Glossary
Appraisal Cash Flow Cash Out Closed-End Home Equity Loan Closing Costs Collateral Combined LTV Conforming And Non-Conforming Loans Creditworthiness Credit Rating Debt Consolidation Debt-Reduction Plan Debt Service Debt-To-Income-Ratio Default Earned And Unearned Income Fair Market Value First And Second Mortgages First Lien Fixed And Adjustable Rates	Full Income Verification Home Equity Home Equity Lines Of Credit Index Rate Interest Loan Application Loan Proceeds Loan-To-Value Ratio Origination Fees Pre-Approval Or Pre-Qualification Pre-Payment Penalty Principal Principal Balance Refinancing Retire Self-Employment Income Stated Income Or No-Income Stipulations Unsecured Loans
Appraisal:   [ return to top ] The examination of the property, by a professional, to assess fair market value, and the written report of the results. Cash Flow:   [ return to top ] The amount of money you have available after monthly debt-servicing. Cash Out:   [ return to top ] To turn some of your home equity into cash through a home equity loan; this is to use the financial power in your home. Closed-End Home Equity Loan:   [ return to top ] One that's for a specific term vs. a line of credit. Closing Costs:   [ return to top ] Part of the expenses involved in a refinancing, as there are buyer's and seller's fees incidental to all real estate transactions. Collateral:   [ return to top ] The property offered as security for a loan. Combined LTV:   [ return to top ] The way a lender calculates the LTV on a home equity loan; it is based on the sum of the debts on both mortgages, compared to the fair market value of your home. Conforming And Non-Conforming Loans:   [ return to top ] Types of loans available to different categories of borrowerswhile conforming loans follow the strictest guidelines for eligibility, non-conforming loans are now offered by many lenders in the form of a range of programs which can often be tailored to individual circumstances. Credit Rating:   [ return to top ] A level assigned to you in determining your eligibility for loans, based on your record of payment on financial obligations. Credit Worthiness:   [ return to top ] Your credit history, which contains information about your borrowing habits and money-management skills, and which determines a lender's decision about what level "risk," or credit grade, to assign youor even whether the loan should be made. Debt Consolidation:   [ return to top ] Paying off, with the proceeds from a home equity loan, a number of higher-interest debts such as credit card balances. Debt-Reduction Plan:   [ return to top ] A strategy recommended for those borrowers wishing to use a home equity loan for debt consolidation; if you continue to run up credit cards, e.g., the whole plan will backfire and you could end up with more total debt than before. Debt-To-Income-Ratio:   [ return to top ] How much of your monthly earnings are used to pay off all your debt obligations, including but not limited to credit card and automobile payments, mortgage payments, and the payments to be required on the loan you're applying for. Default:   [ return to top ] Failure to make mortgage payments as agreed to. Earned And Unearned Income:   [ return to top ] Two different sources of income while earned income comes from wages, salary or business profits, unearned income refers to interest, dividends, rental income, pension benefits, and the like. Fair Market Value:   [ return to top ] The likely selling price of your home, as appraised. First And Second Mortgages:   [ return to top ] The documents that entitle a lender to the property that secures the loan if the borrower fails to meet his obligations per the loan arrangement. While your first mortgage enables you to buy your home in the first place, a second mortgage provides for refinancing opportunities. First Lien:   [ return to top ] Primary claim by the lender for satisfaction of outstanding debt. Gives lender the right to raise this money by foreclosing property if you fail to make payments you've agreed to. Fixed And Adjustable Rates:   [ return to top ] The way the interest on your loan is determined. A fixed rate of interest stays the same over the life of the loan; an adjustable (or "variable") rate changes, increasing or decreasing periodically according to an index which reflects general trends. Full Income Verification:   [ return to top ] A requirement for fully documented proof of income; loans that contain this requirement can usually offer lower interest rates than for no-income verification programs. Home Equity:   [ return to top ] The part of your home that you own outright; that is, the difference between its appraised value and the balance of your mortgage loan. Home Equity Lines Of Credit:   [ return to top ] A variation of the second mortgage with which you receive a special checkbook; every time you write a check, you're actually borrowing money against your home. Similar to using a credit card, with certain exceptions. Index Rate:   [ return to top ] A composite rate used by lenders which reflects general trends of interest rates such as those on Treasury notes; when determining changes in interest rates on adjustable rate mortgages, lenders charge a set amount above index rate. Interest:   [ return to top ] The fixed or adjustable rate at which a lender agrees to finance a loan; the borrower's monthly payments are divided proportionately between principal balance and interest owed. Loan Application:   [ return to top ] Typically a combination of standardized government forms and forms provided by the lender. Loan Proceeds:   [ return to top ] The money you borrow. Loan-To-Value Ratio:   [ return to top ] A comparison of the amount of your loan with the appraised value of the property. Origination Fees:   [ return to top ] The fees (or "points") a lender charges to process a loan; these are usually based on the amount of the loan, one point equaling one percent of that amount. Pre-Approval Or Pre-Qualification:   [ return to top ] An early assurance by a lender that you appear to meet the requirements for a specific type of loan. Pre-Payment Penalty:   [ return to top ] A fee imposed by certain lenders if first mortgage is retired early. Principal:   [ return to top ] The original amount of money you borrowed; does not include any interest. Principal Balance:   [ return to top ] The money still owed on the original amount of your mortgage, not including interest. Refinancing:   [ return to top ] Securing a new loan in order to pay off your existing mortgage or gain access to the existing equity in your home. Retire:   [ return to top ] To pay off the outstanding balance of a first mortgage with the proceeds from a second mortgage. Self-Employment Income:   [ return to top ] The net earnings from your business or profession, determined by subtracting business expenses from gross income. Stated Income Or No-Income Verification Programs:   [ return to top ] Offered by some lenders to borrowers who do not want to or cannot provide fully documented proof of their income. Stipulations:   [ return to top ] Conditions (information, documents, etc.) attached to a pre-approval which, must be met before your loan is completely approved. Unsecured Loans:   [ return to top ] Loans such as credit card debts, which are riskier for lenders than real estate loans because they are not as well protected from default. They are not "secured" by property.