| Office Address: |
1717 Simi Town Center Way #7
Simi Valley, CA 93065
CalDRE: 01220304
NMLS: 336940
Rebecca Baumgartner, Broker:
CalDRE: 00962527
NMLS: 340837
p. (805) 501-0407
f. (805) 577-6208
Rebecca@randgfinancial.com
Glenn Hirschfeld,
Senior Loan Officer
CalDRE: 00869262
NMLS: 341473
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ACCELERATION CLAUSE
Allows the lender to speed up the rate at which the loan comes due or even to demand
immediate payment of the entire outstanding balance of the loan should the borrower default.
ACQUISITION COST
The total cost of purchase including land, land pay-off, home with improvements, and/or site preparation and improvements.
ADJUSTABLE RATE MORTGAGE (ARM)
A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.
Also known as renegotiable rate mortgage, or variable rate mortgage.
ADJUSTMENT INTERVAL
On an adjustable rate mortgage, the time between changes in the interest rate and/or
monthly payment, typically 1, 3 or 5 years, depending on the index.
ALTERNATIVE CREDIT REFERENCES
If a lender asks the borrower to produce alternative credit references, they are asking for credit
references that do not appear on the credit report. For example, insurance, utilities, or
buy here-pay here loans.
AMORTIZATION
The loan payment by equal periodic payments calculated to pay off the debt at the end of a
fixed period, including accrued interest on the outstanding balance.
ANNUAL PERCENTAGE RATE (APR)
The APR is the interest rate reflecting the cost of a mortgage as a yearly rate. This rate is likely
to be higher than the stated note rate or advertised rate on the mortgage, because it takes into
account points and other credit costs.
APPLICATION
Standard FHLMC/FNMA 1003, residential loan application, to be completed by borrower.
An original #1003 typed, computer generated, or handwritten form signed by the borrower(s)
must be in the lender's final loan package.
APPRAISAL
The appraisal usually paid for by the buyer, provides an in-depth report of value and
marketability of the subject property. The appraiser inspects the property, neighborhood,
and considers comparable properties in determining the value of the subject property.
APPRAISED VALUE
The determination of the value of the home as reported by a licensed appraiser.
ASSUMPTION
An assumption clause is the agreement between the buyer and seller where the buyer takes
over the payments on an existing mortgage from the seller. Assuming a loan can usually
save the buyer money since this is an existing mortgage debt and providing the lender's
mortgage instrument allows for the assumption of the loan.
BALLOON (PAYMENT) MORTGAGE
A short-term fixed-rate loan, which involves small payments for a certain period of time and
one large payment for the remaining amount of the principal at a time specified in the contract.
BUY DOWN
When the mortgage is subsidized by lowering the interest rate during a specified term.
CAPS (INTEREST)
A limit set on the increase of the interest rate on an adjustable rate mortgage per year
or over the life of the loan.
CAPS (PAYMENT)
A limit on the amount of change for monthly payments on an adjustable rate mortgage.
CLOSING COSTS
These are the total amount of fees charged to close the loan. The borrower must pay for:
Prepaid interest, Real Estate Taxes, Hazard Insurance, and Private Mortgage Insurance if
applicable. A seller may pay all closing costs up to 6% on a 90% LTV, or 3% on a
95% LTV of the borrower's closing costs exclusive of pre-paids.
CLOSING or SETTLEMENT
The actual transfer of property and land from seller to buyer.
COMMITMENT
The agreement, often in writing, between a lender and a borrower to loan money at a future
date subject to the completion of paperwork or compliance with state conditions.
COMMERCIAL PROPERTY
Commercial properties are any properties other than residential including multi-family
projects that are not sold separately.
CONDOMINIUM
A condominium or condo is a single unit within multiple units that is sold separately from
the other units and is a form of ownership of real property. The owner receives title to a
particular unit and a proportionate interest in certain common areas that may include
parking area, swimming pool, tennis courts, clubhouse, greenbelts, and the exterior
of the multi-unit building.
