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Comprehensive Mortage Dictionary

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A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Abstract of title

Abstract of title is a written history of all transactions and documentation related to the titling of a property. This can include information like foreclosures, liens, loans, selling history, and more. 

What This Means for You:

These are the records that will help inform you about the history of a property when you are looking to purchase. 

Acceptance

The agreement you as the buyer make, or the seller makes with you, entering you into a contract for the purchase.

What This Means for You: One of the late stage processes that brings you that much closer to securing your new home. 

Account termination fee

Sometimes also referred to as a prepayment fee, this is a fee that may be assessed if you pay off your loan ahead of the planned schedule. 

What This Means for You: Lenders do this to help recoup money they would’ve earned from interest payments over time. So, if you plan on paying off your loan early, it’s important to inquire about the Account Termination or Prepayment Fee and assess whether it will save you money as opposed to simply paying the interest. 

Additional principal payment

Also known as a principal-only payment, an additional principal payment is a payment you as the borrower make that exceeds your regular monthly payment, and can help you pay off your loan earlier over time. Payments on a mortgage deal in two terms, the principal and the interest. In the early days of your mortgage term, payments often go towards your interest. By paying towards your principal when just starting out with a loan via additional principal payments, you can help reduce the amount of interest that accrues on the total principal over time.

What This Means for You: Depending on the scenario, additional principal payments may be the right or wrong choice for you. Always make sure to check about prepayment fees and other fees that may be assessed for additional principal payments. Also, ensure you have the correct budget to make these payments financially viable.  

Adjustable-rate mortgage (ARM)

Adjustable-rate mortgages are easiest to understand through their difference to traditional fixed-rated mortgages. In a fixed rate mortgage, your interest rate will remain the same over the entire term of the mortgage. For an adjustable-rate mortgage, you typically have an interest rate locked in for a limited time. Then after that period, your mortgage willbe periodically adjusted to match market shifts in interest rates. Typically, an adjustment cap is applied that limits how high or low a interest rate can go within a single adjustment period.

What This Means for You: Adjustable-rate mortgages may make sense for some buyers more than others. By conferring with your mortgage broker, you can determine if it’s right for you to play the interest market in hopes of securing a lower interest rate over time. 

Adjustment cap

The limit set on how much the interest rate of an adjustable-rate mortgage can fluctuate (either up or down) within a given adjustment period. 

What This Means for You: Adjustment caps help protect both you and the lender. It ensures that you can’t be stuck with an excessive, abnormal jump in interest rate, but also that your rate can’t fall to an extremely low rate that would be unfair to the lender.

Adjustment date

This is the date when your interest rate will change when you have an ARM. 

What This Means for You: Always pay attention to your adjustment dates and market trends so you can have a better sense of whether your rate will increase or decrease. 

Adjustment period

This refers to the period in between adjustment dates when you will be paying the agreed rate set during at the adjustment rate for an adjustable-rate mortgage (ARM).

What This Means for You: Understanding your adjustment period and timelines associated with an ARM will help you better navigate its complexities and ensure rate hikes don’t come as too much of a surprise. 

Affordability analysis

Similar to prequalification, an affordability analysis takes a basic look at the state of your financials in relation to a property. It includes a survey of income, debt, assets, and more. 

What This Means for You: An affordability analysis is a quick way to help you, and a lender, understand what properties are in your price range and what loan amount you may be able to afford without having yet applied to a full loan. 

Amortization

Put simply, amortization is the technical term for paying off a loan through scheduled payments. 

What This Means for You: Amortization also represents the gradual shift from mostly paying off interest at the start of your mortgage term to then making payments to the principal amount borrowed. Sticking to your schedule and hitting your monthly payments is key to keeping your amortization on track. 

Amortization table or schedule

The given timetable laid out for you that identifies how your amortization will be paid, often giving a timeline for instance, every month for 30 years.

