Perkins Lending Team

​​​​Terms

      -A-

  • Amortization: ​The calculation of equal payments over a given time period to payoff a given loan amount at a given interest rate. For instance, if you wanted to pay off a $50,000 loan amortized over 30 years at 7%, you would make 360 equal payments of $332.65 to do so.
  • ​Appraisal: A report prepared by a professional that determines the value of a property based off of the recent sales of comparable properties in the area.
  • ​APRAnnual Percentage Rate. This is a calculated interest rate based off of the actual interest rate of the loan and all the loan fees and charges associated with it. This simply provides borrowers with a better way to compare rates with discount points versus rates without as it shows what the interest rate "would be" if those fees were charged as interest.
  • ARMAdjustable Rate Mortgage. These Mortgage types are usually amortized over 30 years and can adjust in rate over the life of the loan. Several ARM types exist including Fixed-Period ARMs, whereas the interest rate is fixed for a given period of time, then it becomes adjustable every month, six months, year, or three years from that point forward. Fully Adjustable ARM's can adjust every month starting with the second payment.

       -B-

  • Balloon Mortgage:  A mortgage where during the amortization period, the note becomes due in full.  For example:  A 7-year Balloon mortgage with a 30 year amortization will be exactly like a regular 30 year mortgage.  However, after seven years, the note will become due in full, and the borrower must either pay off the loan completely, or refinance with another loan.  Balloon mortgages are ideal for people who plan on selling their house or refinancing within a given time period.

​       -C-

  • Cash-Out Refinance: To refinance with the intention of pulling additional cash equity from the value of the property. Cash-Out refinances also include a refinance whereby a first mortgage is paid off along with a second mortgage or line of credit that was established after the property was purchased.
  • Closing Disclosure: A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).
  • Construction Loan: A loan taken out for the purpose of building a new structure on a piece of land. Construction loans are usually interest-only loans which have "draw periods" of up to 24 months. The draw period is the time frame where the builder can withdrawal money from the available balance to purchase building supplies. Because of this setup, a borrower only pays interest on the money spent during construction. All construction loans must eventually be refinanced into a permanent loan.
  • Credit Report: A report prepared by a third party which provides a history of credit transactions of an individual. Credit reports can also contain scores from each of the three credit bureaus which are used to determine the likelihood that an individual will default on a loan.

​      -D-

  • DTIDebt-To-Income ratio. This is the ratio that lenders use to determine how much of a borrower's income is going to his/her expenses. A "front-end" ratio shows how much is going towards housing expenses only. A "back-end" ratio shows how much is going towards housing expenses PLUS installment debt, child support, credit cards, etc. For example: a person making $4,000 per month, with a $1,000 house payment and $350 in other payments per month has a 25% front end ratio and a 33.75% back end ratio.

​      -F-

  • Fannie Mae (FNMA): The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation's largest supplier of home mortgage funds. Fannie Mae supplies many of the rules and guidelines which investors' loan programs must abide by. 
  • ​FHAThe Federal Housing Administration. FHA was established in 1934 to advance the opportunity of home ownership by the average American. Many lenders offer FHA loans, which require little to no down payment, minimal mortgage insurance (if any), and allow for unique situations such as non-occupant co-borrowers. Although FHA programs offer competitive rates, there are often better offers to be found in conventional financing options if the borrower qualifies.
  • Float: To "ride" the market by not locking in hopes of getting a lower rate or avoid paying extended lock fees. Floating the market can either be very costly or very beneficial.

     -G-

  • GFEGood Faith Estimate. This is a form which illustrates the estimated costs and fees associated with a proposed loan. As of October 2015 this is better known as the Loan Estimate. 

     -H-

  • HUDThe U.S. Department of Housing and Urban Development. HUD was established in 1965 to create a suitable living environment for all Americans. They address housing needs, improve communities, and enforce fair housing & lending laws and regulations. HUD also provides limited government-assisted financing for home-buyers. This is now know as the Closing Disclosure.

      -I-

  • Interest Only:  Some loans have the options to be Interest-Only. This usually lasts for anywhere from three to ten years, whereas the borrower is only required to pay the interest due on the loan amount. After the initial interest-only period, the loan then becomes fully-amortized (pay both principal and interest) for the remaining years of the loan.

