Jerrie Lusk, Assoc. Broker, CRS, Realtor®
My Realty Agent
Re/Max Around Atlanta
Cobb County - Marietta, Georgia

Adjustable Rate Mortgage (ARM) - A mortgage in which the interest rate is adjusted periodically based on an index. Also called a variable rate mortgage.

Adjustment Interval - For an adjustable rate mortgage, the time between changes in the interest rate charged. The most common adjustment intervals are one, three or five years.

Amortization - Literally to "kill off" (root: mort) the outstanding balance of a loan by making equal payments on a regular schedule (usually monthly). The payments are structured so that the borrower pays both interest and principal with each equal payment.

Annual Percentage Rate (APR)
The interest rate which reflects the cost of a mortgage as a yearly rate. This rate is usually higher than the stated loan rate for the mortgage, because it takes into account points and other charges.

Application Fee
The fee charged by the lender to the borrower for applying for a loan. Payment of this fee does not guarantee that a loan will be approved. Some lenders may apply the cost of the application fee to certain closing costs.

Appraisal - The determination of property value based on recent sales information of similar properties.

Assumable Loan - These loans may be passed on from a seller of a home to the buyer. The buyer "assumes" all outstanding payments.

Balloon Mortgage - Behaves like a fixed-rate mortgage for a set number of years (usually five or seven) and then must be paid off in full in a single "balloon" payment. Balloon loans are popular with those expecting to sell or refinance their property within a definite period of time.

Broker - An individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services.

Caps - A set percentage amount by which an adjustable rate mortgage may adjust each adjustment period. For adjustable loans, caps are usually quoted as two numbers as in 2/6. The first number indicates how much a loan may adjust at each adjustment period while the second number indicates how much a loan may adjust over its lifetime.

Loans like the 3/1 and 5/1 adjustable which have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would mean that the first adjustment may be as much as 3%, subsequent adjustments are capped at 2% each, and the lifetime cap is 6%.

Two-Step loans are quoted with a single cap, which is the amount by which the loan may adjust at its single adjustment date.

Closing Costs
Fees paid by the borrower when property is purchased or refinanced. These typically include a loan origination fee, discount points, appraisal fee, title search, title insurance, survey, taxes, deed recording fee, and credit report charges. Since points are listed separately, they are not included in the Closing Costs column on the Microsurf tables. PMI costs are also excluded from this figure. Title insurance, though typically considered a part of closing costs, is not reflected on Microsurf's tables. This fee is usually in the range of 25-30cents per $1,000 borrowed. An N/A in the Closing Costs category means that the information was not available from the lender or, in the case of multiple-state lenders, differed materially from state to state.

Comments
Lenders may provide a brief description of some of their programs or special features on the Microsurf Tables. Many lenders offer discounts to any borrower who mentions Microsurf. It is always recommended that you tell your lender that you found him on the Microsurf Mortgage Tables, because some lenders offer these discounts even if they do not explicitly say so in their comments.

Commitment
A written letter of agreement detailing the terms and conditions by which the lender will lend and the borrower will borrow funds to finance a home.

Conforming Loan
A mortgage loan for $240,000 or lower.

Construction Loan
A short term loan for funding the cost of construction. The lender advances funds to the builder as the work progresses.

Conventional Loan
A mortgage neither insured by the FHA nor guaranteed by the VA.

Conversion
The right of a borrower to convert an adjustable or balloon loan into a fixed loan. The Conversion Option column on Microsurf balloon tables indicates the right of a borrower to convert this balloon loan. The possible options are as follows...


Option Description
Not Available Borrower May Not Convert This Loan.
Must Requalify Borrower May Convert But Must Requalify.
Conversion Fee Applies
Auto-Qualify Borrower May Convert And Is Automatically Qualified.
Conversion Fee Applies

Credit Rating
Borrowers are rated by lenders according to the borrower's credit-worthiness or risk profile. Credit ratings are expressed as letter grades such as A-, B, or C+. These ratings are based on various factors such as a borrower's payment history, foreclosures, bankruptcies and charge-offs. There is no exact science to rating a borrower's credit, and different lenders may assign different grades to the same borrower.
Credit Report
A report to a prospective lender on the credit standing of a prospective borrower. Used to help determine creditworthiness. Information regarding late payments, defaults, or bankruptcies will appear here.

Deed
A legal document which affects the transfer of ownership of real estate from the seller to the buyer.

Default
The failure to make payments on a loan.

Down Payment
Money paid by a buyer from his own funds, as opposed to that portion of the purchase price which is financed.

Equity
The difference between the current market value of a property and the principal balance of all outstanding loans.

FHA Loan
A government-backed mortgage loan supported by the US FHA and the Department of Housing and Urban Development (HUD).

Finance Charge
The total dollar amount your loan will cost you. It includes all interest payments for the life of the loan, any interest paid at closing, your origination fee and any other charges paid to the lender and/or broker. Appraisal, credit report and title search fees are not included in the finance charge calculation.

Fixed-Rate Mortgage
A mortgage where the interest rate does not change for the life of the loan.

Float
Between the time of application and closing, a borrower may choose to bet on interest rates decreasing by electing to float. Floating is essentially choosing not to lock the interest rate. Since it is the borrower's responsibility to lock his or her rate before (or at) closing, choosing to float is considered risky and may result in a higher interest rate. Request information from your lender regarding lock procedures.

Foreclosure
A legal procedure in which real estate is sold by the lender to pay a defaulting borrower's debt .

Good Faith Estimate
An estimate of charges which a borrower is likely to incur in connection with a loan closing.

Gross Monthly Income
The total amount the borrower earns per month, not counting any taxes or expenses. Often used in calculations to determine whether a borrower qualifies for a particular loan.

Hazard Insurance
A form of insurance in which the insurance company protects the insured from certain losses, such as fire, vandalism, storms and certain other natural causes.

Housing Ratio
The ratio of the monthly housing payment to total gross monthly income. Also called Payment-to-Income Ratio or Front-End Ratio.

Index
A published interest rate not controlled by the lender to which the interest rate on an Adjustable Rate Mortgage (ARM) is tied. The index and the interest rate linked to it may increase or decrease. The typical index values quoted on Microsurf are as follows:

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