What This Means for You: An amortization table also helps identify when you’ll be paying which part of your loan, outlining when payments go to interest and when they go to the principal amount. 

Amortization term

The amount of time required to pay off, or amoritize, your loan. This can very from loan to loan.

What This Means for You:  Always confer with your broker or lender about the amoritization term, and allow them to help you explore loan options that might be better suited to your situation. For instance, while 30-year mortgages are the most popular, they may not be the absolute best choice for every single person. 

Annual adjustment cap

The amount within a given year that the interest rate of your adjustable-rate mortgage can increase or decrease. 

What This Means for You: An annual adjustment cap helps ensure that you won’t see an extreme spike in your interest rate within a given year.

Annual percentage rate (APR)

Your APR represents the broader cost of borrowing outside of just the interest rate. It includes your annual mortgage payments, as well as loan origination fees, points, mortgage insurance, and any other fees you may have to pay in addition to regular mortgage payments. For this reason, the APR is often reflected as being higher than interest rate. 

What This Means for You: Federal Truth in Lending Act requires that every consumer loan agreement disclose the APR. Because lenders are required to abide by this law, APR can be a valuable metric for comparing costs of a total loan from lender to lender. 

Application fees

The fees you may have to pay for different financial services. These are typically non-refundable.

What This Means for You: Application fees may crop up all throughout your mortgage journey. Budgeting for the mortgage process should include some cash set aside for these fees. 

Appraisal or appraised value

When purchasing a home, an appraisal will be set up to create an informed estimate of the real property value. A professional appraiser is brought in to inspect the current property, weigh the sale price against the current market, and uses other data to generate a property value based off the information.

What This Means to You: There’s two important factors you need to remember. The first is that typically as the borrower, you will be paying appraisal fees, which can sometimes be hundreds of dollars depending on the market. Secondly, if the property is appraised for less than its sale value, the transaction may be delayed or cancelled entirely at the discretion of the lender. 

Appraisal contingency

Typically, an appraisal contingency is a requirement within a sales contract that means a property must be appraised for an amount equal to or exceeding the selling price. 

What This Means for You: If the appraisal contingency is not met, the property may not qualify for a loan from the lender.

Appreciation

Appreciation refers to the process of your property growing in value over time as opposed to losing value (depreciation). Several factors may be responsible for appreciation, including remodeling and additions, value of the land to external developers, location, and more.

What This Means for You: Appreciation is advantageous for you as the owner. If you hope to resell, you can likely get more than you paid. Investors often gamble on properties in less desirable areas that they believe may soon appreciate in value. If your property appreciates in value, you may be able to increase the amount that can be taken out with a second mortgage or home equity line of credit. 

Approved term:

The full number of months within which your loan is expected to be repaid. This will give you guidance on your payment schedule and clearly define the loan term for all parties:

What This Means for You: Use the approved term to help you budget over time and ensure you meet mortgage payments each month. 

Assessed value

Sometimes mistaken for the appraised value, the assessed value is delivered by a professional tax office. It is their way of determining what you will pay in property taxes based off their value assessment.

What This Means for You: Before purchasing a property, look for information about the area you’re buying in and the rough value of the home you’re purchasing to help you predict and plan for property taxes. Property taxes should always be factored into your annual home expenses budget. 

Assignment

Assignment refers to the process of transferring the rights of a contract to another individual. This may include transferring your loan during a sale or changing the names of the contract holder in the case of a remarriage or death in the family. 

What This Means for You: Always consult with your broker and lender when considering changing the assignment of a loan to ensure you fully understand the consequences of the decision. 

Assumable loan

A specific kind of loan whereby the mortgage and its terms are transferable to other parties. This situation most commonly occurs during a home sale, but can result from other scenarios as well. Not all loans are assumable. 

What This Means for You: It’s important to confer with your mortgage broker and lender to determine whether or not the loan you’re acquiring is assumable for parties in the future. This may effect your decisions on prospects of resale, for instance. 

