Must-Know Terms as an LO

School is out, but the learning never stops in the mortgage industry! With all of the different mortgage loans, terms and processes that you need to be familiar with it can be difficult. If only we had an easy way to remember what each one meant! Having a handy list of terms like these makes it easier for everyone involved in their transactions. To make your mortgage process as smooth and seamless for you, we've put together a list of some common terms that are used in the industry.

Amortization

Amortization is the process of gradually reducing a debt over time through regular payments. It is also the decrease in the value of an asset over time.

Appraisal Fee

An appraisal fee is the cost of having a professional estimate the value of a property.

Appraised Value

The appraised value is the estimated worth of a property as determined by a professional appraiser.

Borrower Defaults

A borrower defaults when they fail to make a payment on a loan. This can lead to legal consequences and may negatively impact the borrower's credit score.

Borrower's Credits

A borrower's credit is a score that indicates the likelihood of the borrower defaulting on a loan. The higher the score, the lower the risk of default.

Closing Disclosure

The closing disclosure is a document that provides final details about the loan transaction. It includes the amount of the loan, the interest rate, the monthly payment, and other important information.

Conventional Loan

A conventional loan is a type of mortgage that is not insured or guaranteed by the government.

Credit Report

A credit report is a document that contains information about an individual's credit history. This includes information about any late payments, defaults, and other negative information.

Debt-to-Income Ratio

The debt-to-income ratio is a measure of how much debt an individual has compared to their income. This ratio is used to assess an individual's ability to repay their debts and is one factor that lenders use when considering a loan.

Down Payment

A down payment is a lump sum of money that is paid upfront when purchasing a property. It is typically used to reduce the amount of debt that the borrower owes on the property.

Escrow Account

An escrow account is a type of bank account where the funds are held until they are needed for the purchase of a property.

FHA Loans

FHA loans are a type of mortgage that is insured or guaranteed by the government. This means that if the borrower defaults on the loan, the government will step in and repay the lender. FHA loans are typically easier to qualify for than conventional loans and may provide more favorable interest rates.

Foreclosure

Foreclosure is the legal process by which a lender can take possession of a property when the borrower defaults on their loan. This process typically begins with the lender sending the borrower a notification of default. If the borrower does not cure the default, the lender may begin foreclosure proceedings.

Home Equity

Home equity is the difference between the value of a property and the amount of debt that is owed on the property. This difference can be used as collateral for borrowing money. Home equity can be increased by making a down payment when purchasing a property, by increasing the value of the property, or by paying off any outstanding debts.

Interest Rate

An interest rate is the percentage of a loan that is charged as interest.

Jumbo Loan

A jumbo loan is a type of mortgage that is larger than the typical loan size. Jumbo loans are typically used to finance the purchase of high-value properties. The interest rates on jumbo loans are typically higher than the interest rates on smaller loans, and they may require a larger down payment.

Lump Sum

A lump sum is a single payment that is made at one time. This payment can be used to pay off a debt, finance the purchase of a property, or any other purpose.

Market Value

The market value of a property is the price that it would sell for in the current market. This value is determined by analyzing the current supply and demand for similar properties.

Mortgage

A mortgage is a loan that is used to finance the purchase of a property. The loan is secured by the property itself, which means that if the borrower defaults on the loan, the lender can take possession of the property. Home mortgages typically have longer terms than other types of loans, and they often involve higher interest rates.

Mortgage Loan Officer

A mortgage loan officer is an individual who works with borrowers to obtain financing for the purchase of a property. The loan officer is responsible for determining the borrower's eligibility for a loan, as well as the terms of the loan. The loan officer may also work with the borrower to find the best interest rate and repayment plan for their needs.

Pre-Approval

Pre-approval is a process that lenders use to determine if a borrower is eligible for a loan. This process typically involves reviewing the borrower's credit history and debt-to-income ratio. If the lender determines that the borrower is eligible for a loan, they will provide the borrower with a pre-approval letter.

Refinancing

Refinancing is the process of taking out a new loan to pay off an existing loan. This can be done to obtain a lower interest rate, to change the repayment schedule, or for other reasons.

Title Company

A title company is a business that provides title insurance and other services related to the transfer of property ownership. These services typically include examining the title to the property, issuing title insurance policies, and handling the closing of the sale.

VA Loan

A VA loan is a type of loan that is guaranteed by the Department of Veterans Affairs. This type of loan is available to eligible veterans, active-duty service members, and reservists. The VA guarantee helps protect lenders from losses that may occur as a result of borrower default.

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