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.
Per Diem Interest
Collected at closing, it is money collected / refunded to borrower to synchronize the closing to the monthly payments
Private Mortgage Insurance (PMI)
An insurance policy offered by a private company to protect a LENDER against loss on a defaulted mortgage loan. Usually PMI is required only for loan with high loan-to-value ratio. Generally the higher the loan-to-value the higher the monthly premium.
Origination Fee
A percentage of the loan amount. Typically 1%. Can be avoided by paying a higher rate; typically is tax deductible.
Owner-occupied
A residence lived in by the borrower.
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. 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).
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
A fee charged to a borrower who pays a loan before it is due. May be 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.
Purchase Agreement
Contract between buyer and seller outlining the terms of the agreement.
Rate vs. Price
Rate refers to the interest rate. Price refers to points. It is easy to become confused as both rate and points are usually referred to in 1/8 percent increments. A good rule of thumb is that often a 1/8% change in interest rate reflects a 1/2% change in points (actual rate and points may vary slightly).
Single Family Residence
Standard, one unit home, as opposed to a Condo/Town Home with a homeowners association.
Title Company
Company that prepares title work and is where the closing is held.
Title Insurance
Policy provided by the title company on their title work guaranteeing the accuracy and completion. Lenders Policy is required and only protects the Lender from loss. Owners Policy is available at buyers discretion and protects the owner.
Title Work
Document prepared by title company which outlines the ownership of the property and other various details.
Trans Union Information Services
PO Box 1000
Chester, PA 79022
(800) 916-8800
Underwriting
Act of approving a loan application. Underwriters are bound by guidelines set forth by Fannie Mae, Freddie Mac, FHA or VA as applicable.
VA Financing
Government backed financing available only for service veterans, characterized by no down payment, no mortgage insurance, but with a funding fee.