CONFORMING LOAN
Loans that are usually given to A or A+ borrowers, meaning that the borrower conforms
to most of the underwriting guidelines.
CONFORMITY IN PROCESSING
The lender strives for conformity in all references to the property or the borrower. For
example: Joseph Paul Applicant, Sr., not Joseph Paul Applicant, or Prince Edward
Street, not Prince Edward Road.
CONSTRUCTION LOAN
This loan is a short-term interim loan for financing the cost of construction. The lender
advances funds to the builder at periodic intervals as the work progresses.
CONSTRUCTION - PERMANENT LOAN
A one time closing prior to construction of the home allowing a specified number of
inspections for draws or advances to the builder during construction, and then automatically
converting over to a permanent loan.
CONVENTIONAL LOAN
A mortgage not insured by FHA or guaranteed by the VA or FmHA.
CREDIT EXPLANATION
A written explanation by the borrower explaining any derogatory credit on the borrower's
credit report, or any situation which the underwriter needs explaining to better understand the
borrower's situation and/or file. (Letter of Explanation)
CREDIT RATING
Some lenders classify the borrower's credit by grading it as: A, B, C, or D as a way of placing
the loan into a program. Every loan is reviewed regardless of rating.
CREDIT REPORT (C/R or CBI)
This report, ordered by the lender, helps to determine the credit worthiness of the borrower.
Lenders and dealers generally order an in-file report to determine whether to continue with
the loan process. A full mortgage C/R is required on all loans.
CREDIT SCORES
These are scores given to borrowers by the three main reporting credit agencies based on
the borrower's credit history. Lenders give importance to the scores in determining which
loan program to place the borrower's loan.
DEBT-TO-INCOME-RATIO (DTI)
The DTI ratio, expressed by a percentage, which results when a borrower's monthly payment
obligation is divided by his/her net effective income (FHA/VA loans) or gross monthly
income (conventional loans).
DEED OF TRUST
A document used in place of a mortgage to secure the payment of a note.
DEFAULT
The failure to make the monthly payments on a mortgage.
DELINQUENCY
The failure to make payments on time, which could lead to foreclosure.
DEPARTMENT OF VETERANS AFFAIRS (VA)
An independent agency of the federal government, which guarantees long-term, low
or no down payment mortgages to eligible veterans.
DEPENDANTS
The number of dependants listed on the loan application by the borrower as
dependants listed on the borrower's federal and state tax filings.
DISCOUNT POINTS
(see points)
DOWN PAYMENT
Money paid to make up the difference between the purchase price and the mortgage
amount. The down payment is determined by the actual cash money paid by the borrower
toward the purchase of the property, or the land value, established by the appraiser, when
a borrower has owned his/her land over two years and is using the land equity in lieu of a
cash down payment or a combination thereof.
DUE-ON-SALE CLAUSE
A provision in a mortgage or deed of trust that allows the lender to demand immediate
payment of the balance of the mortgage if the mortgage holder sells the home.
EARNEST MONEY DEPOSIT
This is the deposit you give to the Realtor, seller, builder, or attorney to hold in escrow as
good faith on your part when signing a purchase contract and is applied toward your
down payment and/or closing costs when you go to closing.
ESCROWS
Sometimes referred to as reserves. Escrows are the property tax, homeowner's insurance,
mortgage insurance, flood insurance, and property assessments such as condo fees. Escrows
are computed at 1/12th of the annual amount and added to the borrower's monthly payment. The
lender will pay these items directly when due from their escrow account. The lender will collect
an advance of the appropriate escrow amount at closing to insure that there is sufficient money
to pay the escrows when due. Escrows are considered prepaid items.
EQUAL CREDIT OPPORTUNITY ACT (ECOA)
A federal law requiring lenders to make credit equally available without discrimination based on
race, color, religion, national origin, age, sex, marital status or receipt of income from public
assistance programs.
EQUITY
The difference between the fair market value and the existing lien on the home.
ESCROW
An account held by the lender into which the homebuyer pays money for tax or insurance payments.
