Mortgage Glossary | HomeLoanDone

1099 income

Income received as a self-employed individual or independent contractor, rather than an employee, and reported on a 1099 tax form.

1st installment

The first payment of a multi-payment property tax bill, usually due in the first half of the year.

2nd installment

The second payment of a multi-payment property tax bill, usually due in the second half of the year.

401K

A type of employer-sponsored retirement savings plan, allowing employees to contribute pre-tax dollars to a tax-deferred investment account.

401K assets

Retirement savings held in a 401k account, which is a type of employer-sponsored retirement plan.

Abstract of title

A summary of the history of ownership and encumbrances (e.g. mortgages or liens) on a property.

Amortization

The process of paying off a loan in regular payments over a specified period of time, which includes both principal and interest.

Appraisal

A professional evaluation of a property's value, usually conducted by a licensed appraiser, and used to determine the amount a lender is willing to lend.

Approval

The decision by a lender to grant a loan, based on a review of the loan application and credit history.

Asset verification

The process of confirming a borrower's assets, such as savings accounts, investment accounts, or retirement accounts.

Automated underwriting system (AUS)

A computer program used by lenders to analyze loan applications and determine whether to approve or deny the loan.

Award letter

A document issued by a government agency, such as the Social Security Administration, that confirms the amount of benefits a recipient is eligible to receive.

Bank statement

A document provided by a bank showing all transactions in a borrower's account, including deposits and withdrawals.

Business tax returns

Tax returns filed by a business, showing its income, expenses, and taxes owed.

Closing agent

A professional who oversees the closing process and ensures that all necessary documents are signed and all funds are disbursed properly.

Closing costs

Fees and expenses associated with a real estate transaction, such as title insurance, appraisal fees, and recording fees.

Closing statement

A document that lists all the financial transactions involved in a real estate sale, including the distribution of funds and payment of fees and expenses.

Closing

The final step in a real estate transaction, when the transfer of ownership and funds take place.

Conditional approval

A preliminary approval for a loan, contingent on the borrower meeting certain conditions, such as providing additional documentation or satisfying certain requirements.

Counteroffer

A response to an offer made in a purchase contract, modifying the terms of the original offer.

Credit report

A record of an individual's credit history, including payment history, outstanding debt, and credit scores.

Debt-to-income ratio (DTI)

A measure of a borrower's ability to repay a loan, calculated as the ratio of monthly debt payments to monthly income.

Deed

A legal document that transfers ownership of a property from one person to another.

Denial

The decision by a lender to not grant a loan, based on a review of the loan application and credit history.

Depreciation

A decrease in the value of an asset over time, due to wear and tear, obsolescence, or other factors.

Dividend income

Income received from investments in stocks, mutual funds, or other securities that pay dividends.

Down payment

The initial payment made by a borrower towards the purchase of a property, typically a percentage of the purchase price.

Earnest Money

A deposit made by the buyer to show good faith in a real estate transaction and to demonstrate their commitment to completing the purchase.

Employment verification

The process of confirming an applicant's employment status and income.

Escrow account

An account held by a neutral third party (escrow company) that holds funds related to a real estate transaction, such as the down payment and closing costs, until all conditions of the sale are met.

Escrow agent

A professional employed by an escrow company who manages the disbursement of funds and the processing of documents related to a real estate transaction.

Escrow instructions

A written agreement between the buyer, seller, and escrow company outlining the terms and conditions of the real estate sale.

Escrow

A neutral third party that holds and disburses funds related to a real estate transaction, such as the down payment and closing costs.

Final approval

The decision by a lender to grant a loan, after all conditions have been met and all required documentation has been received.

Final walk-through

A final inspection of a property before closing, to ensure that the property is in the same condition as when the purchase agreement was signed.

Fixed-rate mortgage

A mortgage loan with a fixed interest rate for the entire term of the loan.

Full-time employment

Employment with a company for a minimum of 30 hours per week.

Funds held in escrow

Money held by an escrow company until all conditions of the sale are met and the transfer of ownership can be completed.

Gift funds

Money gifted to a borrower to be used towards the purchase of a home.

Home equity

The difference between the current market value of a property and the outstanding mortgage balance on it.

Income documentation

Proof of a borrower's income, such as pay stubs, tax returns, or W-2 forms.

Insurance

A contract between a policyholder and an insurance company that protects against financial loss in the event of an unexpected event, such as a fire, theft, or natural disaster.

Interest income

Income received from investments, such as savings accounts, bonds, or certificates of deposit.

Interest rate

The cost of borrowing money, expressed as a percentage of the loan amount.