B

Balance Sheet

A financial statement that is dated and displays your assets and liabilities. 

What This Means for You: A balance sheet is an effective way to understand your finances at a glance.   

Balloon loan

A non-standard type of loan where a borrower takes out a short-term loan, typically 5-7 years but has access to an interest rate as if the loan term was much longer. At the end of this loan period, a balloon payment of the entire principal amount is due. 

What This Means for You: When a balloon payment is due, you may seek a new loan, sell the property, or pay the remaining amount in cash. However, the refinance rate on balloon loans may be higher than usual. Balloon loans appeal particularly to those who want low monthly payments and plan to sell in the near future. 

Base rate

A standardized benchmark for interest rates used to determine how variable interest rates (such as for an adjustable-rate mortgage) should be calculated. 

What This Means for You: The base rate changes with market forces. If you have a loan with a variable rate attached, it’s valuable to monitor the trends so you anticipate any increase or decrease in payments. 

Basis point

A financial calculation term that refers to 1/100th of of 1%. 

What This Means for You: While this is technical lingo, it is commonly used as it factors into how your interest rate is calculated. 

 Bond

In mortgaging, bonds typically refer to a bond secured by a mortgage. They are backed by some form of real estate holding or real property

What This Means For You: Mortgage bonds insulate the investor, as if the bond is defaulted on the bondholder could sell the property attached to the bond to recoup their investment. 

Break even point

Your break even point is understood at the point when total income equals total expenses (thus evening out). 

What This Means for You: In the mortgage world, you’ll most commonly encounter this term when you seek out a refinance. In this context, the break even point determines how long it will take you to recoup the closing costs on a refinance. To get an accurate result, it’s important to tally up all fees you will pay during the process, including origination fees, discount point fees, application fees, underwriting fees, appraisal fees, and more. 

Bridge loan

A short-term loan that helps “bridge” the gap between a concluding loan and the start of another. Bridge loans are commonly used when you are purchasing a new home but have not yet sold your current home, and thus don’t have the funds available for the purchasing costs. 

What This Means for You: Bridge loans are especially useful if you’re buying in a competitive market, and find a home you want to purchase before you’ve been able to sell. While amount varies, bridge loans may entitle you to borrow up to 80% of both your home’s appraised value and the value of the home you’re hoping to buy. 

Broker

Brokers serve the role of facilitating loans between borrowers and lenders, working as a sort of match-maker to ensure the relationship is mutually beneficial to both parties. A broker does not lend directly, but rather works as an independent third party. 

What This Means for You: Brokers can help you acquire a more favorable mortgage rate by working directly on your behalf with the lender. When negotiating your loan, it can be valuable to have someone that serves as a third party and helps navigate the process. 

Broker fees

Broker fees are paid to your brokerage agent for their services, separate from regular lending fees. 

What This Means for You: Broker fees should be factored into your budgeting for the loan process. Fees typically range 0.50 percent to 2.75 percent of the loan principal, with a federal cap on fees at 3%. 

Buydown

Buydown is a prepayment method where the interest rate over the loan term is reduced by paying more costs up front. This is typically achieved by purchasing discount points that help pay off the initial interest on the loan, reducing the total rate that can accrue over time. 

What This Means for You: Buydowns may be an effective method for buyers who have more cash up front and would like to save over time. 

C

Call option

A contractual clause included in loans that allows lenders to request the outstanding amount on your debt at any point during the loan term. Essentially, this allows lenders to call and request the money that was lent.

What This Means for You: Call options are typically seen in the contracts of borrowers in poor financial standing, so the lender may include this provision to protect themselves from buyers reneging on their payment agreements. 

Cap

The limit set on how much the interest rate on a variable rate loan can change within a given period of time. 

What This Means for You: commonly, you’ll deal with caps when you have an adjustable-rate mortgage. Caps help stop the interest from skyrocketing too much in a short period of time, protecting you, but they also help protect the lender from seeing the mortgage rate sink too far. 

