Glossary of Loan Terms

Abstract Of Title

A written history of all the transactions bearing on the title to a specific tract of land. An abstract of title covers the period from the original source of title (often the original land grant from the United States Government to an individual) to the present time and summarizes all subsequent documents that have been recorded against that tract. 

Amortization Periods

A timetable for payment of a mortgage that shows the amount of each payment that should be applied to interest and principal and the remaining unpaid principal balance that will result from the application. Please see Amortization Schedule (Source: FNMA Servicing Guide, Glossary)

Application

A form used to apply for a mortgage loan and to record pertinent information concerning a prospective borrower and the proposed security for the loan. 

Appraised Value

An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data. 

Appraisal

An opinion of value reached by an appraiser based upon knowledge, experience, and a study of pertinent data. What is the appraised value of your property? 

Cash Available

Your housing affordability depends on the amount of money you have for the down payment, closing costs and a cash reserve. The more you can come up with, the less you will have to borrow. 

Cash Flow Basis

This calculation shows when your monthly payment savings exceed your estimated closing costs and discount points. It does not consider the tax impact or differences in principal balance reduction between your current loan and the refinance suggestions. You can use the Amortization Schedule Calculator to compare principal reduction. 

Cash for Transaction

Enter the amount your want to use toward closing costs (discount points and fees) and/or to reduce your loan balance. In situations where your loan balance is above the conforming amount, reducing the principal may allow you to get a lower rate. Enter zero if you want a no-point loan and/or to finance the closing fees. 

Cash required to close

Funds needed by borrower to cover down payment, closing costs, Cash reserves, and prepays. 

Cash Reserve

Funds that the borrower will have remaining after all expenses (down payment, closing costs & prepays) of the transaction have been paid. These reserve funds will be available in the event of any unexpected house-related or other expenses. 

Closing

The conclusion or consummation of a transaction. In real estate, closing includes the delivery of a deed, the signing of notes and security instruments, and the disbursement of funds necessary to the sale or loan transaction. Also referred to as settlement. 

Closing Costs

The money paid by borrowers and sellers to affect the closing of a home loan. This normally includes an origination fee, discount points, title insurance, survey, attorney's fee, and more. 

Commitment

A promise made by a lender to supply financing if certain conditions are met by the borrower. 

Cost

If you select "I'll pay the costs", you will be responsible for paying with cash at closing for applicable third-party closing costs, which include appraisal, credit report, title (a.k.a. lien search), recording fee, and closing/attorney fees. If you select "Include costs in the rate", Countrywide will pay all applicable third-party closing costs in exchange for a higher rate or by financing those closing costs. 

Credit Rating

An expression of creditworthiness based upon present financial condition and past credit history. 

Credit Report

A detailed account of the credit, employment, and residence history of an individual used by a prospective lender to help determine creditworthiness. Credit reports also list any judgments, tax liens, bankruptcies or similar matters of public record entered against the individual. 

Current PITI

This is an abbreviation for a monthly payment that includes principal, interest, taxes and insurance. In mortgage lending it is common for the monthly mortgage payment to include not only the principal and interest payment on the loan, but an escrow amount for real estate taxes and hazard insurance as well. 

Document Preparation

This fee covers the expenses associated with the process of preparing the legal documents that you will be signing at the time of closing, such as the mortgage and note. 

Down Payment

The cash portion paid by a buyer from his/her own funds, as opposed to that portion of the purchase price, which is financed. 

Down Payment Percent

The down payment percentage is calculated by dividing the amount you plan on putting down on the purchase of a home by the selling price. An example would be: If the sale price of the property is $100,000 and you plan on giving a down payment of $20,000, the down payment percent would be 20% ( 20,000/100,000 = .20 or 20%). 

Escrow/Attorney/Title

A neutral third party who carries out the instructions of both the buyer and seller to handle all the paperwork of settlement or "closing." You will either use an escrow company, an attorney or a title company depending on which state you reside in. 

Excluded Loan programs

These are loan programs you may not be interested in applying for. Clicking in one of these boxes indicates loan programs you are NOT interested in seeing information on. 

Extra Payment

Aside from the current amount of rent you pay and other bills, how much more can you afford to pay monthly? 

Filing Status

Please enter here whether you file your income taxes as single, married, separated or Head-of–Household. 

Flood Check

A survey conducted to determine whether a property is in a flood zone. 

Help Links

Help is always a click away! If you need additional information on any of the inputs for a given calculator, simply click on the underlined label for the input field and a window explaining the item will appear. 

Lending Guidelines

Every loan program has different guidelines. Guidelines are used to meet Federal, State and Local laws and enforce minimum requirements by the lender. Guidelines ensure that prospective borrowers won't purchase a home that they won't be able to afford. 

Limiting Factor

Limitations such as Income, Program Guidelines, Debt, and Cash that restrict your ability to get a higher loan amount. 

Loan Amount

This is the actual amount borrowed from the lending institution including any financed fees, debt consolidation, etc. 

Loan Balance

What is the current outstanding balance (the amount you owe) on your present mortgage loan? 

Loan Program

Please click on Loan Programs on the left and choose one of the options e.g. conventional, no income verification, no down payment, etc… 

Maximum Amount

If you are unsure of what percentage you will be putting down on your home purchase, you may put the dollar amount you will be using as a down payment here. 