FANNIE MAE (FNMA)
(see Federal National Mortgage Association)
FARMERS HOME ADMINISTRATION (FmHA)
Provides financing to farmers and other qualified borrowers who are unable to obtain loan elsewhere.
FEDERAL HOME LOAN MORTGAGE CORPORATION (FHLMC)
Commonly called Freddie Mac is a quasi-governmental agency that purchases conventional
mortgages from insured depository institutions and HUD-approved mortgage bankers.
FEDERAL HOUSING ADMINISTRATION (FHA)
A division of the Department of Housing and Urban Development, which insures residential
mortgage loans made by private lenders.
FHA LOAN
A loan insured by the Federal Housing Administration.
FHA MORTGAGE INSURANCE
A small fee (up to 3.8 percent based on the loan amount) required for the insurance on an
FHA loan. This fee can be paid in full at closing or a portion of this fee can be added to
each monthly payment.
FIXED RATE MORTGAGE
A mortgage on which the interest rate is set for the term of the loan.
FLOOD INSURANCE
Lenders submit the property location to a flood insurance service to determine if the subject
property is located in a flood zone. If so, flood insurance must be obtained.
FLOOD CERTIFICATION
A flood certification or flood cert is ordered by the lender from a nationally accepted company
to determine if the property to be insured is in a flood zone.
FORECLOSURE
A legal procedure in which property securing debt is sold by the lender to pay the
defaulting borrower's debt.
FREDDIE MAC
(see Federal Home Loan Mortgage Corporation)
GIFTS
A gift of land or cash to be used toward the down payment or closing costs is allowed
depending on the lender and under the following conditions: 1) The funds must be verified
(bank deposit verification or copies of bank statements from the person giving the money.
2) There must not be any repayment of the gift.
GINNIE MAE
(see Government National Mortgage Association)
GOOD FAITH ESTIMATE (GFE)
Is the estimate of closing costs from the lender and provided to the borrower. GFE must be
signed by borrower and returned to lender upon receipt. In most cases, the GFE estimates
are higher than the actual closing costs and prepaids.
GOVERNMENT NATIONAL MORTGAGE ASSOCIATION (GNMA)
Commonly called Ginnie Mae which provides sources of funds for residential mortgages,
insured or guaranteed by FHA or VA.
GROSS MONTHLY INCOME
The total amount the borrower earns per month, before any expenses or taxes are deducted.
HAZARD INSURANCE
A Homeowner's Policy is required on all loans. This insurance protects the homeowner, as well as,
providing a guaranty against loss to the lender for the amount of the loan extended on behalf of the
borrower. Paid receipt for the first year's premium and binder from your insurance company naming
the lender, as the loss payee is required at settlement.
HOUSING EXPENSES-TO-INCOME RATIO
The ratio, expressed as a percentage, which results when a borrower's housing expenses are divided
by his/her net effective income (FHA/VA) or gross monthly income (conventional loans).
Also see debt-to-income ratio.
HUD-1
The HUD-1 or settlement statement, is the form on which all closing costs and prepaids are listed
whether paid outside of closing (before) or at the settlement table.
INTEREST RATE
The rate at which the loan will be amortized over the term of the loan. Rates are subject to change
until such time as the loan is locked-in to a firm commitment (approval) with an expiration date.
INVESTOR
This is a money source for a lender.
JUMBO LOAN
A jumbo loan is a loan that is larger than the limits set by the Federal National Mortgage
Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans
cannot be funded by these two agencies, they usually carry a higher interest rate.
Sorry, there are no glossary terms for the letter " K " at this time, please select another letter.
LAND EQUITY
A) To determine the value when a borrower has owned their land for less than two years, the value of the
lot is the lesser of original cost or current appraised value. In order to receive the full value (as determined
by the appraiser), the borrower, therefore, must have owned the land for over two years. B) If the land was
a recent give (within two years), then the borrower must contribute a minimum of five (5%) percent of their
own cash on loans in excess of 80% LTV. C) If the lot has been owned for more than two years whether a
gift or not, then the current appraised value is used to determine down payment value toward a borrower's
purchase.
