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| A |
| Adjustable-Rate Mortgage |
| Adjustable-Rate Mortgages (ARM's) are mortgages on which the interest rate and monthly payment will change periodically. The main difference among ARM programs is the length of the initial fixed interest rate period. |
| Amortization |
| The gradual repayment of a mortgage loan by installment. |
| Amount Financed |
| This figure is used to calculate your APR. It represents your loan amount minus any prepaid finance charges (i.e., the sum of "Amount Financed" and "Finance Charge") assuming you kept the loan to maturity and made only the required monthly payments. |
| Annual Percentage Rate (APR) |
| There are two interest rates applicable to your loan: (i) your Actual Interest Rate and (ii) your Annual Percentage Rate. Your Actual Rate is the annual interest rate of your loan (sometimes referred to as the "note rate"), and is the rate used to calculate your monthly payments. The amount of interest you pay, as determined by your Actual Rate, is only one of the costs associated with your loan... there may be others. The Annual Percentage Rate (referred to as the "APR") encompasses both your interest and any additional costs or prepaid finance charges you may pay such as prepaid interest (necessary to adjust your first payment if you close mid-month), private mortgage insurance, closing fees, points, etc. Your APR represents the total cost of credit on a yearly basis after all charges are taken into consideration. It will usually be slightly higher than your Actual Rate because it includes these additional items and assumes you will keep the loan to maturity. |
| Application Fee |
| Some lenders charge an "Application Fee" fee for accepting and reviewing your loan application. |
| Appraisal |
| An appraisal is a written analysis of the estimated value of your property. A qualified appraiser who has knowledge, experience and insight into the marketplace prepares the document. It ensures you're paying fair market value for your home and is required to close on your new home or property. |
| Appraisal Fee |
| This fee is paid to the outside appraisal company we engage to objectively determine the fair market value of your property. This fee varies based on the location and type of your property. |
| Assignment Recording Fee |
| In many instances, after closing we transfer your loan to a specialized loan "servicer" who handles the collection of your monthly payments. The Assignment Fee covers the cost of recording this transfer at the local recording office. |
| B |
| Broker Processing Fee |
| The fee charged to you to have your file packaged and handed over to a selected lender. There is not a broker involved in your transaction, instead you deal with Rock Financial from start to finish. |
| C |
| Condominium |
| A real estate project in which each unit owner holds title to a unit in a building, an undivided interest in the common areas of the project, and sometimes the exclusive use of certain limited common areas. The condominium may be attached or detached. The homeowners association dues are included in the total monthly mortgage payment for qualifying purposes. |
| Credit Report |
| On every loan transaction we order a credit report to determine your past credit history and your outstanding liabilities. This fee covers the cost of such report. |
| D |
| Discount Points (Points) |
| The term "point" refers to one percent of the loan amount. For example, one "point" on a $100,000 loan would equal $1,000. On most programs (and with certain limitations), you may pay "points" at the closing to lower the interest rate on your loan. The more points you pay, the lower your rate. |
| Document Preparation Fee |
| Occasionally we use outside companies to prepare the loan closing documents. This fee covers the cost of this service. |
| Duplex |
| Owner occupied property for more than one family. |
| E |
| Encryption |
| This is a procedure used in order to prevent anyone but the intended recipient from reading the data. There are many types of data encryption, and they are basis of network security. Common types include (Data Encryption Standard) and public-key encryption. |
| Escrows |
| Lenders often set up an account, called an escrow or impound account, to hold the tax and insurance portions of your monthly mortgage payment. At closing, the lender collects sufficient money to establish the necessary reserves in this account. The reserves plus the monthly deposits are then held until such time they are used by the lender to pay the tax and insurance bills. |
| Estimated Closing Fees |
| An estimate of the fees that must be paid on or before the closing date by the buyer and/or seller for services, taxes and items necessary to obtain mortgage. These fees will average between 2% and 5% of the loan amount and vary by lender, property location, and type of mortgage. |
| Express/Courier Fee |
| On refinance transactions, we typically use an overnight courier to expedite the payoff of your existing loan. This fee covers the cost of the courier. |
| F |
| Filing Fees |
| The amount charged by public officials in your area for recording your mortgage and other documents. |
| Finance Charge |
| Your finance charge is the total of all the interest you would pay over the entire life of the loan, assuming you kept the loan to maturity, as well as all prepaid finance charges. If you pre-pay any principal during your loan, your monthly payments remain the same, but your total finance charge will be reduced. |
| Fixed Rate Mortgages |
| Fixed Rate Mortgages are mortgages on which the same rate of interest is charged for the life of the loan. |
| Float |