Maximum Points

This is the maximum points you are willing to pay. Points are fees charged by a lender on the money borrowed. Typically the more points paid, the lower the rate of interest a customer pays on a given loan product. One point equals one percent of the loan amount. They are also sometimes referred to as discount points. 

Monthly Debt

Please enter the combined debts for all borrowers. Enter the following: monthly credit card bills, car loans, car leases, student loans, alimony, etc. Do not enter your current rent or mortgage payment. 

Monthly Income

Based on your earnings and debt, lenders calculate your approximate borrowing limit. Mortgage payments, property taxes, hazard insurance, etc. should not exceed 28-30% of your monthly gross income; these are known as housing expenses. All other debts such as car payments, student loans and credit cards are then added to your housing expenses. This sum should not exceed 36-38% of your monthly gross income. If it does, don't panic, it probably will only reduce the amount of mortgage for which you may qualify. 

Monthly Rent

If you are currently renting the property you reside in, here is where you would enter the amount you pay in monthly rent. 

Mortgage Tax

A city, county, or state tax that is assessed in the purchase and/or sale of real estate. A real estate tax may also be assessed when financing is obtained. 

Notary

An official authorized by law to attest and certify certain documents by his or her hand and official seal. 

Original Term

The term of a home loan is the number of years the home loan is amortized for. Home loans are generally amortized over 15, 20 or 30 years. 

Payment (P&I)

Your monthly mortgage payment, including principal and interest, but excluding tax and insurance payments. 

Payoff Number of Years

If you want to see what your payment would be in order to pay off your loan in a specified number of years, enter the payoff years here. 

Points

Points are fees charged by a lender on the money borrowed. Typically the more points paid, the lower the rate of interest a customer pays on a given loan product. One point equals one percent of the loan amount. They are also sometimes referred to as discount points. 

Processing

The preparation and documentation of a mortgage loan application for underwriting. 

Property Value

LTV or Loan to Value Ratio refers to the relationship between the unpaid principal balance of the mortgage and the property's appraised value (or sales price if it is lower).  

Rate

The annual rate of interest on a loan. 

Recording

The act of entering or recording documents affecting or conveying interest in real estate in the recorder's office established in each jurisdiction. Depending on jurisdictional law and/or practice, until recorded, a deed or mortgage is not generally effective against subsequent purchasers of mortgages. (Source: GNMA Document Custodian Manual, Glossary.) Filing a document as public record is giving constructive notice to the world of the existence of the document and its contents. 

Start Date

The date you want to use as the start date for the amortization, usually the date you closed on your loan or today's date. 

Start Month

The date you will begin adding an extra dollar amount to your regular monthly payments. Enter the payment number from 1 to 360 (e.g., if you will start paying extra principal at the start of year 5 of a 30 year loan, enter "49".) 

Sub-Escrow

Are fees charged by the escrow company for allowing the borrower to be able to sign all the loan documents in the Escrow office instead of having to go to the lenders office. 

Survey

A measurement of land, prepared by a registered land surveyor, showing the location of the land with reference to known points, its dimensions, and the location and dimensions of any improvements. 

Tax Bracket

Please select the tax bracket you fall under. If you are unsure what tax bracket you are in, you may want to speak with an accountant to find out. 

Tax Savings

This is the amount of money you save in income taxes. You save this money because in most cases the interest you pay on your home loan is tax deductible! (Ask your tax advisor). 

Tax Service

A fee collected to set up a third-party to monitor the borrower's property tax payments to ensure that the payments are made on time, and to prevent tax liens from occurring. 

Term

The term of a home loan is the number of years the home loan is amortized for. Home loans are generally amortized over 15, 20 or 30 years. 

Termite Report

A report that results from an inspection by a professional to determine if the property has termites. 

Title Binder

Written evidence of temporary title insurance coverage that only runs for a limited time and must be replaced by a permanent policy. 

Title Exam

An examination of records to ensure that the seller is the legal owner of a property and that there are no other liens/claims against the property. 

Title Insurance

The process of determining the history of the ownership of a property in order to determine if the seller has legal ownership in the property they are selling. 

Title Insurance Endorsements

This is an endorsement of insurance against losses that may result from claims of previously unknown ownership in insured property. 

Underwriting

The analysis of risk, the determination of the appropriate loan amount, and the setting of loan terms and conditions, based on the borrower's creditworthiness and the value of the real property that will secure the loan. 

User Preferences

To make this tool as easy to use as possible we had to make some decisions about what to ask and what to assume. Some of our assumptions were that this tool would be used by a first time home buyer. The loan products offered and the verbiage reflect that assumption. You may qualify for additional loans that are not included in this application. Our motto is Home Loans Made Easy. Really and we mean it. Our loan consultants are expert at matching people to loans and have access to the wide array of products that Countrywide offers. 

Warehouse

A closing-cost fee representing the lender's cost of holding a borrower's loan temporarily prior to being sold on the secondary mortgage market. 

To obtain the highest loan amount?

This option will direct the calculator to try and obtain the highest sales price you can qualify for given your income, debt and available down payment.

To have the lowest possible monthly payment amount?

This option will direct the calculator to select loans that will afford you the lowest monthly payment.

To get the lowest interest rate possible?

This option tells the calculator to find loans with the lowest initial interest rates

Pay the lowest closing costs?

This option will select loan products that require the lowest amount of closing costs. 

Year Acquired

The date you acquired your existing mortgage, used to determine your remaining balance.