Get the Best NJ Home Loan
No matter what your financial situation looks like, the experts at SunQuest will analyze your income, assets, and liabilities; we’ll coordinate with your attorney, accountant, or other advisers, to insure that your New Jersey mortgage supports your other your financial goals.
Take your time and find an ethical and honest Loan Officer that really knows the New Jersey mortgage market. At SunQuest funding, we pride ourselves in being honest, ethical, friendly, fast and easy to work with.
The most important document to request is a Loan Estimate; once the closing costs have been legally disclosed, many of them can’t change. The Loan Estimate allows you to compare offers from different lenders, in a consistent fashion, because everyone’s closing costs will be disclosed in the same format. A rate that is .25% or more below any other rate in the marketplace, is probably not a real rate. Your NJ home loan rate is only considered locked-in after you get an executed lock in agreement from your lender.
Make sure your New Jersey loan officer has experience. Most loans get denied for mistakes made by the loan officer, not because the borrower didn’t qualify for the loan. An experienced loan officer, from a reputable mortgage company like SunQuest Funding, can help insure that you receive the best NJ mortgage product, and NJ mortgage rate for your specific situation. At SunQuest Funding, we have an excellent reputation for structuring transactions that benefit the borrower. We always make promises that we can keep. Call us today and learn how we can help you achieve your home ownership goals.
In General, a home purchase may be your largest financial transaction to date, so it’s important to make the right decisions and to keep an eye on the details. With the assistance of your Real Estate Agent and SunQuest Loan Officer, it should be an efficient, pleasant and rewarding experience.
Count On Your Real Estate Agent present the homes that suit your needs as you’ve defined them. An experienced Agent will help you determine the difference between a “good buy” and a property which, because of its nature (neighborhood, market appeal, etc.), might have to be discounted if you decide to sell in the future. Your Agent will help negotiate the best purchase price for you.
With a Pre-Qualification letter from SunQuest Funding, LLC in hand, your Real Estate Agent will be able to demonstrate that you are a qualified and capable borrower. This will strongly influence the Seller and may make the difference between the Seller accepting your offer instead of an offer from someone else — even if your offer is lower!
Count On Your SunQuest Loan Officer to help you decide on the best loan program for your specific situation and goals; this single decision can save you thousands of dollars throughout the years! Your SunQuest Loan Officer will teach you how to track your loan’s progress through our SPEED LOAN™ portal. With your permission, your SunQuest Loan Officer will update your Real Estate Agent on your New Jersey home loan progress while keeping your personal financial information confidential between you and SunQuest.
Count On Yourself to get pre-approved as early as possible. This will put the power of financing behind you so you can concentrate on selecting your home. Keep your Real Estate Agent informed about any questions or concerns as they develop. Keep the mortgage process moving by providing documentation and decisions as soon as reasonably possible. Enjoy financing your home while remaining objective throughout; make the business decisions that are best for you.
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Since SunQuest Funding specializes in New Jersey home loans, a no-obligation conversation with one of our experienced Loan Officers will help you determine if you qualify.
At the entry level, there are a few things you’ll need to minimally qualify:
- Steady Employment History: You have worked at the same job, or in the same industry, for at least two years. For the purpose of qualifying for a NJ mortgage, time spent in college or vocational school count towards employment history.
- Cash Reserves: For 60 days minimum, and in a verifiable depository account (e.g. bank, credit union, brokerage account, etc.), you must have enough money for the down payment and closing costs. Some mortgage programs allow a gift from a family member.
- Credit History: Generally, you must have a history of paying your bills on time. You should not have unpaid collection accounts or consistent delinquencies on your credit report.
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Getting a New Jersey home loan through SunQuest Funding is an easy process. No more guessing. You can be pre-approved before you find a property to buy! We employ the latest technology to make it easier for you to help us do it with speed. With our SPEED LOAN™ portal, you can track your loan and know its exact status throughout the entire loan process.
