The amount of interest that has accumulated on a loan but has not yet been paid.
A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.
The process of gradually paying off a debt over time through regular payments of principal and interest. Each month, the mortgage payment is split into two parts: some of it goes toward paying down the amount borrowed (the principal), and some goes toward interest, which is the cost of borrowing the money. Early on, more of the payment goes toward interest, but over time, more will go toward reducing the loan balance.
The total cost of borrowing a mortgage loan over a year. It includes not just the interest rate but also other fees like closing costs, points, and loan origination fees. This gives borrowers a clearer picture of the overall cost of the loan, making it easier to compare different mortgage offers.
An estimate of the current market value of a property, conducted by a licensed professional.
The value assigned to a property by a public tax assessor for the purpose of determining property taxes.
A mortgage with relatively low fixed payments during the term, followed by a larger lump-sum payment at the end.
A large, lump-sum payment that is due at the end of a loan term after a series of smaller periodic payments.
A unit equal to one one-hundredth of a percentage point, often used in discussing changes in interest rates.
A short-term loan used to bridge the gap between the sale of an existing home and the purchase of a new one.
A refinancing of a mortgage where the new loan amount is greater than the existing loan amount, and the borrower receives the difference in cash.
The documented history of property ownership, showing the transfer of title from one owner to the next.
The closing costs for a mortgage include all of the expenses related to applying for the loan and finalizing a real estate sale. Some of the costs are related to the property, while others are related to the mortgage lender's services and the paperwork involved in the transaction.
A document that outlines all the costs and terms of a mortgage loan, provided to the borrower at least three days before closing.
An individual who signs a loan agreement along with the primary borrower and is equally responsible for repaying the debt.
A form of joint ownership, typically between spouses, where each party owns an equal share of the property.
A mortgage that meets the requirements set by Fannie Mae and Freddie Mac, including loan limits and credit standards.
A short-term loan used to finance the construction or renovation of a home or real estate project.
A mortgage that is not insured or guaranteed by the federal government.
A detailed report of an individual's credit history used by lenders to determine creditworthiness.
A measure of a borrower's monthly debt payments compared to their gross monthly income, used to assess creditworthiness.
A legal document that transfers property ownership from one person to another.
A voluntary transfer of property ownership from the borrower to the lender to avoid foreclosure.
Fees paid at closing to reduce the interest rate on a mortgage loan.
The portion of the purchase price that a buyer pays upfront in cash, usually expressed as a percentage of the total price.
A provision in a mortgage contract that requires the loan to be paid off if the property is sold or transferred.
A deposit made by a buyer to show serious intent to purchase a home, applied towards the purchase price at closing.
A claim or liability on a property, such as a mortgage, lien, or easement, that may affect its transfer or value.
The difference between the market value of a property and the amount owed on the mortgage.
A financial arrangement where a third party holds funds or documents and regulates the payment of funds until specific conditions in a real estate transaction are met.
An account where funds are held by a third party on behalf of two parties to a transaction, often for paying property taxes and insurance.
A mortgage insured by the Federal Housing Administration, often requiring lower down payments and easier credit requirements.
A type of credit score created by the Fair Isaac Corporation used to assess a borrower’s credit risk.
The price that a property would sell for on the open market, assuming both buyer and seller act without undue pressure.
The Federal National Mortgage Association (FNMA), a government-sponsored enterprise that buys and guarantees mortgages.
A U.S. government agency that provides mortgage insurance to approved lenders for homebuyers, particularly for first-time homebuyers and those with lower credit scores.
A mortgage with an interest rate that stays the same for the entire term of the loan.
Insurance that covers property damage caused by flooding, often required in high-risk flood zones.
The legal process by which a lender takes possession of a property due to the borrower’s failure to make mortgage payments.
A government-sponsored enterprise (GSE) that purchases mortgages from lenders to increase liquidity in the mortgage market, ensuring lenders have funds available to offer more loans.
A document stating that funds given to a homebuyer from a relative or friend are a gift, not a loan, and does not need to be repaid.
A document that provides an estimate of the costs and fees associated with a mortgage loan.
Total income before taxes and other deductions.
The U.S. government department responsible for national housing policies and programs.
A type of loan in which the borrower uses their home equity as collateral, borrowing up to a predetermined limit over time.
An assessment of a property's condition by a qualified inspector before purchase.
An organization that manages a residential community and enforces rules, often collecting fees to maintain common areas and services.
A benchmark interest rate that reflects market conditions, used to determine the interest rate of an adjustable-rate mortgage.
A loan that is repaid over time with a set number of scheduled payments, including principal and interest.
The cost of borrowing money, expressed as a percentage of the loan amount, typically charged annually.
A limit on the amount the interest rate can increase on an adjustable-rate mortgage.
A type of mortgage where the borrower pays only the interest for a specified period, after which principal payments begin.
The period during which a borrower pays only interest on the loan, with no reduction of the principal balance.
A foreclosure process that is handled through the court system.
A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac, often used to finance luxury properties.