Cash available for closing

See cash to close. Another term for cash to close. 

Cash to close

The cash a borrower is expected to have available at closing to insure they can pay all associated closing costs and fees. 

What This Means for You: There are a variety of items you’ll need to pay at closing, including down payment, insurance fees (including title insurance and mortgage insurance where needed), appraisal fees, broker fees, attorney fees and more. Careful budgeting is required to insure you have enough to afford all associated costs. 

Cash-out refinance

In a cash out refinance, the amount for your new loan will exceed the principal amount of the loan it is replacing. This allows borrowers to access extra cash through the refinance. The lender will determine the exact amount of cash you can receive. 

What This Means for You: If you seek a cash-out refinance, it’s important to remember that the interest rate is typically higher than that of a rate-and-term refinance, where the loan amount is the same as your first loan. 

Ceiling rate

The ceiling rate protects you as the borrower from an interest rate exceeding a specified amount. While there may be ceiling rates for fixed-rate mortgages, they are more commonly seen within the context of variable interest rate loans such as adjustable-rate mortgages. In this context, the ceiling rate establishes the highest interest rate a lender can charge you in a given adjustment period. 

What This Means for You: Ceiling rates are a good thing for you as a borrower. They help insulate you from interest rate risk, where rates rise exponentially and as such, your variable-rate mortgage spikes to an unfair amount in a short period of time. 

Certificate of eligibility

An important document that confirms the veteran or active duty status of a borrower seeking a government-backed Veterans Affairs (VA) loan

What This Means for You: There are different requirements depending on your service status you’ll need to meet to attain a certificate of eligibility. As outlined by the VA, active duty service members will need a statement of service signed by a commanding or personnel officer. For veterans, you will need discharge or separation papers to confirm veteran status. National guard, reserve and other members may have different requirements to attain a certificate of eligibility.  

Certificate of reasonable value (CRV)

Issued by the Department of Veterans Affairs, a CRV defines the maximum value of a loan offered by the VA for a given property. This number is established by an independent VA appraisal.

What This Means for You:  A CRV is a crucial document for those taking out a VA loan. Typically, if the CRV amount exceeds the cost of the property, that means the VA will grant a loan for the full purchase price of the property.

Certificate of title

A certificate of title is a statement that identifies the legal owner of a real property. 

What This Means for You: A certificate of title is an official government document, you can have titling companies or attorneys help you procure it. 

Chain of title

Much like the title history you’d find on a car, a chain of title identifies all events associated with a piece of land or a real property. This could include sales, foreclosures, defaults of the loan, and more. 

What This Means for You: The chain of title is a valuable piece of documentation that helps you get a clearer view on the history of a property. 

Clear title

Again similar to a car, a clean title means there are no disputes or legal challenges affecting a property, such as a lien. A home with a clean title is ready for legal sale. 

What This Means for You: If a property doesn’t have a clean title, proceed with caution and speak to both a mortgage broker and an attorney before attempting to move forward with purchasing the property. 

Close

A crucial step in your mortgage process, the Close is when your loan is finalized and your documents are signed. 

Typically, the right of rescission period lasts three days, and funds may not be available until after that period passes. This is the period when you have the option to rescind the loan agreement. 

What This Means for You: Many details of the process for how you Close can differ based on the property or transaction type. Always confer with your broker and lender to ensure you understand every piece of the contract and your rights to rescind before signing. 

Closed

When an item is Closed, you do not need to take any more action on that item. 

What This Means for You: This could refer to your completion status during different steps of the mortgage process. 

Closing

Closing on a mortgage centers around when you and all the associated parties with a loan meet and sign all necessary documents. See also: settlement.

What This Means for You: This is one of the final steps in your mortgage process. Ensure all the necessary information is lined up for a successful closing. 

