:: It's Greek to me!

Terms to know

The mortgage industry is full of terms that are foreign to many people. The following glossary of terms should help you translate the mortgage language into English and help you make sense of the mortgage process.

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Jumbo Loan
Loan with an initial balance greater than $300,700.

Jumbo Pricing
Refers to the fact that rates are generally slightly higher on jumbo loans.

Loan-to-Value (LTV)
Ratio of liens versus value of property or sales price. Ex. 80,000 owed on a property worth 100,000 equals an 80% LTV

Lock-in Period
Time period that a rate is protected for during the loan process

Locking in
Choosing to protect a particular rate and program for a specific period of time

Mortgage Insurance (MI)
Insurance which protects the LENDER against default. Generally the higher the loan-to-value the higher the monthly premium.
Mortgage -- Document. This document signed at closing is the collateralization of the property to the note or loan.

Note
Document. This document signed at closing is the promise by the signers to repay the loan.

Origination Fee
1% of the loan amount. Can be avoided by paying a higher rate; typically is tax deductible.

Odd Days Interest/Per Diem Interest
Collected at closing, it is money collected/refunded to borrower to synchronize the closing to the monthly payments

Paying Points
Money paid upfront to lower the interest rate. Rule of thumb - breakeven point is (where monthly savings meets/exceeds money paid upfront) usually around 60 payments or 5 years. This means that in many cases paying points will pay off as long as you do not sell or refinance your loan before the breakeven point. (actual breakeven point may vary, please talk to us about your exact situation) Some niche programs and products may require points to be paid.

Piggy Back
A second mortgage closed at the same time as a first mortgage. Usually purpose is to avoid mortgage insurance, jumbo pricing, or for future needs.

PITI
Monthly payment. Stands for Principal, Interest, Tax escrow, Insurance (both hazard and mortgage) escrow

Pre-Approval
Based on documented income, assets, and credit.

Pre-paids
Group of items paid at closing including monies to set up the escrow account and to pay prepaid or odd days interest.

Pre-Qualification
Based on stated income, assets and debt. Information not verified, not as useful or informative as a Pre-Approval.

Pre Payment Penalty
An option on certain loan types. A benefit in that the rate is lower on these products compared to other similar products.

Property Taxes
Amount of tax due on a property. Usually is collected as part of the escrow portion of the monthly payment, with the lender being responsible to forward the escrowed money as the bills come due on May 15 and Oct 15.

Purchase Agreement
Contract between buyer and seller outlining the terms of the agreement.

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