- Loan Application: When you decide to go with SunQuest, your Loan Officer we’ll get you set up through our SPEED LOAN™ portal. We’ll send you an email with special and secure login credentials. Once you are set up in our SPEED LOAN™ system, you’ll be able to electronically sign all documents, upload critical documentation and receive the important disclosure information we’re required to send all mortgage applicants. Depending on available documentation you supply us, our efficient methods and high-tech loan processing systems enable us to pre-qualify you for a mortgage on the same day we take your application.
- Processing Your Loan Application: After we complete your NJ mortgage application, we work with you to make sure that all the required documentation has been obtained and all the conditions stated in the preliminary approval have been met.
– Depending on your credit history, income and down payment, the usual required documentation consists of:
- Photo ID (i.e. drivers license, passport, etc.)
- Most recent consecutive four week’s pay stubs.
- Last two years W-2 forms.
- Confirmation of available down payment funds in a depository institution for the past 60 days (i.e. statements from a bank, credit union, brokerage, etc.).
- Sales contract that details the property you are purchasing.
- If you’re refinancing, we’ll need a copy of your most recent mortgage statement.
- Loan Estimate: Once we get your documentation, we’ll send you a clear and honest estimate of all your closing costs. The Loan Estimate form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product. The form uses clear language and is design to help you better understand the terms of the mortgage loan you’ve applied for. All lenders are required to use the same standard Loan Estimate form. This makes it easier for you to compare mortgage loans so that you can choose the one that is right for you. When you receive a Loan Estimate, the lender has not yet approved or denied your loan application. The Loan Estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, the lender will ask you for additional financial information.
- Closing Disclosure: This is a legal document that your Loan Officer must send you; it’s a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). The lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from the lender. The three days also gives you time to ask your lender any questions before you go to the closing table.
- Property Appraisal: We get your property appraised. The report is written by a licensed appraiser who visits the property and measures it, draws a simple floor plan and takes photos. The appraiser also compares the property to other recently sold properties in the area to determine “fair market value.”
- Title Search & Title Report: The search and report documents who owns the property and what leans, if any, are against it; all leans must be paid and satisfied prior to funding your New Jersey home loan mortgage. The report will also include information about any easements or other rights that apply to the property.
- Underwriting: After the loan processing is complete, an Underwriter will review and analyze your New Jersey mortgage loan package. If mortgage insurance is required for your loan, the underwriter will also submit the loan package to a mortgage insurance company for review. The underwriting process usually takes two days or less to complete.
- Credit Decision and Final Approval: Once Underwriting is complete, your New Jersey loan is either approved, denied, or suspended. In reaching a decision on your application for a mortgage, the Underwriter will consider your income, credit, cash reserves and the property itself. Below are a few things that the Underwriter considers.
– Housing Expense Ratio is the percentage of your gross monthly income it takes to make your house payment, including taxes and insurance. If you earn $3,600 and your house expense is $1,200, you have a 33% housing ratio (1,200 is one third of 3,600).
– Total Expense Ratio is the percentage of your gross monthly income it takes to pay your house payment plus other monthly payments you make, such as car payments, credit card debt and student loans.
– Cash Reserves are the money you have left in the bank after your New Jersey mortgage loan, or refinance mortgage loan closes. Cash in the bank is very important in case you run into unforeseen circumstances. Usually, two months worth of house payments are required.
– Credit History is the timeliness with which you’ve paid your bills in the past. Underwriters will generally focus on the last two years.
– Loan-to-Value Ratio is also referred to as “LTV.” If you have a house valued at $100,000 with a $90,000 loan you have a 90% loan-to-value ($90,000 divided by $100,000 = 90%).
– Credit History is the timeliness with which you’ve paid your bills in the past. Underwriters will generally focus on the last two years.
- Funding Your Loan: Some of our SPEED LOANS™ close as fast as 15 days! The satisfying conclusion to the process of getting a New Jersey home mortgage is called the “settlement,” or “closing.” During the settlement you’ll read and sign numerous purchase (or refinance) documents. Depending on the complexity of the transaction and the condition of the documents, most closings take about an hour or less to complete.
