A, B, C’s of Mortgage

Mortgage Tips

Amortization – Number of years it will take you to repay the mortgage loan in full.

Banker –  A company that originates mortgages, using their own or borrowed funds.

Compliance – This Department adheres to external rules and internal controls to protect the company and investors alike.

Debt to Income Ratio (DTI) – Monthly Debt Payments / Monthly Gross Income = DTI. This has to do with a borrower’s qualifying ratios for loan approval.

Equity – The difference between the home’s fair market value and the outstanding mortgage.

Fair Market Value – Amount of worth for a home-based on current market trends, location, and condition.

Gift Funds – Monies gifted to home buyers from Family or an approved donor source. Money must be traceable.

Hazard Insurance – Covers damage caused by a natural disaster; tornado, flood, smoke, etc.

Interest Rate – Fee a buyer pays to borrow the loan from the financial institution. Fixed interest rate stays the same for the life of the loan. Adjustable interest rate (ARM) low, fixed rate for a period typically 3, 5, or 7 years. After said time rate will change.

Jumbo Loan – Non-conforming loans that extend higher than the loan amounts set by the Federal Housing Finance Agency. (Lower debt-to-income ratio, a higher credit score, and larger down payment)


Loan Officer – Employed through the financial institution. Assists in finding the right loan product based on the client’s financial position wants, and needs in a home loan.

Mortgage Insurance – With a less than 20% down payment a client is required to pay mortgage insurance to protect the lending institution in case of default.

Notary – Person authorized to witness and guarantee signatures on documents.

Origination Fee – Upfront fee charged for processing a new loan application

Pre-Approval – Loan amount approved by the lender based on; income, debt, assets, and credit history – determine how much a home buyer can borrow.

Qualifying Ratios – Percentage of monthly income taken up by debt. ie debt-to-income ratio (income – monthly debt payments) and the loan-to-value ratio (ratio of the mortgage after the down payment to property value.)

Real Estate Settlement Procedure Act (RESP) – Passed in 1974: the Real Estate Settlement Procedures Act (RESPA) is  federally regulated by the U.S. Department of Housing and Urban Development (HUD) and Consumer Financial Protection Bureau (CFPB) to govern real estate settlement processes, mandating all parties to inform borrowers on all closing costs, lender servicing and escrow practices, business relationships between all parties in the transaction.

Sales Contract – Agreement between buyer and seller for the transfer of ownership of a particular piece of property and type of financing.

Title – A title shows ownership of a certain piece of real estate property and if any liens are associated.

Underwriting – Determine the amount of risk associated with a loan to a particular borrower’s financial situation.

Verification of Employment (VOE) – Review of a borrower’s work history and job stability.

Warranty Deed – Protecting a homebuyer against claims to the property.

Yield – Earnings from equity on a property after the sale.

Zoning – Local governments specify the use of the private property to control development (residential/commercial/agricultural) in designated areas.