| Until you request to secure a lender's quoted interest rate, the interest rate will continue to change, or float, due to market fluctuations. Locking or securing a rate protects you from these potential fluctuations from the time your lock is confirmed to the day your lock period expires. You may choose to float your rate up until the time your lender contacts you to schedule your closing. At this time, an interest rate must be secured in order to prepare your closing documents. |
| Flood Certification Fee |
| Federal law requires that you obtain flood hazard insurance if your property lies in a flood zone. As part of our evaluation of your property, we engage a flood determination company to tell us whether or not your house lies in a flood zone. The flood certification fee covers the cost. If your house is located in a flood zone, you will be required to purchase Flood Insurance. |
| Flood Life of Loan Coverage |
| Flood zone determinations may change from time to time. The "Life of Loan Coverage" fee allows us to track any changes in your property's flood zone status over the life of your loan. |
| G |
| Government Recording Fee |
| We pay this fee to your local county recording office for recording our mortgage lien, and in the event of a purchase transaction, the deed which transfers title. Fees for recording vary by county and are set by state and local governments. |
| Guideline Ratios |
| There are two guideline ratios used to qualify you for a mortgage. The first is called the front-end ratio, or top ratio, and is calculated by dividing your new total monthly mortgage payment by your gross monthly income. Typically, this ratio should not exceed 28%. The second is called the back-end, or bottom ratio, and is equal to your new total monthly mortgage payment plus your total monthly debt divided by your gross monthly income. Typically, this ratio should not exceed 36%. |
| H |
| Home Equity Line of Credit |
| A home equity line of credit is a credit line that is kept open and restored as you pay off what is owed. An equity line of credit also has a high credit limit similar to a credit card that you are allowed to draw upon as needed. |
| HomeownersInsurance |
| Just like you insure your automobile to protect against theft and damage, you insure your home. Homeowners insurance is required by all lenders to protect their investment, and must be obtained before closing. In most cases, coverage must be equal to the loan balance, or the value of the home. |
| I |
| Insurance |
| Indicates the type of insurance(s) required for your loan. Private mortgage insurance may also be required in addition to what is indicated. |
| Interest Rate Disclosure |
| A description of the conditions applicable to the processing of your loan as well as the terms of your interest rate agreement with Rock Financial. |
| J |
| K |
| L |
| Lender Fees |
| Lender Fees are fees paid to the lender. |
| Lender Processing Fee |
| The lender processing fee covers the cost of analyzing your loan application and compiling and packaging the necessary supporting documentation to close your loan. |
| M |
| Manufactured Home |
| A factory assembled residence built in units or sections that are transported to a permanent site and erected on a foundation. |
| Maximum Cash Out |
| The maximum amount of money you are allowed to get back from your mortgage transaction based on the loan information provided and the amount of equity you have in your home. |
| Maximum Monthly Payment |
| As part of your Mortgage 1st approval, you are given a maximum monthly payment for which you qualify based on the information you provided. This maximum payment is inclusive of the three major components of a typical mortgage payment: loan principal and interest, taxes, and insurance. |
| Monthly Mortgage Payment |
| A monthly mortgage payment typically contains three parts called the PITI (principal & interest, taxes, and insurance). If you pay your taxes and insurance on your own, you pay only principal and interest to your lender. |
| Monthly Principal and Interest (P&I) Payment |
| Principal and interest is the dollar portion to repay the loan. All interest which occurs is calculated on the current balance owing. The principal reduces the remaining balance of a mortgage. |
| Mortgage Term |
| The length of time given to repay the loan. |
| N |
| O |
| Origination Points |
| A fee that is charged by the lender to originate your loan. The fee is typically set up as a percentage of the loan amount (i.e. a 1 point origination fee is equal to 1% of the loan amount). |
| P |
| Payment Schedule |
| The method for disclosing your payment schedule varies by loan type. For fixed rate loans, this section indicates what your required monthly payment will be throughout the life of your loan. The payment schedule for VA, FHA, one-time MIP and uninsured conventional loans should also indicate a fixed monthly payment. The payment schedule for fixed-rate insured loans may gradually decrease over time due to a declining insurance premium. For adjustable rate loans, the payment schedules will vary by loan type and are based on conservative assumptions of future interest rates. |
| Password |
| A password is a special code made up of letters and numbers that will allow you, and only you, to gain access to your personal account information. The best passwords combine letters (both upper and lower case) and numbers. It is best not to use your address, names of friends or family members, or other easily accessed or guessed words. |
| Planned Unit Development (PUD) |
| A planned unit development (PUD) is a project or subdivision that consists of common property and improvements that are owned and maintained by an owner's association for the benefit and use of the individual units within the project. For a project to qualify as a PUD, the owners' association must require automatic, non-severable membership for each individual unit owner, and provide for mandatory assessments. |
