Real Estate Financing Concepts

A process where a lender reviews a borrower's financial information and issues a conditional approval for a mortgage loan, based on the borrower's creditworthiness, income, and debt-to-income ratio.

A mortgage loan application is a detailed request submitted by a borrower to a lender, seeking to obtain a mortgage loan for a property.

A Closing Disclosure is a document that outlines all the final costs and terms of a real estate transaction.

The Loan-to-Value (LTV) ratio is the mathematical proportion of the loan amount to the property's value, showing the lender's exposure.

Mortgage insurance protects the lender against possible losses if a borrower defaults on their mortgage loan, usually paid by the borrower.

Costs incurred by the buyer for services unrelated to the loan itself, such as title insurance, appraisal, and credit reports.

A loan feature that allows the borrower to qualify for a larger loan amount, increasing their buying power. It allows for longer repayment periods and fluctuating interest rates.

A process in which a lender reviews a borrower's financial information and gives a conditional approval for a mortgage loan, based on their creditworthiness, income, and debt-to-income ratio.

Interim interest is paid at closing for the period between the closing date and the end of the month.

A percentage of the loan amount, usually 1% and paid upfront, is known as a 'point' and can be used to reduce the interest rate on the loan.

A fee charged by lenders for processing a loan application, typically calculated as a percentage of the loan amount. It compensates the lender for the administrative and upfront costs associated with evaluating and setting up the loan.

A mortgage broker acts as an intermediary between a borrower and multiple lenders, shopping for the best deals and presenting options to the borrower. The broker's fee is typically paid by the borrower for their services.

Besides interest rates, certain charges can be included in the total cost of a loan, such as origination fees, points, miscellaneous charges and mortgage broker fees.

A loan originator is a person who handles the process of obtaining a mortgage, providing guidance and expertise to borrowers throughout the application and approval stages. They play a key role in securing a loan.

A fee paid to the lender at closing, covering the lender's expenses for processing a mortgage loan. It's typically around 1% of the loan amount.

A lump-sum payment made at closing to increase the lender's upfront profit on a loan. This reduces the interest rate charged over the life of the loan.

Fees that might be charged by lenders for services like application processing, document preparation, or credit checks

The amount paid to a mortgage broker for their services in finding a loan for the borrower. It's typically a percentage of the loan amount and doesn't necessarily raise the loan cost.

A federal law requiring lenders to disclose all loan costs in a clear and standardized format to help borrowers compare different loan options.

The APR expresses the relationship between the amount financed and the finance charge as a percentage. It's used to compare the cost of different loans, taking into account not just the interest rate but also other fees.

The finance charge encompasses various fees associated with a mortgage loan, such as interest, origination fee, discount points, and broker's fees.

No-fee or low-fee loans often have a higher interest rate to offset the lack of upfront fees.

HUD's Housing Counseling Assistance Program provides guidance and resources to help individuals understand homeownership responsibilities, including budgeting for mortgage payments, maintenance, and avoiding foreclosure.

Home buyer counseling helps potential homeowners make informed decisions about financing options, prepare an action plan, and learn about their responsibilities as homeowners.