LAND/HOME or LAND-IN-LIEU
Any loan with a land purchase, land payoff, or where the borrower already owns the property free and clear,
and is constructing a new home or making site improvements to their property.
LIEN
A claim upon a piece of property for the payment or satisfaction of a debt or obligation. An existing lien
could be the present first mortgage and/or second mortgage on a home, or liens placed against the
property by a creditor, which must be, satisfied when the property is sold or refinance.
LEASE-TO-PURCHASE
This is a contract between seller and buyer where the seller agrees to sell at a specific
price and close on the loan at a later date. Usually, part of the monthly payment from the
buyer is set aside toward the down payment.
LOAN-TO-VALUE
Referred to, as LTV is the percentage of loan compared to the actual value of the subject property
purchased. For example: Total price of $80,000 minus a down payment of $16,000 equals a loan amount
of $64,000 -- To determine LTV divide $64,000 (loan) by $80,000 (total cost or appraised value the lesser
of the two) equals an 80% LTV.
LOAN AMOUNT
The amount of funds advanced on behalf of the borrower by the lender and repaid monthly through a
principal and interest payment by the borrower.
LOAN PROGRAMS
These are the various programs available to lenders for different types of loans. Every
borrower's situation is different and these specialized programs often make a loan where
a standard conforming loan will not work.
MANUFACTURED HOMES
Any sectional factory built house, such as modular, doublewide, singlewide, panelized, prefabricated
or sectional housing. Manufactured housing must be legally classified as real estate, must be permanently
affixed to a foundation, and must assume the characteristics of site-built housing to be eligible as security
for a mortgage that is delivered to FHLMC/FNMA. See specific house type within this glossary for
additional information.
MARGIN
The margin is the amount a lender adds to the index on an adjustable rate mortgage to
establish the adjusted interest rate.
MARKET VALUE
This is the highest price that a buyer would pay and the lowest price a seller would accept
on a property. Market value may be different from the price a property could actually be
sold for at a given time.
MODULAR HOMES
These homes are factory built in two or more sections and transported to the property site for final assembly.
While a modular home may be transported on a steel undercarriage, the undercarriage is not a permanent
structural component. The undercarriage is usually removed when the house is placed on a foundation. This
type of housing is built to meet the same code specifications as a site-built home.
MORTGAGE BANKER
A mortgage banker is a licensed business that funds the borrower's loan direct and
usually does not have the capability of multiple submissions to outside lending sources.
MORTGAGE BROKER
A mortgage broker is a licensed business or individual assisting in arranging funding for
a borrower, but who does not loan the money direct. Brokers usually charge a fee or
receive a commission for their services, as does a mortgage banker. Mortgage brokers
generally have the capability of multiple submissions to better assist their clients.
MORTGAGE BANKER/BROKER or CORRESPONDENT
This company holds a license as either a banker (direct lender) or broker (agent to
broker). As a correspondent, the lender closes in the company name and then
immediately sells the loan.
MORTGAGE CREDIT CERTIFICATE (MCC)
The North Carolina Housing Finance Agency (NCHFA) provides federal tax credits (MCC's) to qualified first
time homebuyers. In North Carolina, tax credits of 15% and 25% are offered.
MORTGAGE INSURANCE
Money paid to insure the mortgage when the down payment is less than 20-percent. (See private mortgage
insurance or FHA mortgage insurance) Lenders will submit a copy of the borrower's loan package to a Private
Mortgage Insurance company (MI) company for approval. Freddie Mac/Fannie Mae loans require MI on all loans
above 80% LTV to protect the lender in case of borrower's default. Statistics prove that foreclosures are more
prevalent among borrowers who only put 5% or 10% down payment on their purchase. MI premium (paid by the
borrower) can be paid in full at closing by financing the MI in their loan or paying the full cost of the MI at closing.
The borrower may elect to pay the first years premium at closing and add the premium payments to their monthly
payment in the form of an additional escrow collected by the mortgage company.