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Government Mortgage Programs
New Jersey VA loans provide significant advantages:
- No down payment. Qualifying veterns can buy a home with zero down.
- No mortgage insurance. VA loans have a funding fee and do not require the more expensive Private Mortgage Insurance (PMI).
- Excellent loan programs with 30 year fixed and 15 year fixed rate loans.
- Competitive interest rates. VA rates are the same as, or lower than, conventional rates.
New Jersey home improvement loans, and construction loans, are one of SunQuest’s specialties. Go to our Construction Loans page to see all the details.
During a purchase or refinance, you can finance the renovation of your primary primary residence. When you want to renovate a New Jersey home a FHA 203k mortgage may be the right loan for you.
Improvements allowable through the FHA 203k program include:
- Room Additions
- New Bathrooms
- New Kitchens
- New Windows
- New Roofing and Siding
- New Furnace or Central Air Conditioning
The FHA 203k loan does not provide financing for ground-up construction projects or funding for the completion of a home construction project on a home that’s never had a certificate of occupancy. See our section on Construction Loans page to learn more about the ways SunQuest can help you with NJ construction loans.
The Federal Housing Administration (FHA) is a division of the U.S. Department of Housing and Urban Development (HUD) that provides insurance policies to guarantee 100% of the payment of a loan in the event of default. FHA insures mortgages on single family and multifamily homes including manufactured homes and hospitals. It is the largest insurer of mortgages in the world, insuring over 34 million properties since its inception in 1934. FHA insurance protects the lender.
Many first time home buyers in New Jersey find that an FHA loan is the best mortgage for them.
FHA mortgage loans provide advantages not available through conventional loans:
- Low Down payment: FHA minimum down payment is 3.5% of the purchase price. For a $200,000 home minimum down payment is $7,000.
- Much lower minimum credit score requirement: FHA guidelines now allow for a minimum credit score of 500.
- FHA has a home improvement loan, called a 203k, where a borrower can take a 30 year fixed NJ mortgage to improve their current residence or renovate a home to purchase. With a 203k loan, you can finance up to 110% of the After-Improved Value.
New Jersey home improvement loans, and construction loans, are one of SunQuest’s specialties. Go to our Construction Loans page to see all the details.
HomeStyle Renovation mortgage (HSR), a Fannie Mae Program, permits borrowers to include financing for home improvements in a purchase or re-finance transaction of an existing home. It’s a convenient way for borrowers to make renovations, repairs, or improvements totaling up to 50 percent of the as-completed appraised value of the property with a first mortgage, rather than a second mortgage, home equity line of credit, or other, more costly financing method. Eligible borrowers include individual home buyers, investors, nonprofit organizations, and local government agencies.
Benefits To Borrowers Include:
- Cost-effective way to renovate or improve a home
- Single mortgage means lower closing costs and typically a lower interest rate on a first mortgage
- Borrowers can qualify for CLTV of up to 105% with eligible Community Seconds® subordinate financing
- Loan amount based on “as-completed” value of the home or the cost basis (purchase money loans), whichever is less
The HomeStyle Renovation mortgage does not provide financing for ground-up construction projects or funding for the completion of a home construction project on a home that’s never had a certificate of occupancy. See our section on Construction Loans page to learn more about the ways SunQuest can help you with NJ construction loans.
Conforming & Non-Conforming
Fixed rate New Jersey mortgages, make sense for the majority of borrowers; the interest rate risk remains with the lender and not the borrower.
Fixed Rate Mortgages are home loans where the interest rate and terms of the loan remain fixed through the life of the loan. Generally, fixed rate loans have terms of 30, 25, 20, 15, or 10 years. Shorter term loans have lower interest rates. Shorter term loan payments are higher because they contain more principal than the longer term loan payments.
If you think you’ll be in your NJ home for a long period of time, then a fixed rate loan may make sense for you. Otherwise, you may want to consider other types of home loans.