      -L-

  • ​LIBORLondon Inter-Bank Offering Rate. This is the rate at which London banks borrow money. Most competitive ARM products are based off of this index.
  • Loan Estimate: This form provides you with important information, including the estimated interest rate, monthly payment, and total closing costs for the loan.
  • Lock: To secure a mortgage rate that cannot change regardless of market fluctuations.​
  • ​LTVLoan-to-value. This is the ratio that lenders use to determine how much equity is in a particular property. For instance: a home with a value of $300,000 where the owner carries a $240,000 loan has an LTV of 80%.

​      -N-

  • No Cost Loan: This is a fairly misleading term used to describe any loan where there are no actual costs passed on to the borrower. The misleading part is that although there are no costs "out of pocket" or "rolled into the loan balance," costs such as underwriting fees, appraisals, title work and commissions, all have to be paid from somewhere. In these cases, the costs are paid out of an inflated interest rate. In some cases, it may be worth it, but in others, a borrower may save only $2,000 at closing and find himself paying an extra $100 or more per month in interest for the 30-year life of the loan. It pays to do the math when considering a "No Cost" loan.
  • No Doc Loan: A loan where the borrower does not put any information about his/her job, income, or assets on the loan application. The decision for the approval is made strictly off of the appraisal and credit report. No Doc loans typically carry higher rates than documented loans.
  • No Ratio Loan: A loan where the borrower does not put any information about his/her income on the loan application. The decision for the approval is made strictly off of other factors such as the appraisal, credit report, and assets. Verification of employment is required.

      -P-

  • ​PITI:  Principal, Interest, Taxes, and Insurance. This is a term used by lenders to sum up the total house payment a borrower can expect. This might also include HOA (Homeowner's Association) dues if the property is a PUD or "Planned Urban Development" property.
  • ​PMI: Private Mortgage Insurance is obtained by lenders to protect their investment on a property in the event of a foreclosure. This is required on most loans with a loan-to-value ratio above 80% (Some above 70%).
  • Points: Points are fees charged on a loan for several different purposes. One point is equal to one percent of the loan amount. For example: One point on $120,000 is $1,200. Origination points and discount points can be added/increased to lower interest rates, extend lock periods, modify loan parameters, or finance PMI.
  • Prepayment Penalty: (Also called a "Pre-Pay") A penalty charged by the investor for the early payoff of a loan. Some loans have a "hard" or "soft" prepayment penalty whereas a fee is charged if the loan is paid off within a specified time frame (usually 2-3 years). A "hard" pre-pay means the fee will be charged no matter the reason for the payoff. A "soft" pre-pay means the fee is only charged if the borrower refinances, but not if the property is sold.

      -R-

  • ​Rate: The factor at which interest is charged on a loan.
  • ​Rescission Period:  A "waiting period" between when closing papers are signed and funds are actually disbursed. Most refinances on primary residences have a mandatory three day rescission period where the borrower may cancel the loan he/she has agreed to before those three days have passed.
  • Refinance: To secure a new mortgage on an already-owned property.
  • RESPA: Real Estate Settlement Procedures Act. Guidelines put in place by the government to ensure fair and equal lending practices across the country.​

​      -S-

  • Stated Income Loan: A loan where the borrower states an income amount on the loan application, but is not required to document it with pay stubs or tax returns.  These loans, do, however, require verification of employment.
  • Subordinate Financing:  Any loan or line of credit in a position behind a first mortgage.

​      -T-

  • Term: The length of a loan. Examples: 30 year, 20 year, 15 year.
  • TIL:  Truth In Lending. This is a standard form which shows the amount of interest a borrower is charged over the life of his/her loan. This form also factors in pre-paid finance charges (origination fees, processing fees, etc) to show what those fees would equate to if they were charged as interest. This shows as the APR, or Annual Percentage Rate.​​​ As of October 2015, when this form is given at application it is know as the Loan Estimate, and when it is given at closing is is known as the Closing Disclosure.
  • Title Insurance:  This is insurance required by all lenders to make certain that there are no hidden or unknown liens on a property before a new loan is placed. Title Insurance protects both the lender and the borrower.