MORTGAGEE
The lender.
MORTGAGEE CLAUSE
Is the lender's name and address as it is to appear on the title binder, attorney's insured closing letter,
and hazard insurance policy.
MORTGAGOR
The borrower or homeowner.
NON-ASSUMPTION CLAUSE
This is the statement in a mortgage contract forbidding the assumption of the mortgage
without the prior approval of the lender.
NON-CONFORMING LOAN
Is a loan that does not fit into the standard conforming loan programs. Difficult loans due to credit, type of
property, or income may fall into this category.
OFF-FRAME MODULAR HOME
A home that is built in a factory, then relocated on to property as a single family dwelling. The home is Usually
moved on a flat bed truck, and assembled with a crane. Compared to a manufactured double-wide; and Off-Frame Modular home would have a higher pitched roof, no axles, no wheels, and possibly two or three stories.
Usually we are allowed to treat these homes as single family dwellings.
ON-FRAME MODULAR HOME
A manufactured home that is similar to a double-wide in set up, but may look like an Off-Frame Modular home.
On-Frame Modular home are brought to the property on axles and wheels; and are set up similar to
double-wide. These homes are considered to be A double-wide, and we will have to use an
Manufactured loan program.
ORIGINATION FEE
The fee charged by the lender to process the loan documents; usually computed as a percentage of the
loan amount.
PANELIZED OR PRE-FABRICATED HOMES
These homes consist of packaged, factory-built components that are assembled on-site. This type of
house must conform to local and state building codes for site-built construction.
PITI
Principal, interest, taxes and insurance. Also called proposed monthly housing expense.
PLANNED UNIT DEVELOPMENT or PUD
A PUD refers to units sold separately that are within multi-unit buildings (see condominium). A PUD
development will have homeowner's dues and should be calculated with payment for qualifying ratios.
POINTS (LOAN DISCOUNT POINTS)
The prepaid interest assessed at closing by the lender. Each point is equal to 1-percent of the loan amount.
PRE-APPROVAL
A pre-approval is issued when a lender and/or broker has reviewed the preliminary documents (usually
#1003, pay stubs, W-2's, and credit report). A pre-approval is then issued subject to any additional verifications
of employment, reserves, and down payment, the appraisal and any additional documents to complete the file.
A pre-approval is not a commitment to lend.
PREPAIDS
The expenses necessary to create an escrow: real estate taxes, hazard insurance, private mortgage
insurance, and special assessments.
PREPAYMENT
A privilege in a mortgage allowing the borrower to make payments in advance of their due date.
PREPAYMENT PENALTY
Money charged for an early repayment of debt.
PRIVATE MORTGAGE INSURANCE (PMI)
In the event that you do not have a 20 percent down payment, lenders will allow a smaller down
payment - as low as 5 percent in most cases. With the smaller down payment loans, however,
borrowers are usually required to carry private mortgage insurance also known as PMI. PMI requires
an initial premium payment and may require an additional monthly fee depending on the loan's
structure. This insurance protects the lender only in case of default.
PRIVATE ROADS/EASEMENTS
General guidelines: FHLMC's policy requires recorded deeded access to a public road, while FNMA
will accept private roads if a road maintenance agreement exists.
PROCESSING
Mortgage loan processing is the gathering of documents needed to submit to an underwriter for loan
approval. The mortgage loan processor requests and receives documents to complete the file.
Sorry, there are no glossary terms for the letter " Q " at this time, please select another letter.
RATIOS
Are the percentages of borrower's income to existing debt and to existing debt plus the new payment.
Standard ratios are 28/36, but vary from lender to lender.
RECISION
This is the cancellation of a contract. With respect to mortgage refinancing, it is the law
that gives the homeowner three days to cancel.
RECORDING FEES
The money paid to the lender for recording a home sale with the local authorities, thereby
making it part of the public records.
REFINANCE
Refinance is the act of paying off your existing mortgage(s) and replacing it with a new
mortgage. If sufficient equity exists in your home as determined by the appraised value,
then you may take cash out for debt consolidation, home improvement, or for other uses.