Closing costs

Closing costs are all of the fees and other costs you have to pay when closing on a loan. As highlighted by Investopedia, closing costs typically range from 3-6% of a home’s purchase price. Some items that may be a part of closing costs include: attorney’s fees, titling fees, appraisal fees, discount points, and mortgage insurance among other charges as well. Closing costs can be a significant chunk of change and they are vital to plan for. 

What This Means to You: For buyers in Maryland, expect to pay a hefty sum in closing costs. Maryland averages $11,876 for closing costs, one of the highest in the county. Be aware that certain items such as homeowners insurance, escrow payments, and property taxes are not calculated into your closing costs. 

Closing date

The date when your closing documents are signed. Mark it on your calendar!

Closing Disclosure (CD)

A crucial document for your closing process. It discloses all of the information on the procedures of your closing and terms of your loan, such as purchase price, interest rate, loan term, an estimate of insurance and property tax costs, closing costs, and other information. 

​​What This Means for You: Your Closing Disclosure is one of the most important documents in the mortgage process. It outlines everything you’re agreeing to before closing on a loan. To ensure you have enough time to process all the information, there is the important Closing Disclosure 3-day rule. This means you will have at least three days at minimum to fully review your Closing Disclosure before you sign. 

Closing statement

A document identifying the final details of a real estate transaction. It will list all of the costs, and identify the buyers and sellers. 

What This Means for You: Your closing statement is a useful document you should keep for your records. 

Co-borrower

An additional borrower that signs onto a loan agreement, and thus assumes equal responsibility for repayment of the loan.

What This Means for You: Co-borrower scenarios are common in the instance of married companies that want to have equal share of the loan responsibility, but there are other scenarios where co-borrowing may be common as well. 

Coinsurance

In the realm of property ownership, coinsurance refers to the provision included in some home insurance policies that owners have their property insured to its full value, or close to its full value. 

What This Means for You: If you fail to insure your property to the satisfactory amount, you may be subjected to fees by the property insurance company. 

Collateral

This term refers to assets you as the borrower use to secure the terms of loan in the event of a failure to pay. These assets can be anything, including a home, car, business properties or equipment, and more. 

What This Means for You: The most common form of collateral you encounter is the home you are purchasing. If you default on your loan (fail to pay), your loaning institution will enter into a process called foreclosure, where they take control of your home and auction it off to a new buyer. It’s crucial to always make your mortgage payments. If you struggle with making payments, inquire about mortgage assistance from the federal or state government. 

Collection

The process of an agency attempting to collect on delinquent loan payments or other bills.

What This Means for You: Often when a bill or loan goes to collection, the original institution that controlled it has outsourced the delinquent payment to a debt collection agency who’s sole goal is to collect these delinquent payments. Avoid the hassle of collections by paying bills on time. 

Combination Loan

Combination loans are two loans granted to the same borrower from the same institution. Combination loans may serve different purposes, for instance a loan to fund the construction of a new home and then the loan for the purchase of that home. Othertimes, combination loans are used for borrowers who can’t afford the 20% down payment on a property.

What This Means for You: Combination loans may benefit borrowers in certain situations, and they may also be disadvantageous for other borrowers. Always consult with your broker and lender to get a clear view of what options fit your own needs best. 

Combined liens

The accumulated remaining balance of all mortgage transactions on a property. Combined liens can be used to determine a property’s value during an appraisal. 

What This Means for You: It’s important to ensure you have access to as much documentation as possible for a given property before moving forward with any transaction involving it. 

Combined loan-to-value ratio (CLTV)

The ratio of all loans associated with a property against its principal value. It is an effective way for lenders to help determine a buyers risk of default when issuing multiple loans on one single property. 

What This Means for You: Lenders use a few different methods to determine your CLTV, including the amount left on your original loan, and the drawn amount on a home equity line of credit. 

Commitment letter

An official letter from a mortgage lender stating that you have been approved for a loan. This letter is delivered after an approval process, and while it is not a guarantee of a loan, it is an identification that you qualify.