Conforming fixed rate loans have the maximum loan amount limits Fannie Mae and Freddie Mac allow. These limits range from $417,000 in many parts of the country and up to $625,500 in the very highest cost areas, such as parts of New Jersey. Maximum loan limits vary from county to county. Fannie Mae and Freddie Mac generally offer the best New Jersey mortgage interest rates, for fixed rate loans. They also have some of the most flexible underwriting guidelines.
Jumbo Fixed Rate mortgages have loan amounts above those available from Fannie Mae or Freddie Mac. Jumbo loans have slightly higher interest rates than conforming loans because they don’t have the intrinsic guarantee that government- owned Fannie and Freddie provide. Otherwise, Jumbo Fixed Rate loans have the same features as conforming fixed rate loans. Jumbo loans are available for borrowers purchasing or refinancing higher priced homes.
An Adjustable Rate Mortgage (ARM) generally has an initial fixed rate period of 3, 5, 7 or 10 years. After the initial fixed period, the interest rate begins to adjust yearly based on the yield of the 1 year T-bill or LIBOR indexes. An ARM involves interest rate risk for borrowers because the rate varies based on the lender’s cost of money.
Once the home loan interest rate begins to adjust, the payment calculations are based on the new principal balance and the remaining term of the loan. Pre-paying an ARM loan can significantly reduce the payment at each change date.
Many borrowers seeking a New Jersey ARM, or a New York ARM, intend to live in their home for a short period of time. They may also intend to aggressively pay down the home loan at some point. Other borrowers may choose an ARM for multiple and strategic financial planning reasons.
Adjustable rate NJ home loans, and NY home loans, are offered by Fannie Mae and Freddie Mac with strict loan limits. These New Jersey mortgages, and New York mortgages, are considered to be “Conforming”.
Jumbo ARM New Jersey mortgages, and New York mortgages, are adjustable rate mortgages that exceed Fannie Mae or Freddie Mac loan limits. People purchasing or refinancing a higher priced NJ home, or a higher priced NY home, for a short period of time, might consider a Jumbo ARM. The Jumbo ARM terms are similar to Fannie Mae ARM loans except that the loan amounts are higher.
New York and New Jersey construction loans, and home renovation loans, are one of SunQuest’s specialties. Go to our Construction Loans page to see all the details.
A Home Equity Loan is a second mortgage on your home. Second mortgages are mortgage loans that are recorded after a first mortgage. New Jersey home equity loans, and New York home equity loans, can be fixed rate or variable rate.
Fixed rate second mortgages are called “closed end second mortgages” and are for a specific amount of money. You can take a closed end NY second mortgage, or a closed end NJ second mortgage, for home improvement or debt consolidation.
Variable rate second mortgages are called “home equity lines of credit,” also known as HELCO loans. You can use your NY HELCO loan, or NJ HELCO loan, as a rolling line of credit or for the same purpose as a closed end second mortgage. With a HELOC, the payment is based on the amount borrowed against the credit limit and you only pay interest on the amount of money that you have used out of your line of credit.
Glossary Of Mortgage Terms
If you are in the process of securing a New Jersey home loan, you may hear a few words or terms that need defining. Following is a list of commonly-used words and terms you may encounter while shopping for the best New Jersey mortgage. The more you know about mortgages, the easier the process will be.
Adjustable-Rate Mortgage (ARM): Also known as a variable-rate loan, usually offers a lower initial rate than fixed-rate loans. The interest rate can change at specified time periods based on changes in an interest rate index that reflects current finance market conditions, such as the LIBOR index or the Treasury index. The ARM promissory note states maximum and minimum rates. When the interest rate on an ARM increases, the monthly payments will increase and when the interest rate on an ARM decreases, the monthly payments will be lower.
Adjustment Period: The time between interest rate adjustment dates for an ARM. They are usually the initial period between the time the ARM is originated and the first interest rate change date, and subsequent adjustment periods between each interest rate change after the first interest rate change.