| Points (Discount Points) |
| The term "point" refers to one percent of the loan amount. For example, one "point" on a $100,000 loan would equal $1,000. On most programs (and with certain limitations), you may pay "points" at the closing to lower the interest rate on your loan. The more points you pay, the lower your rate. |
| Prepayment Penalty |
| A prepayment penalty is a fee that is charged if the loan is paid off earlier than the specified term of the loan. Depending on your loan program and applicable state law, you may or may not incur a prepayment penalty. Contact your loan officer for specific information. |
| Prepaid Interest |
| Prepaid Interest is interest on your new mortgage that is paid at closing. The amount of interest will vary from 0 to 30 days, as it is calculated from the date of closing to month end. For example, if the loan closed on March 20th, prepaid interest would be owed from March 20th through March 31st. A normal monthly principal and interest payment would cover interest due for the previous month. If the loan closed on March 20th, the first payment would be due May 1st. The May 1st payment would cover interest due for the month of April. |
| Private Mortgage Insurance (PMI) |
| Private Mortgage Insurance (PMI) is the insurance a borrower is required to pay if they have less than 20% (in some cases 25%) equity in their home. Rock Financial uses several insurance companies to obtain PMI coverage. If you are required to pay PMI, the monthly amount must be calculated and included in the proposed mortgage payment and also included when estimating the amount needed to establish your escrow account. In order to calculate PMI, four pieces of information are needed: loan amount, loan term, loan-to-value (LTV) and the PMI factor which is based off of the required coverage amount and whether the mortgage is fixed or adjustable. |
| Property Taxes |
| The taxes assessed on the property by the local government (e.g. city, county, village or township) for the various services provided to the property owner. Such services may include police and fire department services, garbage pick up and snow removal. |
| Q |
| R |
| Rent Free |
| If you are living with a relative or friend without paying rent, this is considered "rent free". |
| Requested Cash Out |
| The amount of money you requested to get back from your mortgage transaction. Remember, your closing costs and escrows will be subtracted from this amount. |
| S |
| Second Mortgage |
| A second mortgage is a lien in which you are given a lump sum amount which you pay off in installments over a specified period of time. When the second mortgage is paid off, the obligation is considered closed. Home improvement and debt consolidation loans are considered second mortgages. |
| Security |
| This refers to the address of the property being pledged as security for your loan. |
| Single Family |
| It is a residence that houses one family. |
| Site Condominium |
| A single family residence that is detached dwelling which is characterized as a site condominium by the way it is platted by the builder. |
| Subject Property |
| The home that you intend to obtain the mortgage on is called the subject property. If you are doing a refinance, the subject property is typically the address of the home you are living in now. If you want to refinance your second home, list the address of that home as the subject property. If you are purchasing a home, the subject property is the address of the home you are buying. |
| Survey Fee |
| A survey is a bird's eye sketch of your property which shows the boundary lines of your lot, and details any encroachments between you and your neighbors. The survey fee covers the cost of the survey. |
| T |
| Tax Service Fee |
| In some cases, we engage a third party to monitor and/or handle the payment of your property tax bills. The Tax Service Fee covers the cost of this service. |
| Third Party Fees |
| Fees paid to a third party for services requested by the lender on your behalf. |
| Title |
| Individuals who will have legal ownership in the property are considered "on title" and will sign the mortgage and other documentation. Note: if you are married, your spouse will need to be "on title" even if you are not using his/her income for qualifying purposes. |
| Title Company Closing Fee |
| This fee is paid to the title insurance company which conducts your closing and handles the transfer of funds among the parties. |
| Title Insurance |
| Title insurance protects a lender against any title dispute that may arise over a particular property. It is required to close on your home. |
| Title Insurance Premium |
| In order to determine that the property is properly owned and not subject to any unacceptable liens, we require a search of the local real estate records, and a title insurance policy insuring the lender that there are no defects in title. The Title Insurance Premium covers the cost of the search and the insurance. The cost of title insurance varies both by state and by county. |
| Total Payments |
| This is the total amount you will have paid over the life of the loan for principal, interest and prepaid finance charges, assuming you keep the loan to maturity and made only the required monthly payments. |
| U |
| Underwriting Fee |
| The underwriting fee covers the cost of evaluating your entire loan package, including your credit report and appraisal, to determine whether we can approve your loan request. |
| V |
| W |
| Wire Transfer Fee |
| On occasion, we will transmit funds to you, your prior lender, and/or the title insurance company conducting your closing via the inter-bank wire transfer system. This fee covers the cost of such transfer. |
| X |
| Y |
| Z |