Amortization: The repayment of a loan (typically a mortgage) through regular payments. Payments are determined by the duration of the loan, the remaining capital and interest rates.
Annual Percentage Rate (APR): The total cost of the loan, including interest, mortgage insurance, points, and other related costs.
Adjustable-Rate Mortgage (ARM): A type of mortgage loan whose interest rate varies depending on market conditions. This means that your payments in May to increase or decrease from month to month. Most weapons have a stopper that prevents the payment of the amount of the increase beyond certain levels.
Debt-to-income ratio (DTI): The relation between the amount you pay on the loan to your total income. Lenders use to determine whether or not you can easily pay the loan. According to the Federal Housing Administration (FHA) mortgage payments should not exceed 29% of your monthly income before taxes, and your total debt (including credit cards and other loans) should not go over 41% .
Deed-in-lieu : An act that goes into your property to your lender and the settlement of your debt. It does not allow you to keep your house, but it helps you to avoid foreclosure proceedings and the associated costs.
Equity: The amount of interest you have in your property. It is calculated by subtracting the amount you still have your house at fair market value.
Fair market value (FMV): A price for your home to discuss the current market conditions. FMV assumes that the buyer and seller acting freely and have all relevant information on the deal.
Fixed-rate mortgage: a type of mortgage that uses an interest rate fixed for the life of the loan. This gives you more stability as a borrower, as your payments remain the same irrespective of the numbers.
Foreclosure: A process that your property is sold and the proceeds to your lender, which allows them to recoup their losses if you default on the loan.
Forbearance: An agreement that your lender modifies your payment plan to help you progress and avoid foreclosure. This means reducing your monthly payments in May or suspend for a period of time. Contrary to the amendment of the loan, this is usually temporary and is often used as a loss mitigation option.
Interest: A percentage of the principal added to your monthly fees as a means of paying your lender for the use of money.
Interest Only: A loan from the structure where you pay only the interest for the life of the loan and pay the capital only after a given period.
Lien: A claim held by your lender against your property as a form of security in the event of default on the loan.
Loan-to-value ratio (LTV): The ratio of the total amount you pay on the loan for the real price of your home. The increase in percentage, the less you have to put as down payment.
Loss Mitigation: A process to avoid foreclosure of borrowers and lenders to limit their losses on delinquent borrowers. When you fall behind or request a loan modification, your lender for loss mitigation office will handle your claim and take appropriate decisions.
Mortgage banker: A company that sells loans to secondary lenders like Fannie Mae and Freddie Mac.
Mortgage broker: a person or company that acts as a mediator between the agents, buyers, sellers and mortgage lenders. Brokers are paid a percentage of the amount received by the lender or seller. Lenders are required by law to disclose all fees paid to brokers and other parties, so you can be sure they are not bribes at your expense.
Mortgage Insurance: An insurance policy that will minimize losses to the lender in case you are unable to keep up with payments. This is usually required for borrowers who make a payment less than 20% of the purchase price.
Principal Balance Reduction : a type of loan modification from your lender, which reduced the balance to reduce your monthly payments. Lenders usually grant that the people in areas heavily impaired, or when the amount of depreciation is always lower than the cost of foreclosure of your home.
Refinancing: A process in which you take out a loan to pay another. This allows you to enjoy better loan terms like a lower interest rate or a more stable structure.
RESPA : Real Estate Settlement Procedures Act. It's a law that requires all lenders to give you a good faith estimate (GFE) of the loan and to disclose all the costs involved. It also gives you the right to dispute charges or cancel the loan within a reasonable time.
Short sale : An alternative to foreclosure. In a sale, you sell the house for less than its fair market value, and give the product to your lender as payment for the house. Although it does not allow you to keep your house, it is less damaging to your credit foreclosure.
Teaser Rate: an introduction, offered interest rates on many mortgages to borrowers learned. After the introductory period, the interest to return to normal levels, increasing your monthly payments for the remainder of the loan.
TILA: Truth in Lending Act, also known as the National Consumer Credit Protection Act. This law requires lenders to give you information on conditions and the total cost of the loan.
