Loan-to-Value (LTV) Ratio The percentage created by dividing a mortgage loan against a property by the total property value. If a property is worth $400,000 and has a $300,000 loan against it, it has an LTV ratio of 75%. Lenders usually have a maximum LTV ratio they will extend. How high that ratio is depends on the loan program the borrower selects. Maturity A loan that has reached “maturity” has reached the end of its loan term. If it is fully amortized, the balance should be $0 at maturity. If it is a “balloon loan,” there may still be a balance due as a lump-sum payment at maturity. Monthly Gross Income A borrower’s monthly income, without consideration for taxes or expenses. In other words, an employee’s monthly gross income is the number at the top of the monthly pay stub, not the actual “take-home” income after tax withholdings. Mortgage A loan secured by real estate, with a specific property as collateral. A mortgage is formed by two critical documents — the deed of trust, which establishes ownership of the property with a lien for the lender; and the promissory note, or the contract for the loan. Mortgage Insurance Insurance that protects the lender against the borrower’s hypothetical future default. Mortgage Payment The monthly payment that must be made to service the mortgage loan and keep it current, without incurring default penalties.
Negative Equity A condition that exists when a borrower has a larger mortgage balance than the current value of the property. If a borrower has a $300,000 loan but the house is only worth $250,000, the owner’s equity is -$50,000, or $50,000 in negative equity. Note Short for promissory note, the note is one of two critical instruments that form a mortgage (the other one is the “deed of trust”). The note establishes the terms of the loan, including the interest rate, loan balance, loan term, and repayment terms. Origination Fee A fee that the lender may charge for their services in creating the loan. Often expressed in the form of “points,” each point being 1% of the loan balance. PITIA An acronym for principal, interest, taxes, insurance, and association fees. Refers to the four major mandatory housing payments. Figuring out the final “housing payment” must include all of them. The lender may require the borrower to make extra payments and hold the extra funds in escrow to cover property taxes, insurance, and HOA fees (if there are any). Points Each point is 1% of the loan balance. For a $200,000 loan, one point would be $2,000. The lender may charge points as an origination fee, or offer the opportunity to pay “discount points” as a fee to reduce the interest rate on the loan. Pre-Approval A process by which the lender officially approves a borrower to borrow a certain amount. The application process is more extensive, with more documentation required, and therefore carries more weight than “prequalification.”
LARRY LOAN OFFICER | OFFICE 904-555-1010 | Larry@loans.com | www.Authorify.com
RITA REALTOR | BROKERAGE 904-555-5555 | Rita@realtor.com | www.Authorify.com
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