What This Means for You: Commitment letters are important because they can be furnished to sellers to show your financial capability to purchase, giving you a leg up over non-approved buyers shopping for the same home, and allowing you to move forward with the purchase process. 

Comparables (comps)

Comparable properties to the one you intend to sell, typically similar in location, size, amenities, and more. Comps are used to help determine a reasonable price to list the home on the market. 

What This Means for You: Comps help real estate agents value your home. Finding relevant comps is a useful step in the selling process. 

Compound interest

Roughly, interest earned on interest. Specifically a type of investment account where you earn interest that grows or compounds over time as opposed to simple interest where you only earn interest on the principal loan amount. 

What This Means For You: Compound interest can be a great way to earn additional money from an investment. 

Conforming loan

Mortgages that meet the standard guidelines of Fannie Mae or Freddie Mac. This is so the loans, following underwriting and funding, can be securitized and sold on the investor market. 

What This Means For You: Conforming loans may have more stringent requirements to meet than non-conforming loans, especially in terms of items like debt-to-income ratio (DTI) and credit score, but they also may allow you to pay less mortgage insurance or for a shorter period of time, saving you money over the lifespan of the loan. 

Construction loan

Short term, high-interest loans that help fund the new build of a residential home. Lenders make payment directly to builders during the progression of construction.

What This Means for You: Construction loans typically only last one year, so it’s important that you work with a builder that can keep the project on track. 

Contingency

Sometimes known as a contingency clause is a stipulation that requires a property to be purchased within an amount of time specified by the home seller. The period typically lasts 30-60 days. A contingency helps ensure that a property can be returned to the market if you can’t secure a loan in time. 

What This Means for You:

Contractual Payment

A contractual payment is simply the amount you’ve agreed to pay each month for your mortgage as outlined in your loan contract. You’ll pay the contractual payment every month over the agreed term (time of a loan). 

What This Means for You: A contractual payment is presented as a total number, but may include payments for several different aspects of the mortgage loan including paying on the principal, the interest, homeowners insurance, tax, and mortgage insurance if applicable to you. 

Conventional loan

A conventional loan is one not backed by a government agency as opposed to a non-conventional or government backed loan. Most standard loans you take out from private lenders will be conventional loans. If you however have an FHA, VA, or USDA loan, among others, you instead have a government-backed loan. 

What This Means for You: Conventional loans can be divided into conforming and non-conforming loans. Conforming loans meet the standards set by Fannie Mae and Freddie Mac and can be securitized and sold on the mortgage investment market. 

Convertible ARM

A type of adjustable-rate mortgage where you as the borrower may have the option to convert the loan to a fixed-rate mortgage under certain conditions.

What This Means for You: To confirm this possibility, it’s important to inquire about a convertibility clause within your ARM agreement. 

Conveyance 

Conveyance is the process of transferring ownership of a property to another party via its title and deed. 

What This Means for You: Conveyance may crop up in a number of circumstances, most commonly when buying and selling a property but also in cases such as a family death and more. An instrument of conveyance (a title, deed, or contract) is the legal document used to facilitate and legitimize this process. 

Co-signer

As a opposed to a co-borrower, a co-signer assumes equal responsibility for repayment of a loan, but does not reap the equity built by the loan. 

What This Means for You: Most commonly, you’ll encounter co-signing in scenarios where a parent co-signs for a child who does not currently have the right financial portfolio to secure a loan on their own. 

Cost of Funds Index (COFI)

An index that is utilized to determine the benchmark for interest rates that apply to variable-rate mortgages such as for adjustable-rate mortgages.

What This Means for You: As outlined by Freddie Mac, the COFI is “calculated ​​as the sum of the monthly average interest rates for marketable Treasury bills and for marketable Treasury notes, divided by two, and rounded to three decimal places.”

Covenant

An agreement made within a mortgage or home loan that stipulates how the property can be used, typically barring certain uses under the threat of foreclosure. 