Illegal payments made to someone as a reward for facilitating a transaction, typically a violation of the Real Estate Settlement Procedures Act (RESPA).
A fee charged when a borrower fails to make a scheduled loan payment by the due date.
An agreement that gives a tenant the option to purchase the property at the end of a lease term.
A formal, detailed description of a property's boundaries and location, used in legal documents.
A legal claim against a property as security for a debt, usually in the form of a mortgage.
A lender's formal offer to provide a loan under specific terms, typically after reviewing the borrower’s financial information.
A standardized form that provides details about the terms of a loan, including the estimated interest rate, monthly payment, and total closing costs.
The administration of a loan, including collection of payments, handling of escrow accounts, and communication with the borrower.
A ratio used to assess lending risk that compares the loan amount with the appraised value of the property.
An agreement between a lender and borrower to lock in a specific interest rate for a set period during the mortgage process. Also called Rate Lock.
A professional who arranges mortgage loans between borrowers and lenders, usually earning a commission.
Insurance that protects the lender against losses if a borrower defaults on the loan, often required for loans with low down payments.
A tax deduction that allows homeowners to reduce their taxable income by the amount of interest paid on a mortgage.
A legal document obligating the borrower to repay the mortgage loan, specifying the terms of repayment.
A mortgage that does not meet the guidelines of Fannie Mae and Freddie Mac, typically because of loan size or credit quality.
A formal notice filed by a lender indicating that a borrower has missed payments and is in default on their loan.
The percentage of occupied units in a building or property, often used to assess the performance of rental or commercial properties.
An adjustable-rate mortgage that allows the borrower to choose from multiple payment options, including interest-only and minimum payments.
A fee charged by a lender for processing a new loan application, typically a percentage of the loan amount.
A property sale where the seller provides financing to the buyer, allowing them to make payments directly to the seller instead of obtaining a traditional mortgage.
An acronym for Principal, Interest, Taxes, and Insurance – the four components of a typical monthly mortgage payment.
Daily interest that accrues on a loan from the closing date until the first mortgage payment is due.
A type of community that includes a mix of residential, commercial, and recreational properties, with shared amenities and common areas managed by a homeowners association (HOA).
Fees paid directly to the lender at closing in exchange for a reduced interest rate, also known as discount points.
A fee charged to a borrower who pays off their loan before the scheduled maturity date.
An initial assessment by a lender indicating the amount a potential borrower may be eligible to borrow based on self-reported information.
The original loan amount or the remaining balance of the loan, excluding interest.
The remaining unpaid portion of the loan principal, not including interest or fees.
Insurance that a borrower may be required to purchase if they make a down payment of less than 20%, protecting the lender in case of default.
A written promise to pay a specified amount of money, often with interest, at a specified time.
A tax assessed on real estate by the local government, based on the property's value.
Financial ratios used by lenders to determine a borrower's ability to repay a loan, including the debt-to-income ratio.
A legal document used to transfer a person's ownership interest in a property without any warranties or guarantees about the title's status.
An agreement between borrower and lender that locks in the interest rate for a specified period during the loan application process.
A fee charged by a local government for registering a real estate transaction, such as the recording of a deed.
The process of replacing an existing mortgage with a new loan, usually to secure a lower interest rate or better terms.
A loan available to homeowners 62 years or older, allowing them to convert part of their home equity into cash without selling the home.
A written agreement between buyer and seller outlining the terms of a property sale.
A loan taken out in addition to the first mortgage, using the home's equity as collateral.
A document that itemizes all costs and fees associated with the closing of a real estate transaction.
A sale of a property where the proceeds are less than the amount owed on the mortgage, with the lender's approval.
A mortgage offered to individuals with lower credit scores or limited credit history, typically at a higher interest rate due to increased risk.
A legal claim by the government against a property for unpaid property taxes.
A legal document that indicates ownership of a property, evidenced by a deed.
Insurance that protects the buyer and lender against losses arising from disputes over property ownership or defects in the title.
Yes, many loan programs allow the use of gift funds from relatives or close friends for down payments. Lenders may require a gift letter and documentation to verify that the funds are a gift, not a loan.
Your credit score influences:
- Loan eligibility.
- Interest rates.
- Required down payment.
Higher credit scores generally lead to better loan terms.
PMI is insurance that protects the lender if a borrower defaults on a loan. It's typically required for conventional loans with down payments less than 20%. PMI can be canceled once sufficient equity is built in the home.
Yes, obtaining pre-approval is advisable. It involves a lender reviewing your financial information to determine your borrowing capacity, giving you a clearer picture of your budget and enhancing your credibility with sellers.
The process usually takes 30 to 45 days from application to closing, depending on factors like loan type, borrower preparedness, and lender efficiency.
Closing costs are fees associated with finalizing a home purchase, including:
- Loan origination fees.
- Appraisal and inspection fees.
- Title insurance.
- Prepaid taxes and insurance.
These typically range from 2% to 5% of the home's purchase price.
The minimum down payment varies by loan type:
- Conventional Loans: As low as 3%, though 20% is common to avoid private mortgage insurance (PMI).
