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Mortgage Glossary

ARM's: Adjustable Rate Mortgages are those whose rates of interest adjust periodically to reflect the market conditions.

Bridge Loan: A sum of money lent by a bank to cover an interval between two transactions, typically the buying of one house and the selling of another.

Commercial Loan: A debt based funding arrangement that a business can set up with financial institution.

Construction Loan: A short term (often 3 year) real estate financing secured by a mortgage on the property being financed. The loan is meant to cover the cost of land development.

Conventional Loan: A mortgage loan not insured by any government program. This loan is the most common and different from the FHA and VA loans, that are insured by the government.

FHA Loan: (Federal Housing Administration)A Loan issued by a federally qualified lender.

Income Property Loans: A loan secured on a property  which already has a source of income, such as rent. The loan is used to cover the debt service payments on the loan.

Low-doc loans: A loan that does not require borrowers to provide documentation of their income to the lenders or do not require much documentation.

LTV: One of the key risk factors that lenders assess when qualifying borrowers for a mortgage.

MIP: MIP, or "Mortgage Insurance Premium"  is an insurance policy that protects a mortgage lender in the event that the borrower defaults on payments, dies, or is otherwise unable to meet the contractual obligation of the mortgage.

Origination Fee: A fee charged by a lender on entering into a loan agreement to cover the cost of processing a loan.

PMI: Private Mortgage Insurance, insurance payable to a lender or trustee for a pool of securities that may be required when taking out a mortgage loan.

Points: Points are additional mortgage company charges for making a loan.

Ratios: The ratios of a consumer's proposed monthly mortgage payment, and proposed overall monthly debt to his or her gross monthly income. These ratios must fall within specific ranges for specific types of mortgages.

VA Loan: A mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs. The loan is issued by qualified lenders.

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