What This Means for You: Always check mortgage or deed agreements for covenants. They’re usually set out by neighborhoods or communities. Please keep in mind that discriminatory covenants (barring homeownership on the basis of race, religion, gender identity, or national origin) are illegal, and if you encounter a home with a discriminatory covenant, it’s important to report it to your local housing authority. 

Credit bureau

Credit bureaus collect and aggregate your credit information to generate reports and a credit score. This information is used by lenders to determine your creditworthiness and ability to repay loans. There are three major reporting agencies: Equifax, Experian, and TransUnion.

What This Means for You: Each year, you are entitled to one free credit report from each of the three major reporting bureaus. To get yours, simply go to https://www.annualcreditreport.com/index.action

Credit limit

The maximum amount an institution can lend to you on one line of credit. 

What This Means for You: Your credit limit is a useful way of determining the max loan you’ll be able to afford from any given institution. 

Credit monitoring service

Credit monitoring helps you keep track of activity on your credit cards and credit accounts to monitor for fraudulent activity. 

What This Means for You: Credit monitoring is an essential part of ensuring your credit health stays where it needs to be. 

Credit report

Your credit report is a record of your credit transactions, debt payments, and any other details associated with your credit It is a valuable way a lender will determine your creditworthiness and ability to repay your loan. 

What This Means for You: Monitoring your credit report is a great way to keep track of your financial health and spot problem areas that need addressing before you take on a loan.

Credit risk

Credit risk is assessed from a lender as the likelihood that you as the borrower will not be able to repay your loan as agreed. 

What This Means for You: Speak with your bank, broker, and lender about ways to lower your credit risk and help ensure you will appear to lenders as a borrower.

Credit score

Your credit score is an aggregated number used to identify your trustworthiness as a borrower. Credit scores take into account a variety of factors, including paying your credit bills on time, paying off debt, and the frequency of loans you take out.

What This Means for You: There are a variety of ways you can lower your credit score, from consolidating debt to scheduling automatic payments for your monthly credit bills. 

Creditor

The entity to which offers credit to you, or is considered the person or entity to which you owe money.

What This Means for You: Creditors come in all varieties, from banks and lenders to credit card companies and in-house lenders.

Creditworthiness

Your estimated ability to repay a loan to a lending institution.

What This Means for You: Creditworthiness factors in several elements, including your credit score, to make a determination about your likelihood to repay your loan. 

Curtailment

Curtailment payments are extra payments you make on your loan to help reduce the principal amount of your loan, and in turn lower the interest over time. 

What This Means for You: Always check to see if prepayment fees will apply for paying your mortgage off ahead of time. 

D

Debt consolidation

The process of consolidating loans into one debt payment. Debt consolidation is often used to eliminate high interest loans faster. 

What This Means for You: A common method for home owners is taking out a home equity line of credit because of its low interest rate and consolidating it with higher interest rates loans to reduce the overall interest rate. 

Debt-to-income ratio

Debt-to-income ratio (DTI) is a measurement of your cumulative monthly payments (for instance, insurance payments, student loan payments, car loan payments, medical debt payments) tallied against your monthly income. It’s a useful metric to see if you will be able to afford taking on a mortgage paymen.

What This Means for You: While the amount may vary by location and circumstance, the recommended DTI ratio is 36% or under for most buyers (meaning only 36% of your monthly income goes to existing payments). 

Deed 

A legal document that transfers ownership of a real property from the buyer to the seller. 

What This Means for You: The deed is the legal document that idenitifies your right to ownership, while titling is simply the process of acquiring a deed and the concept of ownership it instills. 

Deed of trust

An agreement signed at the closing of a mortgage loans stating you as the borrower agree to pay back the loan in full to the bank. 

What This Means for You: Deeds of trust are considered a “secured mortgage transaction,” and in some states they are used in place of traditional mortgages. 

