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 First Home Mortgage Home Page  Resource Center  Mortgage Glossary  K-P 
K-P Mortgage Terms

This list will help you understand some important terms used in the mortgage, lending and application process. Your Loan Officer can also explain these terms and our products.

 
 
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Leasehold
Interest in an estate that entitles a person to possession, but not ownership, of the land. 

Lender
The bank, mortgage company, or mortgage broker offering the loan.

Lien
A charge against a property whereby the property is made security for the payment of a debt such as a judgment or mortgage.

Life of Loan Cap
The maximum interest rate that can be charged during the life of the loan. Also called Lifetime Cap. This value is often expressed as an increment above the initial note rate. For example, an adjustable rate loan with an initial rate of 7.25% and a 6% lifetime cap will never adjust above a rate of 13.25% (7.25% + 6.0%).

Loan-To-Value Ratio (LTV)
The relationship between the amount of the mortgage loan and the lesser of the sales price or appraised value of the property, expressed as a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the value of the property and contributing 10% as a down payment.  For refinances, the value is determined by an appraisal.

Lock (noun)
The period, expressed in days, during which a lender will guarantee a rate. Some lenders will lock rates at the time of application while others will allow the borrower to lock the rate after the application is taken.

 Lock (verb)
The act of committing to a mortgage rate. This action, taken by a borrower between application and closing, is sometimes accompanied by a payment  to the lender. Opposite of float.

Margin
The amount a lender adds to the quoted index rate for an adjustable rate loan to determine the new interest rate.

Market Value
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.

Monthly Housing Expense
Total principal, interest, taxes, and insurance paid by the borrower on a monthly basis. Used with gross income to determine affordability.

Mortgagee
The lender.

 Mortgage Interest
The amount of money the borrower pays the lender to compensate the lender for the use of its money to purchase the home.  This interest is tax-deductible. 

Mortgagor
The borrower.

National Association of Realtors
A trade organization that sets the standards for the real estate profession and enforces a rigid code of ethics in real estate dealings.

Negative Amortization
The result of artificially low monthly mortgage payments which do not cover all interest due to the lender.  The deferred interest is added to the loan balance which may be higher than the original amount of the loan.

Origination Fee
The fee imposed by a lender to cover processing expenses in connection with lending money. Usually a percentage of the original loan balance.

PITI
The sum of the principal, interest, taxes and insurance. Also called monthly housing expense.

 Planned Unit Development
A subdivision having lots or areas owned in common and reserved for the use of some or all of the owners of the separately owned lots.

Points
Prepaid interest paid by the borrower to the lender at closing.  A point is equal to 1 percent of the loan amount (e.g., 1.5 points on a $100,000 mortgage would cost the borrower $1,500). Generally, by paying more points at closing, the borrower reduces the interest rate of the loan and thus reduces future monthly payments.

Power of Attorney
An instrument authorizing a person to act on behalf of the person granting it.  A limited power of attorney restricts the power to a particular transaction.

Prepaids
Expenses such as taxes, insurance and assessments which are paid in advance of their due date and which must be paid by the buyer on a prorated basis at closing.

Prepayment
To repay the remaining balance of a loan ahead of the regular schedule.

Prepayment Penalty
Lenders who impose prepayment penalties will charge borrowers a fee if they wish to repay part or all of their loan in advance of the regular schedule.  

Prequalification
The process of establishing a borrower's qualification for a loan of a particular amount based on income and expenses.  Pre - qualification does not guarantee that the loan will be approved, but can be used to demonstrate financial capability to an agent or seller.

Principal
The amount of debt, not counting interest, left on a loan.

Private Mortgage Insurance (PMI)
Paid by a borrower to protect the lender in case of default. PMI is typically charged to the borrower when the Loan-to-Value Ratio is greater than 80%.


First Home Mortgage Corporation is a licensed full service mortgage lender, providing processing, underwriting and closing for mortgage on properties in Maryland, Delaware, Virginia, Washington DC, Pennsylvania (licensed by the Commonwealth of Pennsylvania, Department of Banking), and West Virginia.

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