Mortgage Term Glossary

1. Adjustable rate- An interest rate that changes periodically in relation to an index.  Payments may increase or decrease accordingly.
2. Annual Percentage Rate (APR) - The cost of credit on a yearly basis, expressed as a percentage.  Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z.  Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount that the interest rate stipulated in the mortgage note.  Does not include title insurance, appraisal, and credit report.
3. Appraisals- A fee charged by an appraiser to render an opinion of market value as of a specific date.  Required by most lenders to obtain a loan.
4. Assumption of Mortgage - The agreement of a purchaser to become primarily liable for the payments on a mortgage loan.  Unless otherwise specified by the lender, the seller may remain secondarily liable for payments.
5. Closing costs - Any fees paid by the borrowers or sellers during the closing of the mortgage loan.  This normally includes an origination fee, discount points, attorney’s fees, title insurance, survey, and any items which must be prepaid, such as taxes and insurances escrow payments.
6. Contract of Sale - The agreement between the buyer and seller on the purchase price, term and conditions necessary to both parties to convey the title to the buyer.
7. Credit Limit - The maximum amount that you can borrow under a home equity plan.
8. Discount Points (or Points) - The amount paid either to maintain or lower the interest rate charged.  Each point is equal to one percent of the loan amount.
9. Down Payment - The difference between the purchase price and that portion of the purchase price being financed.  Most lenders require the down payment to be paid from the buyers own funds.  Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.
10. Equity - The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.
11. First Mortgage - A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).
12. Fixed rate - An interest rate which is fixed for the term of the loan.  Payments as well are fixed at one amount.
13. FHA loan- More appropriately termed “FHA insured loan”.  Is a loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.
14. Good Faith Estimate - A written estimate of closing costs which a lender must provide you within three days of submitting an application.
15. Grace Period - A period of time during which a loan payment may be paid after its dues date but not incur a late penalty.  Such late payments may be reported on your credit report.
16. Home Equity line of credit - A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified.  Repayment is secured by the equity in your home.  Simple interest is usually tax-deductible.  Often used for home improvements, major purchases, or expenses, and debt consolidation.
17. Home Equity Loan - A fixed or adjustable rate loan obtained for a variety of purposed, secured by the equity in your home.  Interest paid is usually tax-deductible.  Often used for home improvement or freeing of equity for investment in other real estate or investment.  Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.
18. Hazard Insurance - A contract between purchaser and insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, et.), for a premium.
19. HUD/Settlement Statement - A form utilized at loan closing to itemize the costs associated with purchasing the home.  Used universally by mandate of HUD, the Department of Housing and Urban Development.
20. Interest Rate- The periodic charge, expressed as a percentage, for use of credit.
21. Loan to Value Ratio (LTV) - A ratio determined by dividing the sales price or appraised value into the loan amount, expressed a as percentage.  For example, with the sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80% may require Private Mortgage insurance.
22. Lock or lock in - A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period.  Provides protection should interest rate rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds your have borrowed.
23. Minimum Payment - The minimum amount that you must pay, usually monthly, on a home equity loan or line of credit.  In some plans, the minimum payment may be “interest only”, (simple interest).  In other plans, the minimum payments may include principal and interest.
24. Mortgage Insurance (MIP or PMI) - Insurance purchased by the borrower to insure the lender or the government against loss should you default.  MIP, or mortgage insurance premium, is paid on government-insured loans (FHA or VA loans) regardless of your loan to value ratio.  Should you pay off a government insured loan in advance of maturity, you me be entitle to a small refund of MIP.  PMI or private mortgage insurance is paid on those loans which are not government insured and whose LTV is greater than 80%.  When you have accumulated 20% of your homes value as equity, you lender may waive PMI at your request.  Please note that such insurance does not constitute a form of life insurance which pays off the loan in case of death.
25. Mortgage Loan - A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan.  The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.
26. Mortgagee - The lender in a mortgage loan transaction.
27. Qualifying Ratios - Comparisons of a borrower’s debts and gross monthly income.
28. Title - the written evidence that proves the right of ownership of a specific piece of property.
29. Title Insurance - Protection for lenders of homeowners against financial loss resulting from legal defects in the title.
30. Underwriting - The process of verifying data and approving a loan.
31. Variable Rate - An interest rate that changes periodically in relation to an index.  Payments may increase or decrease accordingly.
32. VA Loan- More appropriately termed “VA insured loan”.  A loan for which the Veteran’s Administration insures the lender against losses the lender may incur due to your default.  Available only to veterans possession a Certification of Eligibly.

Application for Florida loan Pre-Qualification