IRA (Individual Retirement Account)

A type of individual retirement savings account, offering tax advantages for retirement savings.

Lending

The act of providing a loan, typically for the purpose of purchasing a home.

Lien

A claim by a creditor on a property as security for a debt.

Loan application

A formal request for a loan, including personal and financial information about the borrower.

Loan disbursement

The release of loan funds from the lender to the borrower, typically at the closing of a real estate transaction.

Loan estimate

A document provided by a lender that outlines the estimated costs and terms of a loan, including interest rate, fees, and monthly payments.

Loan origination fee

A fee charged by a lender for processing a loan application, typically a percentage of the loan amount.

Loan processing

The series of steps a lender takes to evaluate a loan application and determine whether to approve or deny the loan.

Loan-to-value ratio (LTV)

A measure of the amount of a loan compared to the value of the property, calculated as the loan amount divided by the property value.

Manual underwriting

The process of evaluating a loan application without the use of an automated underwriting system, typically used for borrowers with unique or complex financial circumstances.

Minimum credit score

The lowest credit score a lender will accept for a loan application, which varies by lender and loan type.

Mortgage brokering

The act of finding and matching mortgage borrowers with appropriate lenders.

Mortgage insurance

Insurance that protects a lender against loss if the borrower defaults on the loan.

Mortgage loan origination

The process of creating a new mortgage loan, including evaluating a borrower's creditworthiness and processing the loan application.

Notary public

An official appointed by a government to witness the signing of important documents and administer oaths.

Part-time employment

Employment with a company for less than 30 hours per week.

Pay stub

A document provided by an employer showing an employee's earnings, deductions, and year-to-date earnings.

Pension income

Regular income received from a pension plan, typically after retirement.

Pension letter

A document issued by a pension plan administrator that confirms the amount of pension benefits a recipient is eligible to receive.

Pension

A type of retirement plan offered by an employer, providing a guaranteed income for life after retirement.

Pre-approval

A preliminary approval for a loan, based on a review of the loan application and credit history, but not yet final.

Principal

The original amount borrowed, excluding interest and any additional charges.

Profit and loss statement (P&L)

A financial statement showing a business's revenue, expenses, and profit or loss over a specified period of time.

Property taxes

Taxes levied on real estate by a government, typically based on the value of the property.

Purchase Contract

A legally binding agreement between a buyer and a seller that outlines the terms and conditions of a real estate transaction.

Real Estate Owned (REO)

A property that has been foreclosed on and is now owned by a bank or other lender.

Refinance

The process of obtaining a new mortgage loan to replace an existing mortgage loan.

Rental property

A property that is owned and rented out to tenants for income.

Reserves

Funds set aside by a borrower to cover housing expenses in case of emergencies or job loss.

Retirement income

Income received during retirement, such as from a pension plan, Social Security, or individual retirement account (IRA).

Savings account

A claim by a creditor on a property as security for a debt.

Seasonal employment

Employment that is only available during certain times of the year, often related to a specific industry or type of work.

Self-employed

A person who runs their own business or is otherwise not employed by a company.

Seller's Disclosure

A document provided by the seller to the buyer that details any known defects or issues with the property being sold.

Settlement statement

Another term for a closing statement, which lists all the financial transactions involved in a real estate sale.

Social security income

Monthly income received from the Social Security Administration, typically after retirement.

Stocks

A type of investment, representing ownership in a corporation, and traded on a stock exchange.

Subject to

A clause in a purchase contract that specifies conditions that must be met before the contract becomes legally binding.

Title and escrow company

A business that specializes in conducting real estate transactions, including verifying title ownership, holding funds in escrow, and preparing and recording documents.

Title commitment

A document issued by a title insurance company that outlines the terms and conditions of title insurance coverage.

Title examination

A review of the title records to determine the ownership and encumbrances on a property.

Title insurance

Insurance that protects the holder from financial loss due to disputes over ownership of a property.

Title search

The process of reviewing public records to verify the ownership and encumbrances on a property. Title: A document that proves ownership of a property.

Trust

A legal arrangement in which a trustee holds and manages assets for the benefit of a beneficiary..

Underwriting approval

The decision by a lender's underwriter to approve a loan, based on a review of the loan application and credit history.

Underwriting

The process of evaluating a loan application to determine the risk of lending to a borrower, including a review of credit history, income, and assets.

Verification of deposit (VOD)

The process of confirming an applicant's savings and checking account balances.

Verification of employment (VOE)

The process of confirming an applicant's employment status and income.

W-2 income

Income received as an employee, reported on a W-2 tax form.