecting a specific piece of property to determine the present condition of the title.

Underwriting

The process by which credit and economic factors are used to determine whether a borrower qualifies for a loan.

Warranty Deed

A legal document used to convey title.