Amortization: A term used to describe the process of paying off a loan over a predetermined period of time at a specific interest rate. The amortization of a loan includes payment of interest and a portion of the outstanding principal balance during each payment cycle.
Amortization Schedule: Provided by mortgage lenders, the schedule shows how over the term of your mortgage the principal portion of the mortgage payment increases and the interest portion of the mortgage payment decreases.
Annual Percentage Rate (APR): The cost of credit expressed as a yearly rate. The APR includes the interest rate, points, broker fees and certain other credit charges that the borrower is required to pay.
Application Fee: The fee that a mortgage lender charges to apply for a mortgage to cover processing costs.
Appraisal: A professional analysis, including references to sales of comparable properties, used to estimate the value of the property.
Appraiser: A professional who conducts an analysis of the property, including references to sales of comparable properties in order to develop an estimate of the value of the property. The appraiser’s report is called an “appraisal.”
Appreciation: An increase in the market value of a home due to changing market conditions and/or home improvements.
Arbitration: A process where disputes are settled by referring them to an impartial third party (arbitrator) chosen by the disputing parties who agree in advance to abide by the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator issues the decision.
Asbestos: A toxic material that was once used to make insulation and fireproofing material in houses. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. However, some older homes may still have asbestos in these materials.
Assets: Everything of value an individual owns.
Assumption: A home buyer’s agreement to take on the primary liability for paying an existing mortgage from a home seller.
Balloon Mortgage: A mortgage with monthly payments based on a 30-year amortization schedule and the unpaid principal balance due in a lump sum payment at the end of a specific period (usually 5 or 7 years) earlier than 30 years. The mortgage contains an option to reset the interest rate to the current market rate and to extend the maturity date provided certain conditions are satisfied.
Bankruptcy: Legally declared unable to pay your debts as they become due. Bankruptcy can severely impact your ability to borrow money. Talk to a credit counselor as soon as you realize you are having problems paying your bills on time to try to prevent bankruptcy.
Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability, your assets and reserves, and the amount of your income each month that is available after you have paid for your housing costs, debts and other obligations.
Cash Reserves: The money you have left in the bank after your New Jersey or New York mortgage loan, or refinance mortgage loan, closes. Cash in the bank is very important in case you run into unforeseen circumstances. Usually, two months worth of house payments are required.
Closing (Closing Date): When the real estate transaction between buyer and seller is completed. The buyer signs the mortgage documents and the closing costs are paid. Also known as the settlement date.
Closing Agent: A person that coordinates closing-related activities, such as recording the closing documents and disbursing funds.
Closing Costs: The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs and items that must be prepaid or put into escrow, and other costs. Ask a lender or real estate professional for a complete list of closing cost items.
Closing Disclosure: [This document is one of the most critical documents you’ll receive.] A Closing Disclosure is a five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). The lender is required to give you the Closing Disclosure at least three business days before you close on the mortgage loan. This three-day window allows you time to compare your final terms and costs to those estimated in the Loan Estimate that you previously received from the lender. The three days also gives you time to ask your lender any questions before you go to the closing table.
Collateral: Property which is pledged as security for a debt. In the case of a mortgage, the collateral would be the land, the house, and other buildings and improvements.
Commitment Letter: A letter from your lender that states the amount of the mortgage, the number of years to repay the mortgage (the term), the interest rate, the loan origination fee, the annual percentage rate and the monthly charges.
Concession: Something yielded or conceded in negotiating a transaction.
Condominium: A unit in a multi-unit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas. The owners do not own the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for building maintenance, property upkeep, taxes and insurance on the common areas, and reserves for improvements.
Counter-offer: An offer made in return by the person who rejects the previous offer.
Credit: The ability of a person to borrow money, or obtain goods with payments over time, as a consequence of the favorable opinion held by a lender as to the person’s financial situation and reliability.
Credit Bureau: A company that gathers information on consumers who use credit and sells that information in the form of a credit report to credit lenders.
