Glossary | Garden State Home Loans | NJ

Glossary

Knowledge is power and there’s no difference when it comes to obtaining a home loan! To help you on the journey to becoming an educated borrower, we’ve created this glossary of terms you’ll need to know during your home loan process.

 

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Amortization
Amortization is the act of paying off of debt with a fixed repayment schedule in regular installments over time.

Appraisal
When obtaining a mortgage, an appraisal is ordered through an independent third party to estimate the value of the property being financed. This assures the lender that they aren’t loaning a borrower more money than the property is worth.

Appreciation
Appreciation is the increase in a property's value over time.

Asset
An asset is a property owned by a person that is regarded to have value and can meet debts and commitments.

Bankruptcy
Bankruptcy is the state of working through debt with the help of your bank or the government, both through debt forgiveness and restructuring.

Borrower
A borrower is someone who works with a lender to secure financial assistance in purchasing or refinancing a home.

Buyer's Agent
A buyer’s agent is a person who represents a buyer when they purchase a home.

Cash Out Refinance
A cash out refinance is the replacement of your first mortgage, where the interest rate is usually lower than the interest rate on a home equity loan.

Cash to Close
Cash to close" refers to the total amount of money you need to bring to closing to complete your real estate transaction. This includes your down payment, earnest money deposit, etc.

Closing
Closing is the final step in a real estate transaction, also known as a completion or settlement.

Closing Agent
A closing agent is an impartial third party who oversees the final details of a real estate transaction.

Closing Costs
Closing costs are all of the fees you pay to your mortgage company to close the loan. Some of these costs are appraisal, processing, and underwriting fees. These costs are included in your "cash to close"

Closing Disclosure (CD)
A Closing Disclosure is a form that outlines all of the details of your loan. This includes your interest rate, projected monthly payments, fees, closing costs and much more. It is required by law that your lender gives you your Closing Disclosure at least 3 days before closing.

Co-Borrower
A co-borrower is any additional borrow whose name will appear on loan documents and whose income and credit history are used for loan qualification.

Conditional Approval
A conditional approval means that you have been approved for a mortgage, but still need to provide additional documentation pertaining to your financial situation before closing.

Condominium
A condominium, or condo, is one of a group of housing units, in which each homeowner has an individual unit and all land in the condominium is owned by all the homeowners.

Construction Loan
A construction loan is a short-term loan which is used to finance building a home or other real estate project.

Contingency
A contingency is a provision in a real estate contract that details that the contract would cease to exist in the event of a certain occurrence.

Conventional Loan
conventional loan is a mortgage that is not guaranteed or insured by a government agency.

Credit (loan related)
Credit is a contractual agreement when a borrower receives something of value now and agrees to repay the lender in the future.

Credit Utilization
Credit utilization is the comparison between the amount of credit available and the amount currently used.

Debt-to-Income Ratio (DTI)
A debt-to-income ratio, also referred to as DTI, is one method a lender uses to measure an individual’s ability to afford monthly mortgage payments and repay debt.

Default
To default on a loan means that the borrower has failed to stick with the terms of the loan. For example: no longer making mortgage payments.

Down Payment
A down payment is the amount of money you pay upfront toward the purchase of your home, typically paid as a percentage of the price of the home. The higher the down payment, the less money you have to borrow.

Earnest Money
Earnest money is money that a buyer pays to the seller to confirm intent to purchase. This money is held in an escrow account and eventually becomes applied to a buyer's down payment and closing costs.

Equity
Also known as real property value, equity is the amount the owner would receive after the property is sold off and the mortgage is paid off.

Escrow
Escrow is the monetary assistance offered by a third-party on behalf of the transacting parties. Borrowers often choose to escrow their property taxes and homeowner's insurance as part of their mortgage payments.

Fair Housing Act
The Fair Housing Act was signed in 1968 by President Lyndon Johnson. It prohibits home sellers and lenders from discriminating against customers because of race, color, religion, sex, familial status, or national origin.

Fair Lending
Fair lending is the practice outlined in the Fair Housing Act of 1968. It prohibits lenders from discriminating against borrowers on the basis of race, color, national origin, religion, sex, familial status, or physical handicap.

Fair Market Value
Fair market value is the estimate of the market value of a property. FMV is based on what a knowledgeable, willing, and non-pressured buyer would probably pay to a seller.