- FHA Loans: Minimum of 3.5%.
- VA and USDA Loans: Often require no down payment.
Qualification criteria typically include:
- A good credit score.
- A stable income and employment history.
- A manageable debt-to-income ratio.
- Availability of funds for a down payment and closing costs.
Various purchase loans are available, including:
- Conventional Loans: Not insured by the government.
- FHA Loans: Insured by the Federal Housing Administration.
- VA Loans: Available to veterans and service members, backed by the Department of Veterans Affairs.
- USDA Loans: For rural property buyers, backed by the U.S. Department of Agriculture.
A purchase loan is a mortgage used to finance the acquisition of a home. It provides the necessary funds to buy a property, which the borrower repays over time with interest.
Yes, provided the property generates rental income and is primarily used as an investment. Additional requirements may apply regarding rental occupancy and income potential.
A Cash-Out Refinance lets you access equity from an investment property by refinancing your mortgage and taking out additional cash. This can be used for property improvements, new investments, or debt consolidation, while potentially adjusting mortgage terms.
Yes, a cash-out refinance can free up equity in your primary residence to fund an investment property. However, consider the risks and potential changes to your primary home mortgage terms.
Financing multiple properties simultaneously is an option, but it requires a strong financial profile, higher credit scores, and adequate cash reserves for potential vacancies or maintenance.
Yes, financing multiple properties with a single loan may be possible, but it depends on credit score, income, and rental property management experience. Multi-property loans often require higher down payments and stricter qualifications.
Some loan programs consider projected rental income to help qualify. A detailed rental income analysis may be required, and often only a portion of the income is considered in the assessment.
Interest rates are typically higher than those for primary residences due to increased lender risk. Rates depend on loan type, borrower creditworthiness, and market conditions. Comparing rates and terms is essential.
Down payments generally range from 15% to 30% of the purchase price, depending on the loan type and financial profile. Higher down payments may lead to better loan terms and lower interest rates.
A good credit score, a substantial down payment (15-30%), and proof of income are typically required. Additional factors include your debt-to-income ratio, investment experience, and the property’s potential rental income.
- Conventional Investment Property Loans: Standard mortgages not backed by government agencies, offered by private lenders, requiring higher credit scores and down payments. - FHA Investment Property Loans: Insured by FHA, usable for multi-family properties if the borrower lives in one unit. - Interest-Only Investment Loans: Interest-only payments during the initial period to manage early cash flow. - Other specialty loan programs may also be available.
Points are fees based on a percentage of the loan amount. One point equals 1%. Origination points cover loan processing, while discount points are paid to reduce the interest rate.
Fannie Mae and Freddie Mac were created by the government to boost the housing market. They borrow low-interest money and provide it to local banks for affordable housing loans. Fannie Mae and Freddie Mac are responsible for about 90% of the secondary mortgage market.
Conforming loans meet Fannie Mae/Freddie Mac standards for loan specs, amounts, and interest rates. Non-conforming loans don’t meet these standards and are usually funded by private lenders with higher interest rates.
Yes, checking your credit beforehand allows you to resolve issues and improve your credit score before applying for a loan.
Owning a home can be better long-term, but costs increase over time due to interest, taxes, and maintenance. Renting offers flexibility with fewer responsibilities and no maintenance costs.
You need income records (pay stubs, tax returns), bank records, and information about your debts.
Mortgage brokers help find lenders and assist with loan processing. Mortgage lenders are companies that issue loans. Loan officers are employees who help process your loan from start to finish.
Yes. To speed up the process, get pre-approved, prepare your paperwork ahead of time, check your credit history, and respond promptly to loan officer requests.
Closing costs are typically 3% to 6% of the total loan. They include application fees, appraisal fees, credit report fees, title insurance, survey fees, and attorney costs, among others.
Fixed-rate mortgages are better when current rates are low because you can lock them in. If rates are high, an ARM might be better as rates may drop over time. Refinancing is also an option later on to take advantage of rate changes.
FRMs have a fixed interest rate for the loan's life, while ARMs have interest rates that can change during specified adjustment periods.
VA loans are for military members and veterans, while FHA loans are available through HUD. Both loans guarantee the lender is paid if you default. You need to meet specific criteria to qualify for either loan.
Yes, HUD offers programs like FHA loans, 203(K) loans for fixer-uppers, and options for homes obtained through foreclosure. FHA loans only require a 3% down payment. VA loans are available for veterans and their unmarried surviving spouses.
PMI is required if your loan is considered risky by the lender, usually for down payments of less than 20% or poor credit. It protects the lender in case you default on the loan. PMI reimburses the lender if the home's value doesn't cover the loan amount in case of default.
Some loans will allow you to secure just a 5% down payment plus closing costs. Another option is a piggy-back loan where you get approved for the first and second mortgage to avoid PMI. You could also apply for an FHA loan which only requires a 3.5% down payment. However, your interest rate will likely be higher, and you will be required to buy private mortgage insurance (PMI).