Credit History: A credit history is a record of credit use. It is comprised of a list of individual consumer debts and an indication as to whether or not the debts were paid back in a timely fashion or “as agreed.” Credit institutions have developed a complex recording system of documenting your credit history; this is called a credit report.
Credit Report: A document used by the credit industry to examine an individual’s use of credit. It provides information on money that individuals have borrowed from credit institutions and a history of payments.
Credit Score: A computer-generated number that summarizes an individual’s credit profile and predicts the likelihood that a borrower will repay future obligations.
Creditworthy: Your ability to qualify for credit and repay debts.
Debt: A sum of money owed from one person or institution to another person or institution.
Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expense, installment debts, alimony, child support, car payments, and payments on revolving or open-ended accounts such as credit cards.
Deed: The legal documents conveying title to a property.
Deed of Trust: A legal document in which the borrower conveys the title to a 3rd party (trustee) to hold as security for the lender. When the loan is paid in full the trustee re-conveys the deed to the borrower. If the borrower defaults on the loan the trustee will sell the property and pay the lender the mortgage debt.
Default: Failure to perform a legal obligation; a default includes failure to pay on a financial obligation, but may also be a failure to perform some action or service that is non-monetary.
Deposit: The amount of money you put down on a house to hold it.
Depreciation: A decline in the value of a house due to changing market conditions, decline of a neighborhood or lack of upkeep on a home.
Down Payment: A portion of the price of a home, usually between 3-20%, not borrowed and paid up front.
Earnest Money Deposit: The deposit you make to show that you are committed to buying the home. The deposit will not be refunded to you after the seller accepts your offer, unless one of the sales contract contingencies is not satisfied.
Equity: The value in your home above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity.
Escrow: The holding of money or documents by a neutral third party prior to closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.
Fixed-Rate Mortgage: A mortgage with an interest rate that does not change during the entire term of the loan.
Foreclosure: A legal action that terminates all ownership rights in a home when the home buyer fails to make the mortgage payments or is otherwise in default under the terms of the mortgage.
Gift Letter: A letter that a family member writes verifying that he/she has given you a certain amount of money as a gift and that you do not have to repay it. You can use this money towards a portion of your down payment through some mortgage products.
Gross Monthly Income: The income you earn in a month before taxes and other deductions. Under certain circumstances, it may also include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.
Home Inspection: A professional inspection of a home to review the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.
Homeowner’s Insurance: A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances.
Housing Expense Ratio: This ratio is the percentage of your gross monthly income it takes to make your house payment, including taxes and insurance. If you earn $3,600 and your house expense is $1,200, you have a 33% housing ratio (1,200 is one third of 3,600).
Index: The published index of interest rates on a publicly traded debt security used to calculate the interest rate for an ARM. The index is usually an average of the interest rates on a particular type of security such as the LIBOR.
Individual Retirement Account (IRA): A tax-deferred plan that can help build a retirement nest egg.
Inflation: An increase in the general level of prices.
Inquiry: A request for a copy of your credit report. An inquiry occurs every time you fill out a credit application and/or request more credit. Too many inquiries on a credit report can lower your credit score.
Interest: The cost you pay to borrow money. It is the payment you make to a lender for the money it has lent to you. Interest is usually expressed as a percentage of the amount borrowed.
Keogh Funds: A tax-deferred retirement-savings plan for small business owners or self-employed individuals who have earned income from their trade or business. Contributions to the Keogh plan are tax deductible.
Liabilities: Your debts and other monetary obligations.
LIBOR Index: The London Interbank Offered Rate (LIBOR), or more officially ICE LIBOR for Intercontinental Exchange, is the average of interest rates estimated by each of the leading banks in London that it would be charged were it to borrow from other banks.
Lien: A claim or charge on property for payment of some debt. With respect to a mortgage, it is the right of the lender to take the title to your property if you do not make the payments due on the mortgage.
