Abe Gates Mortgage Broker -Serving the Greater Seattle Area

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

Adjustable Rate Mortgage
A mortgage in which the loan rate changes during the life of the loan, usually at one, three, or five-year intervals. Changes are governed by the movement of an index, such as the treasury bill, treasury securities index, or a national or regional average cost of funds index.

Advance
Additional funds loaned to a mortgagor by the mortgagee.

Amortization
A payment plan by which the borrower reduces his or her debt gradually through monthly payments of principal.

Annual Percentage Rate
The cost of your credit as a yearly rate. This includes interest and certain additional costs and fees associated with the loan. It is often referred to as the APR.

Appraisal
An evaluation of a specific property to determine its current market value based on recent sales of similar homes in a given market, in addition to other factors.

Approval
Grant of loan based on proof of good title, proof of actual income/employment, and the actual appraised value of the property being mortgaged.

Assumable mortgage
A mortgage that can be assumed, or taken over, by the buyer from the seller.

Balloon Loan/Mortgage
A mortgage with regular payments of principal and interest that do not fully pay off the loan before its due date. The balance of the mortgage is due in a lump sum at the end of the term of the note.

Capacity
The ability of the borrower/co-borrower to repay the loan.

Closing Costs
The costs associated with processing and closing the loan, such as application fees, points, title search, insurance, and credit report.

Closing day
The date on which the title for the property passes from seller to buyer and/or the date on which the borrower signs the mortgage loan agreement.

Co-Signer
A person who signs on the loan but does not have ownership of the property being mortgaged (i.e., a co-signer is not on the title and has no claim to ownership rights in the property). The co-signer is legally bound to the loan, i.e., one that agrees to assume responsibility for a loan if the borrower becomes unable or unwilling to repay the loan.

Collateral
The property, or other assets, that are being secured against the loan to ensure repayment of debt.

Condominium
A form of ownership in which the owner gets title to a housing unit and interest in the common areas; commonly referred to as a condo.

Credit
A reflection of past payment history; a positive amount added to the transaction balance.

Credit Report/Rating
A written report detailing an individual's credit history. This helps the lender decide the credit worthiness of a prospective borrower.

Debt Ratio
The amount of debt or payments one must pay in relation to the income earned. May be calculated based on the current monthly debt divided by gross monthly income.

Deed
The actual document that proves ownership of a specific property (i.e., real estate). The deed lists the owner(s) of the property.

Delinquency
A loan payment that is overdue but within the period allowed before actual default is declared; failure to pay an obligation when due.

Delinquent mortgage
A mortgage involving a borrower who is behind on payments. If the borrower cannot bring the payments current within a specified number of days and terms, foreclosure could occur as a last resort.

Disbursement
The payoff amount(s) for a loan, payable to specific lending companies to pay off the open debt(s).

Disposable Income
A term referring to all income remaining after all necessary expenses are paid, such as mortgage, car payment, insurance, etc.

ECOA
Equal Credit Opportunity Act is a federal law that requires lenders to loan without discrimination based on race, color, religion, national origin, sex, marital status, age, income received from public assistance programs, or the fact that the applicant has exercised any right under the Consumer Credit Protection Act.

Equity
The difference between the value of your home and the amount owed on it.

Fannie Mae
In February, 1938, the federal government established Fannie Mae to expand the flow of mortgage money by creating a secondary market. Fannie Mae is a private, shareholder-owned company that works to make sure mortgage money is available for people in communities all across America. Today, Fannie Mae operates under a congressional charter that directs their efforts to increase the availability and affordability of homeownership for low-, moderate-, and middle income Americans.

Federal Housing Administration (FHA)
A federal agency, established by Congress in 1934, in order to make mortgages more affordable for consumers and investments more desirable for lenders. FHA-approved lenders may obtain insurance on mortgage loans that meet FHA standards.

Finance Charge
The dollar amount the credit will cost you during the life of the loan.

First mortgage
The primary mortgage on a property. When the property is sold, the lender who issued the first mortgage is paid first.

Fixed-rate mortgage
A home loan whereby interest remains fixed for the entire loan term.

Foreclosure
A legal procedure in which property mortgaged as security for a loan is sold to pay the defaulting borrower's debt.

Freddie Mac
Freddie Mac is a stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing. Freddie Mac purchases mortgages from lenders and packages them into securities that are sold to investors. By doing so, Freddie Mac ultimately provides homeowners and renters with lower housing costs and better access to home financing.

Free and Clear Property
A house that is paid in full and has no mortgage(s) or liens against it.

Funded
This refers to a loan in which checks have been issued.

Ginnie Mae
A government organization that administers mortgage-backed securities programs to channel new sources of funds into residential financing through the sale of privately issued securities.

Good Faith Estimate
A disclosure detailing the estimated closing/settlement costs.

Grantee
The party in a deed who is the buyer.

Grantor
The party in a deed who is the seller.

Gross Monthly Income
The total monthly income earned before deductions (taxes).

Group Mortgage Protection Insurance
Insurance that is paid by the borrower that includes mortgage life and/or mortgage disability coverage; pays the monthly mortgage payment or the unpaid balance of the mortgage in the event of a death or a disability of one of the borrowers.

Hazard Insurance
Insurance that protects against damage caused to property by fire, windstorm or other common hazards.

Installment Payment
The regular periodic payment that a borrower contractually agrees to make to a lender.

