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Mortgage Glossary
Good Faith Estimate - Written estimate of the settlement costs the borrower will likely have to pay at closing. Under the Real Estate Settlement Procedures Act (RESPA), the lender is required to provide this disclosure to the borrower within three days of receiving a loan application.
Government Recording Fee - This is a fee paid to your local county recording office for recording your mortgage lien, and in the event of a purchase transaction, the deed that transfers title. Fees for recording vary by county and are set by state and local governments.
Grace Period - Period of time during which a loan payment may be made after its due date without incurring a late penalty. The grace period is specified as part of the terms of the loan in the Note. Grace periods apply only to mortgages on which interest is calculated monthly. Simple interest mortgages do not have a grace period because interest accrues daily.
Graduate Mortgage Payment - A mortgage that requires borrowers make larger payments to the loan for specified periods. The GPM starts off low for the first few months, but gradually rises for the next few months but then it remains constant at the fully amortized level.
Gross Income - Total income before taxes or expenses are deducted.
Guideline Ratio - There are two guideline ratios used to qualify you for a mortgage. The first is called the front-end ratio, or top ratio, and is calculated by dividing your new total monthly mortgage payment by your gross monthly income. Typically, this ratio should not exceed 28%. The second is called the back-end, or bottom ratio, and is equal to your new total monthly mortgage payment plus your total monthly debt divided by your gross monthly income. Typically, this ratio should not exceed 36%.
back to topHome Equity Line of Credit - A home equity line of credit is a credit line that is kept open and restored as you pay off what is owed. An equity line of credit also has a high credit limit similar to a credit card that you are allowed to draw upon as needed.
Homeowners Insurance - Just as you insure your automobile to protect against theft and damage, you insure your home. Homeowners insurance is required by all lenders to protect their investment, and must be obtained before closing. In most cases, coverage must be equal to the loan balance, or the value of the home. Varies - $350 and up, a standard policy insures the home and the homeowners possessions.
Housing Expense Ratio - The percentage of gross monthly income devoted to housing costs. This is a method used in qualifying borrowers.
Housing and Urban (or HUD) - Housing and Urban Development, the U.S. government agency established to implement federal housing and community development programs; oversees the Federal Housing Administration.
back to topInspection Fee - A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. This makes the potential buyer aware of any potential hazards or home repairs that may be needed. A typical inspection costs around $225 - $450.
Interest - The fee a lender charges for permitting the borrower to use their money for a specific length of time.
Interest Adjustment - The amount of interest due between the date your mortgage starts and the date the first mortgage payment is calculated from. Sometimes there is a gap between the closing date of your home purchase and the first payment date of your mortgage. Let's say that the closing date on your new house is August 10th - but your mortgage payments are on the 15th of each month (so your first payment is calculated from August 15th and paid on September 15th). That leaves four days (August 10th to 14th) that aren't accounted for in your first mortgage payment. You have to make an extra payment to make up for these four days; the payment is generally due on your closing date. You can avoid all this by arranging to make your first mortgage payment exactly one payment period (e.g., one month) after your closing date.
Interest Only Mortgage - An interest only mortgage is one that gives you the option of paying just the interest or the interest and as much principal as you want in any given month during an initial period of time. Interest only loans can be 30-year fixed-rate mortgages or adjustable rate mortgages.
Interest Rate - The rate of interest a lender receives for permitting the borrower to use money for a specific length of time. The rate is calculated by dividing the total amount of interest charged by the loan amount.
Interest Rate Cap - Consumer safeguards that limit the amount the interest rate on an ARM loan can change in an adjustment interval and/or over the life of the loan. For example, if your per-period cap is 1% and your current rate is 7%, then your newly adjusted rate must fall between 6% and 8% regardless of actual changes in the index. The interest rate ceiling is the highest interest rate that you can receive under an Adjustable Rate Mortgage. The interest rate floor is the lowest interest rate that you can receive under the ARM. Floors are less likely than ceilings.
back to topJoint Liability - Liability shared among two or more people, each of whom is liable for the full debt.
Joint Tendency - A form of ownership of property giving each person equal interest in the property, including rights of survivorship.
Jumbo Mortgage - A mortgage larger than the limits set by Fannie Mae and Freddie Mac outlined as follows: Lower 48 States: 1 unit (i.e. a single family home): $333,700; 2 unit (i.e. a duplex) : $427,150; 3 unit: $516,300; 4 unit: $641,650; For Alaska and Hawaii: 1 unit (i.e. a single family home): $500,550; 2 unit (i.e. a duplex): $640,725; 3 unit: $774,450; 4 unit: $962,475 .
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Quicken Loans
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