RESERVES
An amount equal to two months PITI verified in the borrower's account prior to closing.
SALES PRICE
Total cost of purchase. (See acquisition cost)
SECTIONALS
Doublewides, singlewides, and triplewides are residential structures built on a steel undercarriage
with the wheel assembly necessary for transportation in one or more sections to be permanent or
semi-permanent location. The wheel assembly is removed when the residential structure is placed
on a permanent foundation, but the steel undercarriage remains intact as a necessary structural component.
SERVICING
Servicing a loan is all the steps and operations a lender performs to keep a loan in good standing, such as
collection of payments, payment of taxes, insurance, property inspections and the like. Lenders often times
sell the servicing of the loan to an outside company.
SOURCE OF FUNDS
These are the verifiable funds needed by an applicant to qualify for a mortgage loan. Funds include
down payment, closing costs, prepaids, and reserves.
STICK-BUILT OR SITE BUILT HOMES
Homes constructed on site and built to state and county building codes.
SURVEY
A measurement of land, prepared by a registered land surveyor, showing the location of the land with
reference to known points, its dimensions, and the location and dimensions of any buildings.
TERM
The mortgage loan repayment including principal and interested calculated over a specified time.
TERMITE INSPECTION
Is the inspection by a qualified Pest Control Operator (PCO) to determine if termites are present in the
soil or the structure of a home, and the location and damage if any caused to a structure.
TERMITE TREATMENT
Termites subsist on cellulose, which they get from wood. A) The subterranean termites live in the ground
beneath a structure. They need the moisture in the earth and the cellulose to survive. They tunnel into nearby
homes to get it. Treatment: All new construction and existing homes, which show subterranean termites
present - Soil is treated. Termites will not cross the barrier and will die. B) The drywood termites need no
contact with the earth. They live right inside the homes that they devour. Treatment: Spot treatment
or fumigation.
TITLE
A document that gives evidence of an individual's ownership of property with or without structure(s) on
the property.
TITLES
Manufactured houses are titled vehicles. If a title exists, evidence must be provided to show it has been
surrendered to the Department of Motor Vehicles. If new unit, a title is not issued. If existing unit is being
financed, the unit must be taxed as real property, not personal property.
TITLE INSURANCE
Must insure the lender without any exceptions - (Survey required on all new construction). Borrower may
request owner's title insurance also.
TITLE SEARCH
The examination of municipal records to determine the legal ownership of property, and to determine
if there are any liens or judgments that effect the title of the property.
TOWN HOMES (or TOWN HOUSES)
Homes built with a connecting wall to each other.
TRUTH-IN-LENDING (T&L)
The lender is required to prepare T&L, which discloses the annual percentage rate (APR) of the loan
based on an estimate of the interest rate quoted and any discount points charged at settlement, which
effectively raises the APR. The APR stated on the T&L will then be higher than the rate quoted due to the
inclusion of these points. The T&L also discloses the finance charge on the loan over the full term of the
loan. This amount is always an eye-opener to borrowers (the principal amount of the loan plus the
total interest paid).
UNDERWRITING
Is the decision-making process to determine if credit will be extended to the applicant. The underwriter
reviews all documents collected during the processing of a loan request for compliance with RESPA,
lender or FHLMC/FNMA guidelines, and for file conformity. The underwriter must determine if the
borrower has the capacity to repay the loan, has the borrower shown the self-discipline to repay payments,
and if the borrower does not pay, is the collateral sufficiently valuable to recoup the loan amount advanced
on behalf of the borrower.
VA LOAN
A long-term, low or no down payment loan guaranteed by the Department of Veterans Affairs.
VA MORTGAGE FUNDING FEE
A premium of up to 1-7/8 percent paid on a VA-backed loan based on the loan amount and paid at
closing or added to the amount financed.
VERIFICATIONS
Documents requested by the lender verifying the borrower's employment (VOE), funds on deposit
(VOD), mortgage (VOM), or rent (VOR). Usually occurs in underwriting.
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