First-Time Homebuyer Credit
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Glossary of Terms
1003 FORM: When you purchase a home and apply for a mortgage, a residential loan application, also known as a form (1003) will need to be filled out. This four-page form will ask you questions about your employment history, your current income, your residence history, your savings and asset information and will ask questions about the home that you are purchasing.
ADJUSTABLE-RATE-MORTGAGE (ARM): A mortgage or deed of trust with a variable interest rate (an interest rate that changes periodically. This mortgage tends to attract more people into the mortgage market.
APPRAISAL REQUEST: A request analysis of the estimated value of a property prepared by a qualified appraiser.
APPRAISED VALUE: Estimated worth of a property determined by someone qualified in valuation.
BALLOON PAYMENT: When the final payment on a note is greater than the preceding normal installments, the final installment is termed a balloon payment. An installment promissory note providing for the last payment to be much larger than any previous payment.
BORROWER’S AUTHORIZATION: A signed document from the borrower allowing releasing personal information.
CLOSING COSTS: The miscellaneous expenses buyers and sellers normally incur in the transfer of ownership of real property over and above the cost of the property.
CREDIT REPORT: Credit history of a person or business issued by a company in the credit reporting business, used to help determine creditworthiness.
CREDIT SUPPLEMENT: Any missing information on your credit report supplied by the credit bureau.
DEBT-TO-INCOME RATIO: Borrowers monthly payment obligations as a percentage of their income.
EQUITY: Ownership in property, determined by calculating the fair market value less the amount of liens and encumbrances.
FIXED (INTEREST) RATE MORTGAGE: A mortgage with an interest rate that does not change over the life of the loan.
FUNDING: The release of loan funds from a lending institution to the escrow company, generally on the closing day of escrow or recordation.
GOOD FAITH ESTIMATE: An estimate of charges which a borrower is likely to incur in connection with a settlement.
GROSS INCOME: Total income before expenses is deducted.
HUD FORM: A final accounting of closing costs, itemizing the buyers and sellers closing costs separately; a consumer protection form.
IMPOUND (ACCOUNT): A trust account established by the lender to pay property taxes and hazard insurance.
INCOME RATIO: The monthly payment on a loan (including principal, interest, taxes and hazard insurance) divided by the borrower’s monthly gross income.
INDEX: A number used by a lender to measure interest rate changes over time; used as a guide for resetting rates of adjustable rate loans.
JUDGMENT LIEN: A money judgment that, because it has been recorded, has become a lien against the judgment debtor's real property.
LIABILITIES: Debts or claims that creditors have against assets.
LOAN TO VALUE: The amount of un-used equity left after borrowing against the property.
OPTION ARM MORTGAGE: (ARM) The Options Adjustable Rate Mortgage is an ARM (Adjustable Rate Mortgage) like most others in its origins. It consists of taking an index, most commonly the MTA (12 months Treasury Average), CODI (Cost of Deposit Index), and COSI (Cost of Savings Index), then adding a margin to total the final interest rate. Unlike other ARM's where the principal and interest or simple interest payment is calculated from the total of the index and margin, the Options ARM offers 4 monthly payment options every month, giving you the opportunity to choose which payment gets made based on your economic condition at the time the payment is due. This monthly payment option is where the Options ARM derives its most common name. Other names the Option ARM is known by are: Cash-Flow ARM's, Pay Option ARM's, and Pick a Payment Loans.
PAR RATE: The wholesale rate a mortgage investor charges before a lender, banker or broker marks it up to increase their profit and/or commissions.
PRELIMINARY REPORT: A report showing the current status of a property and the condition under which a title company is willing to insure title as of a specific date.
PREPAYMENT PENALTY: An additional fee a lender may charge if a borrower pays off all or part of the loan balance before a period chosen by the lender or before the loan is due.
RATE LOCK COMMITMENT: The promise of time to deliver the exact rate quoted.
RESERVES: With regard to mortgage loans, an accumulation of funds, collected from the borrower by the lender as part of each monthly mortgage payment, an amount allocated to pay property taxes and insurance when they are due.
TITLE: Evidence of the owner's right or interest in property. (1) The right of ownership. (2) The evidence of a person's ownership or interest in property.
TITLE REPORT: A report which discloses condition of title, made by a title company preliminary to issuance of title insurance policy. A duplicate (usually microfilmed) of a county’s public record, maintained by a title company at its offices for use in title searches.
VESTING: The manner in which title is held.
VOD: Verification of Deposit form sent to borrower’s financial institutions to verify funds for the down payment and closing costs.
VOE: Verification of employment form sent to prospective borrower’s employer to verify employment.
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