Mortgage Definitions

Escrow

That portion of a borrower's monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments and other items as they become due.

Loan to Value Ratio (LTV)

Amount of Loan / The cost or value of the property. Conventional loans with an LTV of greater than 80% and most FHA loans generally require mortgage insurance.

TIL (Truth in Lending)

Shows cost of credit at a yearly rate along with the principal and interest portion of payment and breakdown of closing costs.

Prepaids

Property expenses paid in advance, and usually prorated at the time of closing to help set up your escrow account.

Fannie Mae

A privately owned section of the secondary mortgage market. It adds liquidity to the mortgage market by investing in home loans throughout the country; specific guidelines must be met on a loan for us to sell it to Fannie Mae.

Origination Fee

A fee paid to a lender for processing a loan application that is a percentage of the mortgage amount.

Discount Point

A point (1% of the loan amount) paid to the lender at closing to permanently buy down or lower the interest rate. It is usually a percentage of the loan amount and can sometimes be paid by the buyer or seller.

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