Federal Housing Administration (FHA)
The Federal Housing Administration (FHA) is a government agency that sets standards for construction, underwriting, and insures bank loans and loans by private lenders for home building.

FHA Loan
A FHA loan is a mortgage issued by federally qualified lenders and insured by the FHA. FHA loans are designed for low-to-moderate income borrowers who cannot make a large down payment.

Fixed-Rate Mortgage
A fixed-rate mortgage is a fully amortizing loan, whose interest rate remains that same throughout the life of the loan

Forbearance
Forbearance is an option given to borrowers who are experiencing difficulty making their mortgage payments. It involves the temporary suspension of a mortgage loan’s terms by the lender in order to give the borrower a chance to get back on his/her feet. All missed payments must be eventually paid.

HUD
The United States Department of Housing and Urban Development, otherwise known as the HUD, is a Cabinet department in the Executive Branch of the United States federal government.

HUD Loan
HUD loans are made available for people who are dedicated to financial responsibility and restoring their financial reputation.

Interest Rate
Your mortgage interest rate is a component of your mortgage payment. Interest is the cost you pay to the lender for financing your home.

Jumbo Loan/Jumbo Mortgage
A jumbo loan, or jumbo mortgage, is a home loan that exceeds conforming loan limits. In most areas, the loan limit is $417,000 but can reach $625,500 in high-cost areas.

Lender
A lender is any organization, individual, or public group that makes funds available with the stipulation that the funds will be repaid, with interest or other fees, as a monthly payment or as a lump sum

Lien
A lien is a legal right to the possession of a property owned by another person until a debt owed by that person is paid or discharged.

Loan Application
A loan application is a document the provides information, financial and otherwise, about the borrow that lenders use to make a decision about whether or not to lend money to the borrow.

Loan-to-Value Ratio (LTV)
The loan to value ratio is the relationship between the loan amount and the value of the property expressed as a percentage of the property’s value.

Mortgage
A mortgage is a loan that borrowers take out in order to purchase a home.

Mortgage Commitment Letter
A mortgage commitment letter outlines all of the agreed-upon terms of your loan between you and your lender.

Mortgage Insurance
Mortgage Insurance is a policy that compensates lenders or investors for any losses incurred due to the default of a mortgage loan. This typically applies to people who put less than 20% down on their home.

Mortgage Rate Lock
A mortgage rate lock is an agreement between the borrower and lender that allows the borrower to lock the interest rate on a mortgage over a set period of time.

Origination Fee
An origination fee is a fee charged by a lender entering into a loan agreement to cover the loan processing cost.

PITI
PITI is an acronym for the four components of a mortgage payment- Principal, Interest, Taxes and Insurance.

Points
Buying points, or buying down your rate, allows you to pay a percentage of your mortgage amount up front in exchange for a lower interest rate. One point equals 1% of your mortgage amount.

Pre-Approval
Pre-approval is the evaluation of a potential borrower by a lender to determine whether the borrower qualifies for a loan from the lender.

Primary Residence
A primary residence is the legal residence of a person. A person may only have one primary residence at any given time.

Principal
The principal is a component of your mortgage payment which is dedicated to paying back the exact amount of money you borrowed for your loan.

Processing Fees
A processing fee is a fee charged to process a loan application, including applications for credit checks, property appraisals, and basic administrative costs.

Property Tax
A property tax is a levy on the value of the property by government authority.

Quitclaim Deed
A quitclaim deed can be used to transfer property rights. It releases a person’s interest in a property and are typically used as property transfers between family members.

Refinance
To refinance is to take out a new loan on different terms, often to lower your payment, shorten your term, or use the equity you’ve built up over time to get cash back from your home.

Rental Property
A rental property is a property which the owner receives payment from tenants in return for using or occupying the property.

Secondary Residence
A secondary residence is a property in which the owner(s) lives in part of the time.

Title Vesting
Title vesting refers to identifying the owner of a property, whom of which has full rights to selling the property.

VA Loan
A VA loan is a mortgage loan program provided to help veterans and their families obtain home financing.

Zoning
Zoning is the regulation of the use of real estate property by local government, restricting property to residential, commercial, and industrial uses. Zoning laws are the laws put in place to govern and/or enforce zoning regulations.
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