Loan Estimate: [This document is one of the most critical documents you’ll receive.] The form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan. The Loan Estimate also gives you information about the estimated costs of taxes and insurance, and how the interest rate and payments may change in the future. In addition, the form indicates if the loan has special features that you will want to be aware of, like penalties for paying off the loan early (a prepayment penalty) or increases to the mortgage loan balance even if payments are made on time (negative amortization). If your loan has a negative amortization feature, it appears in the description of the loan product.
Loan Origination Fees: The fee paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1% of the mortgage amount.
Loan-to-Value Ratio (LTV): If you have a house valued at $100,000, with a $90,000 loan, you have a 90% loan-to-value ratio ($90,000 divided by $100,000 = 90%).
Lock-In Rate: A written agreement guaranteeing a specific interest rate when your mortgage closes.
Low-Down-Payment Feature: A feature of a mortgage, usually a fixed-rate mortgage, that helps you buy a home with as little as a 3% down payment.
Margin: The amount (expressed as a percentage) added to the index for an ARM to establish the interest rate on each adjustment date.
Market Value: The current value of your home based on what a willing purchaser would pay. The value determined by an appraisal is sometimes used to determine market value.
Mortgage: A loan secured by a lien on your home. In some states the term mortgage is also used to describe the document you sign to show that you have granted the lender a lien on your home; other states use a deed of trust document instead of a mortgage. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.
Mortgage Broker: An independent finance professional who specializes in bringing together borrowers and lender to facilitate real estate mortgages.
Mortgage Insurance (MI or PMI): Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).
Mortgage Lender: The lender providing funds for a mortgage. Lenders also manage the credit and financial information review, the property and the loan application process through closing.
Mortgage Rate: The cost or the interest rate you pay to borrow the money to buy your house.
Mutual Funds: A fund that pools the money of its investors to buy a variety of securities.
Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.
Offer: A formal bid from the homebuyer to the home seller to purchase a home.
Open House: When the seller’s real estate agent opens the seller’s house to the public. You do not need a real estate agent to attend an open house.
Points: 1% of the amount of the mortgage loan. For example, if a loan is made for $50,000, one point equals $500.
Pre Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. The per-approval is based on the specific down payment, property tax, credit approval, and income detailed in the letter; it’s also contingent on the appraisal. Getting a Pre Approval letter also shows a home seller that you are a serious buyer.
Predatory Lending: Abusive lending practices that include making a mortgage loan to an individual who does not have the income to repay it or repeatedly refinancing a loan, charging high points and fees each time and “packing” credit insurance on to a loan.
Pre Qualification Letter: See Pre Approval letter.
Principal: The amount of money borrowed to buy your house or the amount of the loan that has not yet been paid back to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan at any given time. It is the original loan amount minus the total repayments of principal you have made to date.
Private Mortgage Insurance (PMI): See Mortgage Insurance
Property Appreciation: See Appreciation
Radon: A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses.
Rate Cap: The limit on the amount that the interest rate on an ARM can increase or decrease during any one adjustment period.
Ratified Sales Contract: A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspections, making repairs, closing by a certain date, and the like.
Real Estate Professional: An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you have specifically contracted with a buyer’s agent, the real estate professional represents the interest of the property seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers, but are generally not involved in the lending process.
Refinance: Obtaining a new mortgage with all or some portion of the proceeds used to pay off the original mortgage.
Replacement Cost: The cost to replace damaged personal property without a deduction for depreciation.
Securities: A financial form that shows the holder owns a share or shares of a company (stock) or has loaned money to a company or government organization (bond).
Title: The right to, and the ownership of, land by the owner. Title is sometimes used to mean the evidence or proof of ownership of land; although another term used for that is “deed.”
Title Insurance: Insurance that protects lenders and homeowners against loss of their interest in the property because of legal problems with the title.
Total Expense Ratio: This is the percentage of your gross monthly income it takes to pay your house payment plus other monthly payments you make, such as car payments, credit card debt and student loans.
Underwriting: The process a lender uses to determine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage.
Uniform Residential Loan Application: A standard mortgage application that your lender will ask you to complete. The form request your income, assets, liabilities and a description of the property you plan to buy, among other things.
Warranties: Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.