Glossary Glossary Index | A B C | D E F | G H I J K L M N | O P Q R S T U V Z   Good Faith Estimate   Required by federal law, a Good Faith Estimate (GFE) is a written list of the estimated closing costs associated with a mortgage transaction, including the lender's charges along with the local closing agent's charges and fees. It also includes estimated amounts for real estate property tax and homeowner's insurance.   Back to glossary index   Gross Monthly Rental Income   The amount of money received each month for rent on property that is owned and used for investment purposes. This income will need to be verified through a lease or through tax returns.   Back to glossary index   HELOC   A secure line of credit using the available equity in the applicant's residence as collateral. HELOC stands for Home Equity line of credit.   Back to glossary index   Homeowner's Insurance or Hazard Insurance   Insurance protecting against loss to real estate caused by fire, other natural causes, vandalism, etc., depending upon the terms of the policy. A borrower must have this type of insurance to close on a loan. This insurance may not cover flood or wind damage.   Back to glossary index   Housing Ratio   A borrower's total monthly housing payment (PITI - Principal, Interest, Taxes, and Insurance) divided by gross monthly income and shown as a percentage. For example, if PITI = $1,500 and gross monthly income = $6,000, then the Housing ratio would equal $1,500 divided by $6,000 or 25%. Sometimes referred to as the front ratio.   Back to glossary index   HUD   Stands for the U.S. Department of Housing and Urban Development. This government agency is responsible for implementing and overseeing federal housing and community development programs. It also oversees the Federal Housing Administration.   Back to glossary index   HUD-1 Uniform Settlement Statement   See Closing Statement.   Back to glossary index   Income   Sources of revenue including a borrower's salary, bonuses, interest and investment income. Income is one area of financial information that lenders review during the mortgage lending process.   Back to glossary index   Index   A published rate used by lenders that serves as the basis for determining interest rate changes on ARM loans. Some commonly used indices include the 1-Year Treasury Bill, 6 Month LIBOR, and the 11th District Cost of Funds (COFI).   Back to glossary index   Interest Rate   The fee paid to a lender to borrow money expressed as a percentage.   Back to glossary index   Investment Related Savings   The estimated total savings of buying invested at a rate of 8% for the number of years that a borrower would plan to own a home.   Back to glossary index   Jumbo Loan   A mortgage loan that exceeds the conforming loan amount. Jumbo loans usually command higher interest rates.   Back to glossary index   LIBOR (London Interbank Offered Rate)   The rate at which banks in the foreign market lend money to one another. One of the more dependable barometers for the international cost of money, the LIBOR is one of many indices used for setting interest rates for ARM loans.   Back to glossary index   Lien   A legal claim against a property.   Back to glossary index   Lifetime Cap   A provision of an ARM that limits the highest interest rate that can occur over the life of the loan. These caps vary with each ARM and can be used as a point of comparison when shopping for a loan.   Back to glossary index   Loan Amount   The amount a consumer borrows from a lender to purchase a home.   Back to glossary index   Loan Programs   The type of loan as defined by term and repayment features. Examples include 30-year fixed-rate mortgage, 10/1 ARM mortgage.   Back to glossary index   Loan-to-Value Ratio (LTV)   The loan amount expressed as a percentage of the lower of the appraised value or purchase price of the property. For example, a 90% LTV loan means a 10% downpayment or financing 90% of the sales price or appraised value of the property. There are often different maximum LTV limitations for different loan programs.   Back to glossary index   Lock Rate   See Rate Lock.   Back to glossary index   Manufactured Housing   Factory-built or prefabricated housing, including mobile homes.   Back to glossary index   Mortgage   A legal document that pledges a property as security for repayment of a loan.   Back to glossary index   Mortgage Insurance (MI)     Insurance paid by the borrower that protects the lender in case the borrower defaults on a loan. With conventional loans, mortgage insurance is not required if your downpayment is at least 20%. Also known as private mortgage insurance.   Back to glossary index   Mortgage Insurance Premium (MIP)   The up-front insurance premium that must be paid on an FHA loan. The insurance helps cover the cost of reselling the home if the borrower defaults on the loan.   Back to glossary index   Mortgagee   The company or person in a mortgage loan transaction that holds the mortgage note as a pledge for repayment of the loan   Back to glossary index   Mortgage Note   A written, legal document that binds the borrower to repay a loan at a stated interest rate, during a specified period of time.   Back to glossary index   Mortgagor   The borrower in a mortgage loan transaction.   Back to glossary index   Multi-family   A building with more than four residential units.   Back to glossary index   Negative Amortization   When monthly mortgage payments do not cover the principal or interest due, rather than declining, the balance on the loan will actual increase.   Back to glossary index   Nonconforming Mortgage Loan   See Jumbo Loan.   Back to glossary index