Helpful Definitions
This is a search of the land records in the county where the home or land is located. It certifies to the lender and buyer, who the actual owner of the land is and whether there are any liens against it. Liens can be from a loan with a bank, a judgment against the owner, or unpaid property taxes. the goal is to make sure you get what you are paying for: free and clear property.
A mortgage with an interest rate that changes during the life of the loan according to movements in an index rate. Sometimes called ARM loan – ARM loan or VRMs (variable-rate mortgages).
The gradual repayment of a mortgage loan, both principal and interest, by installments. An Amortization Schedule shows you how much of your monthly payment goes to interest and how much goes to the principal each month.
The cost of credit, expressed as a yearly rate including interest, mortgage insurance, and loan origination fees. This allows the buyer to compare loans, however APR should not be confused with the actual interest rate. The actual interest rate is only the amount of interest paid on the loan amount.
A written analysis prepared by a qualified and certified appraiser that provides the best estimate for the real current value of the property and improvements. The value is based upon other similar properties in the area which have recently sold on the open market, with adjustments made up or down based upon conditions unique to your property.
This is a plan to reduce the debt by making half-payments every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is a large savings in interest. Not all lenders allow this, but you should check to see if your lender does have the bi-weekly program.
A document issued by the federal government certifying a veteran’s eligibility for a Department of Veterans Affairs (VA) mortgage.
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
These are expenses over and above the price of the property that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, appraisal, insurance, recording fees, escrows for taxes and house insurance, etc. Closing costs will vary based upon the value of the house and the loan, and buyers and sellers can negotiate at the time of the contract.
Required by federal law, the Closing Disclosure (CD) is typically the first document you will review with your closing agent. This form will disclose all costs related to the home purchase, including loan fees, real estate taxes, and other miscellaneous expenses. There are many separate costs when buying a home, and this document helps you understand and prepare for them. It contains information regarding the details of your loan, including the amount financed, the annual interest percentage rate, the finance charge, and the payment schedule. This document will also take into consideration any modifications that may have been made to your interest rate or points during the loan process.
Be sure to compare your Closing Disclosure (CD) to your initial Loan Estimate (LE) as the CD will include final closing costs and any modifications that may have been made to your interest rate or points during the loan process. Some changes from your initial LE are normal, but make sure to ask for an explanation if you notice a big shift. Because this document contains a lot of information that is essential for homeowners to review, it is required by law that it be sent to you three business days before closing.
To calculate your debt-to-income ratio, divide all your monthly debt payments by your gross monthly income. This number is one of the ways lenders assess your ability to manage the monthly mortgage payments for the loan amount you are considering.
The Deed of Trust is simply you putting your property up as collateral to secure the repayment of your loan. If you honor your trust and make all payments, the deed of trust is canceled and your property is free and clear. If you breach your trust and don’t repay the loan, then the trustee can foreclose on the property to attempt to repay the lender for your debt on the property.
Part of the purchase price of a property that is paid in cash and not financed with a mortgage.
An amount of money from the Buyer deposited with the Seller, or someone on their behalf, that secures the sales contract. At closing, the amount in the escrow account is credited back to the buyer toward the purchase price.
The amount of financial interest in a property. Equity is the difference between the fair market value of the property and the amount you still owe on the property.
This is a monthly amount the lender collects from you in addition to your principal interest. It is one-twelfth (1/12) of the annual property taxes and homeowners insurance premium, and sometimes, mortgage insurance (if applicable). So, if your taxes and insurance are $2,400 per year, then the lender would collect $200 per month for escrow to make sure they can pay the taxes and insurance when they become due each year.
Mortgage interest that is fixed throughout the entire term of your loan.
Every piece of property in Mississippi is taxed. By formally declaring a piece of property you own to be your primary residence (homestead), you are given a reduction in the amount of taxes you will have to pay each year on the property. You only have to apply one time, but you can only have the exemption for one property in Mississippi as long as you don’t have it in any other county or any other state.
This is the relationship between the amount of money you owe on your property and the appraised value (or sales price if it is lower) of the property. For example, a $100,000 home with an $80,000 mortgage has an LTV of 80 percent.
The Deed of Trust is simply you putting your property up as collateral to secure the repayment of your loan. If you honor your trust and make all payments, the deed of trust is canceled and your property is free and clear. If you breach your trust and don’t repay the loan, then the trustee can foreclose on the property to attempt to repay the lender for your debt on the property.
A fee paid to a lender for providing the mortgage loan. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
This document is a legal contract between you and your lender where you have to repay the borrowed money at the interest rate, and that the lender can’t change the terms after it is signed. The promissory note details the loan amount, interest rate, payment schedule, and length of the term. It also lists the penalties the lender can impose if you fail to make the mortgage payments as scheduled.
A Quitclaim Deed is where a person is giving or selling to someone whatever interest they have, if any, in a piece of property. In a Quitclaim Deed, there are no warranties about the title, or that the Grantor even owns it. These are usually used between family members or neighbors, transferring property to one another, without a survey.
Under federal law, your lender is required to supply you with a Notice of Right to Cancel. The Notice of Right to Cancel provides each borrower under the transaction a three-business day window to cancel the new mortgage loan.
This is a search of the land records in the county where the home or land is located. It certifies to the lender and buyer, who the actual owner of the land is and whether there are any liens against it. Liens can be from a loan with a bank, a judgment against the owner, or unpaid property taxes. the goal is to make sure you get what you are paying for: free and clear property.
The lender’s process of deciding whether to make a loan to a potential borrower based on credit, employment, assets, and other factors, and the matching of this risk to an appropriate rate, term, and loan amount.
A final inspection shortly before settlement to make sure the property is in the same condition that it was at the time the offer contract was written.
A Warranty Deed is a type of deed where the grantor (seller) guarantees that he or she holds clear title to a piece of real estate and has a right to sell it to the grantee (buyer). A General Warranty Deed protects the grantee against title defects arising at any point in time, extending back to the property’s origins. A Special Warranty Deed protects the grantee only against title defects arising from the actions or omissions that occurred during the time the Grantor owned the property.