Institutional Lender
A financial institution that invests in mortgages, stocks, bonds, etc. and carries them in its own portfolio. Savings banks, life insurance companies, commercial banks, pension funds, and savings and loan associations are some examples of institutional lenders.

Insured loan
A loan insured by FHA, or a private mortgage insurance company.

Interest
The cost paid by a borrower for the use of money borrowed.

Lien
A legal claim by an individual (or group of individuals) on the property of another individual, or individuals, as security for money owed.

Loan
A sum of money given to an individual with the intent that it is to be repaid at some future date along with any agreed upon interest.

Loan Servicing
A term referring to the steps taken to maintain a loan from the time it is closed until the last payment is received and the obligation is paid; steps may include billing the borrower, collecting payments, escrowing tax and insurance payments, and making contract changes.

Loan-to-Value
The total amount of the loans (mortgages) divided by the market value (i.e., the appraised value).

Loss Payee
A term referring to the designated entity or individual that is to receive the proceeds from a settlement claim such as an insurance policy.

Maturity Date
The date a loan becomes due and payable.

Mortgage
A loan that is secured by real estate. The mortgagor (the buyer) promises to repay principal and interest, to keep the home insured, to pay all taxes and keep the property in good condition.

Mortgage Banker
A company that provides mortgage financing with its own funds.

Mortgage Broker
One who, for a fee, brings together a borrower and a lender.

Mortgage Commitment
A formal written communication by a lender, agreeing to make a mortgage loan on specific property, specifying the loan's amount, length of time and conditions.

Mortgage Company
A company whose principle activity is the origination and/or servicing of mortgage loans.

Mortgage Loan Insurance
A form of insurance protection for a borrower that would pay part or all of the mortgage debt upon the death of the insured person.

Mortgage Origination Fee
A charge by the lender for the work involved in the preparation and servicing of a mortgage request.

Mortgagee
The lender who makes the mortgage loan.

Non-Conventional Mortgage
A mortgage loan that does not conform to agency-established limits such as loan to value ratio, term, and other characteristics. Usually the regulatory limits are set by Fannie Mae, Freddie Mac and other government established guidelines.

Note
A formal document showing the existence of a debt and stating terms of repayment.

Occupancy
A term referring to the use of the property. Generally, there are four types of occupancy: 1) owner (lives in the property), 2) non-owner (does not live in the property, rents the property), 3) investment, and 4) second/vacation (property is not rented, but is lived in at least one day per year by the owner).

Open Debt
Money that is owed.

Partial Payment
A payment made by the borrower that is less than the full amortized monthly payment amount due and is not intended to be accepted as the full payment.

Partial Release
A lender's relinquishment of its claim to some part of the real property that secures a mortgage loan.

Payment
The periodic amount due to repay a lender for the proceeds of a loan. It includes principal repayment, interest repayment, and often escrows for taxes and insurance premiums.

Payoff
The total amount of money needed to pay off a loan; includes all principal, interest, and fees associated with a loan contract.

Points
A dollar amount, expressed as a percentage of the loan amount that is paid to a lender. Points can reduce the interest rate on a loan and sometime cover costs of the origination of the loan.

Prepayment
An advance payment on a mortgage, i.e., a payment that is made before its contractual due date.

Principal
The actual amount of money borrowed that is expected to be repaid over an agreed period of time. This is the amount of the loan, not including interest.

Promissory Note
A contract/agreement between the borrower and the lender for repayment of the loan. (Same as the note.)

Property Type
Classification of property, i.e. 1-family house, 2-family house, condo, etc.

Public Securitization
The issuing of securities (or bonds) to a large group of investors, usually a company. In a public securitization, the securities are registered with the Security and Exchange Commission and are announced via a prospectus (i.e., marketed publicly).

Purchase Price
The original price the borrower paid for the mortgaged property.

Recurring costs
These costs are ongoing like mortgage insurance, property taxes and insurance.

Rescission Period
A three business-day (Monday - Saturday) waiting period from the time the final loan papers are signed to receipt of the actual loan money. According to federal law, the customer can cancel the loan without any penalty during this period.

Revolving Account
An account with no set term of when the money borrowed has to be paid back. The balance owed can change, as can the payment being made. Most credit card accounts are revolving.

Right of Foreclosure
The right of the lender to close out the mortgagor's interest and take over the property if the mortgagor violates the provisions of the mortgage.

Right of Rescission
The customer's right to cancel a loan transaction in which a security interest is or will be retained or acquired for a consumer's principal dwelling.

Seasoned Loan
A term referring to a mortgage loan that is older than one year.

Second Mortgage
The second lien on a property that is used to secure a loan.

Secondary mortgage market
This is the arena where the selling, trading and buying of existing loans among lenders and investors takes place.

Securitization
Securitization is the process of selling non-conventional loan packages to investors (public or private) who represent an interest in the cash flow generated by asset-backed loans. Loans are sold to a trustee (for cash), who in turn sells the loan (in bond form) to investors.

Self-Employed
A term referring to an individual who collects more that 24 percent of his/her income from a business in which he/she has ownership.

Title
Evidence (usually in the form of a certificate or deed) of a person's legal right to ownership of property

Truth in Lending Act
A federal law requiring a disclosure of credit terms using a standard format; intended to facilitate comparisons between the lending terms of financial institutions.

Variable-rate mortgage
A mortgage in which the loan rate changes during the life of the loan, usually at one, three, or five-year intervals. Changes are governed by the movement of an index, such as the treasury bill, treasury securities index, or a national or regional average cost of funds index.