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Title and Escrow Glossary |
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Some words you'll hear ...
Amortization:
The repayment of a loan in a specified number of equal periodic payments that includes principal and accrued interest.
Annual Percentage Rate (APR):
The effective annual cost of a mortgage, including interest, loan fees and certain other costs.
Closing Costs (Buyer):
Costs, paid for by the buyer, that may include loan fees, discount points, title insurance, appraisal fees, credit report , recording fees, etc. These costs are in addition to the down payment.
Debt-to-Income Ratio:
The ratio of monthly debt payments to monthly gross income. Lenders use a housing ratio (mortgage and other housing-related payments divided by monthly income) and a total ratio (all debt including the mortgage payment divided by monthly income) to determine the amount of the loan that a borrower's income qualifies them for.
Equity:
The owner's interest in the property , generally the difference between the amount of all
liens on the property and what the property is worth.
Escrow:
A legal relationship between a buyer, seller, and a third party holding money or papers until all conditions of a sales agreement and loans are fulfilled.
Index:
Any number of economic indicators lenders use to calculate interest rate adjustments for adjustable rate mortgages (ARMs).
Lifetime Interest Rate Caps and Floors:
The maximum level to which the interest rate on an adjustable rate mortgage (ARM) can increase (Cap), or decrease (Floor), over the life of the loan. Cap is sometimes called the "ceiling rate".
Loan Origination Fee:
A one-time fee that covers a portion of the lender's administrative costs in processing a loan.
Loan-to-Value (LTV):
The ratio, expressed as a percentage of the amount of the loan to the property 's appraised or sales value, whichever is less. You may see this represented as an 80% loan or a 95% LTV.
Margin:
In adjustable rate mortgages (ARMs), margin or spread, is the difference between the interest rate charged on the loan and the index. Generally, the margin remains fixed over the life of the loan.
Mortgage
A lien or claim against real property given by a buyer to a lender as security for money borrowed. In some states a Deed of Trust is the document used.
Mortgage Insurance:
Often required when making a down payment less than 20%. It protects the lender against payment default by the homeowner . This insurance does not relieve the borrower of the obligations to repay the loan, nor should it be confused with various forms of life or disability insurance designed to payoff a mortgage in the event of disability or death of the borrower.
Payment Cap:
Limit that the monthly payment can change from one adjustment period to another. (Also called a Payment Change Cap.)
Points
One point equals one percent of the
loan amount. Points may be paid in order to reduce the interest rate or as a fee in connection with the origination of the loan. May be tax deductible. Consult your tax advisor for details.
Principal
The remaining amount or balance of the mortgage loan.
Purchase Contract/Real Estate Sales Agreement
An agreement between a buyer and a seller of real property , setting forth the price and terms of the sale.
Purchase Price
The total selling price of the home including the cash down payment and the principal on the loan.
Title Insurance
Protects lenders or homeowners against loss of the property due to legal defects in the title . It may be issued either to the owner or the lender, with insurance benefits being paid only to the entity named in the title policy. We will require a lender's policy in connection with the loan.
Title Search
A check of all recorded documents to ascertain whether there are any liens, overdue assessments, other claims or restrictive covenants against the property that might adversely affect the title .
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Real Estate 
