FM VA Web Content Viewer (JSR 286)

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A

Term Adjustable-Rate Mortgage (ARM)

explanation When you choose an ARM loan, you receive an introductory rate that changes on a set schedule. When your loan adjusts, monthly payments can go up or down, depending on current rates. Also referred to as a variable-rate mortgage.

Term Amortization

explanation Your loan repayment process. The Amortization schedule is the amount you pay each month in principal and interest to ensure your loan is repaid by the end of your loan's term.

Term Annual Percentage Rate (APR)

explanation Adds points, closing fees and any other loan costs to your interest rate to provide you with a better sense of the total cost of your loan. Shown as a percentage.

Term Appraisal

explanation An estimate of your property's value determined by an independent Appraiser. The appraiser weighs comparable properties and current market conditions to provide your appraisal. Also referred to as a valuation.

B

Term Borrower

explanation The person who receives a mortgage with the obligation to repay the loan's principal and interest.

Term Broker

explanation In real estate, a broker is an individual that passed their broker license exam and can handle property transactions, own a firm and hire agents to work for them.

C

Term Certificate of Eligibility (COE)

explanation This document, necessary when you apply for a VA loan, verifies you're eligibility. It is obtained through the Department of Veteran Affairs. You'll get one by submitting your Separation Paper (Form DD-214) and Request for Certificate of Eligibility (VA Form 1880) available through your local VA office.

Term Closing

explanation The last step of your home purchase or refinance, your closing is where you sign necessary documents and exchange funds. As a home buyer / owner you'll need to attend (in some cases with your representative). Also referred to as a settlement.

Term Conventional loan

explanation A mortgage not insured or guaranteed by a government agency such as the Department of Veteran Affairs (VA), the Federal Housing Administration (FHA), or the Department of Agriculture (USDA).

Term Credit Report

explanation A detailed report of your borrowing and repayment history provided by an independent credit agency.

D

Term Debt-to-Income Ratio (DTI)

explanation A percentage calculated by dividing your debt (rent or mortgage payments, other loans, credit cards, etc.) by your total income. Some mortgage solutions require specific debt-to-income ratios for eligibility. Example: Your total debt payments are $1,000 per month and your total income is $4,000 per month, your DTI is $1,000/$4,000 or 25%.

Term Delinquency

explanation When your loan is past due.

Term Department of Veterans Affairs (VA)

explanation The federal agency that oversees veteran services including home financing programs.

E

Term Entitlement

explanation The amount the VA will repay your lender if you default on your VA loan. Entitlement plays an important role in determining how much you can borrow through your mortgage. If you live in an area with a high cost of living, it could impact the size of your entitlement.

Term Equity

explanation Your home's value minus the amount you owe on it (the balance on your mortgage or home equity loan/line of credit). Example: if your home is worth $200,000 and you owe $150,000 on your mortgage and home equity loans, your equity would be $50,000.

Term Escrow

explanation Funds your lender collects and stores in an escrow account to pay property taxes, homeowner’s insurance and mortgage insurance. Your lender to pays these expenses on your behalf, adding the cost of taxes and insurance to your monthly mortgage payment.

F

Term Fixed-Rate Mortgage

explanation Your interest rate remains the same for the entire loan. Your monthly payment will only change if your taxes or insurance costs fluctuate.

Term Foreclosure

explanation A legal process where the lender takes possession of a home after a borrower has not met the mortgage’s terms of repayment. Also known as a repossession; often homes are re-sold to pay off borrowers’ debt.

Term Funding Fee

explanation A fee you'll pay directly to the VA to help offset losses on defaulted loans. Your VA Funding Fee amount depends on a number of factors, including down payment size, VA loan history and the nature of your service.

G

Term Guaranty

explanation A portion of your loan is guaranteed by the Department of Veteran Affairs, who will pay your lender this guaranty if your loan forecloses. The guaranty amount varies depending on your loan amount, property location and other factors. Your guaranty amount may impact your ability to qualify for specific loans or loan amounts.

H

Term Hazard Insurance

explanation A portion of your homeowner's insurance that covers you from hazards such as fire or some natural disasters.

Term Homeowner's Insurance

explanation Insurance you take out on your property that covers hazards (events such as fires) and liability (accidents that take place in your home). Typically, homeowner’s insurance is required by your lender.

I

Term Inspection

explanation An assessment of a property's condition prior to sale. Typically performed by a professional home inspector.

Term Interest Rate

explanation The cost you pay to borrow your mortgage, shown as a percentage. Contributes to the amount you owe in interest and how much you pay for your mortgage each month.

Term Interest Rate Reduction Refinance Loan (IRRRL)

explanation Allows you to refinance a VA loan to a new VA loan to lower your rate. Fewer requirements compared to VA Cash-Out refinances mean the process is typically faster. You may not need an appraisal, you'll need to complete less documentation and a new Certificate of Eligibility (COE) usually isn't required. Also known as a VA Streamline.

J

Term Jumbo Loan

explanation Loans larger than the limits set by Fannie Mae and Freddie Mac. Jumbo Loan amounts vary depending on the location of your property. Interest rates on Jumbo Loans are typically higher than conforming loans.

L

Term Lien

explanation A claim on a home used as collateral against a debt. Your mortgage is an example of a Lien.

Term Loan-to-Value Ratio (LTV)

explanation A percentage calculated by taking your mortgage amount and dividing it by your home's value. The LTV may be used to determine if you're eligible for a mortgage. Example: If your home is worth 100,000 and your mortgage is for $65,000 your LTV is 65,000/100,000 or 65%.

O

Term Origination Fee

explanation The fee lenders charge to establish your mortgage. Unlike a discount fee or "points" this fee does not impact your mortgage interest rate.

P

Term Pre- qualification

explanation An estimate of how much you may be able to borrow based on unverified financial details you provide such as your debt, income and liquid assets.

Term Prime

explanation Mortgages provided to those with good credit scores, a history of stable income, low debt ratios and ample down payment.

Term Principal

explanation The amount of your loan that remains unpaid. Or, the portion of each mortgage payment used to pay down the amount you owe on your mortgage.

Term Private Mortgage Insurance (PMI)

explanation Often required on mortgages with a down payment below 20% (note, different guidelines apply to FHA and VA loans) this insurance protects your lender if your mortgage defaults. PMI is typically added to your monthly payment.

R

Term REALTOR®

explanation Real estate agents that belong to the National Association of REALTORS®. Real estate agents are licensed and earn a commission when representing home sellers and buyers in real estate transactions.

Term Refinance

explanation You pay off your existing mortgage with a new loan. You may want to do this to lower your interest rate, reduce monthly payments, change your term, lock in a low fixed rate or take cash out of your home’s equity.

S

Term Streamline

explanation Streamline loans are generally available for Federal Housing Authority (FHA) or VA loans. VA Streamline is another term for an Interest Rate Reduction Refinance Loan (IRRRL). Streamline refinances typically involve fewer requirements and are a faster option when your goal is to keep the same loan, but refinance to reduce your interest rates.

Term Subprime

explanation Mortgages provided to those who have issues with their credit score, lack a history of stable income, have high debt ratios and/or don't have enough of a down payment.

T

Term Title

explanation The document that identifies you as a property owner along with a history of previous owners of the property.

V

Term VA Loan

explanation A mortgage that provides a number of benefits to eligible veterans and active military including no down payment, no mortgage insurance and flexible qualifying guidelines.