Default

Defaulting on your loan results when you fail to make mortgage payments on time, or otherwise violate terms of the loan agreement. Defaulting has severe consequences, including foreclosure on your home and seizure by the bank. 

What This Means for You: Defaulting can be extremely detrimental to your long term financial health and having a foreclosure on record can affect your ability to get another home loan in the future. Pay your monthly payments on time to avoid defaulting. 

Delinquency

If you fail to make payments on time, the payment will be considered delinquent by the lender. 

What This Means for You: Delinquency can lead to defaulting on your loan, and set the stage for foreclosure to take place. 

Discount points

See: Points

Down payment

The amount you put down in cash on your home loan. Down payments are a requirement for most types of mortgages. While the amount needed to be put down ranges, commonly the benchmark is 20% of the total loan value. 

What This Means for You: While 20% is required for most conventional loans, many government-backed loan options help lower the down payment to make mortgages more accessible. FHA loans, for example typically have a down payment amount of 3.5% while many VA loans require no money down at all. 

Draw

In construction loans, a draw is when you take out an advanced payment from the loan to pay contractors working on the project. 

What This Means for You: Drawing may be necessary to keep construction projects on track and ensure workers are satisfied. 

Due-on-sale provision

A clause in some mortgage contracts stipulates that if the property you have a loan on is sold, the lender is owed full repayment of the loan. 

What This Means for You: On the other hand, assumable mortgages are mortgages where you are able to transfer over the loan to the buyer of the property.

E

Earnest money

Sometimes referred to as a good faith deposit, earnest money is cash put down as deposit on a property to show you are serious in your intentions to buy.

What This Means for You: Earnest money may not be necessary in every scenario, but is popular in competitive buying markets. The specific amount will depend on the real estate market you’re buying in. If you’re working with an agent, get their insight on if earnest money is necessary and how much you should put down. 

Encumbrance

Any type of lien, liability, or legislation that affects a property title and limits its usage or saleability in some way.

What This Means for You: Encumbrances are commonly thought of as a negative, however this is not universally the case. Nearly every property in the country is under an encumbrance of some kind. For instance, zoning laws that restrict residential properties from being used as commercial properties in certain areas are common. Mortgage liens result when you take out a mortgage as a home, restricting aspects of resale until you’ve repaid your loan. Other encumbrances, such as liens placed due to delinquent mortgage payments, are more serious. 

Equal Credit Opportunity Act (ECOA)

The ECOA is a federal law that aims to eliminate discriminatory lending practices, criminalizing the act of denying a loan or other types of credit to an individual on the basis of race, gender, sexual orientation, religion, or national origin. 

What This Means for You: Institutions that violate the ECOA may be prosecuted by the Department of Justice. The Consumer Financial Protection Bureau is responsible for enforcing compliance and investigating complaints of discriminatory lending practices.

Equity

Equity is the difference between what you owe on your mortgage and the fair market value of your home. Equity raises the more of your mortgage that you pay off, or if the value of your home increases. 

What This Means for You: Equity is one of the essential wealth building tools you have at your disposal. There are several ways you can use equity. You can use equity to access a larger down payment if you decide to move and purchase a home. A reverse mortgage allows you to save for retirement using your equity. And there are several loan options you can take to get cash on hand against your equity, such as a Home Equity Line of Credit (HELOC). 

Escrow

Escrow refers to funds held by a third party to protect the interests of both parties in a financial transaction until certain conditions are met or a certain amount of time has lapsed. 

What This Means for You: Escrow will be required for different aspects of most real estate transactions. 

Escrow account

An account created at no charge to you to hold escrow funds. Generally, there are two types of escrow accounts used for different purposes. The first is to hold your earnest money deposit on a home, and protect your interests in the event that the transaction falls through. The second type of escrow account is typically established for your home insurance and taxes. This is set up by the lender and you deposit each month into the account as part of your mortgage payments.

What This Means for You: When you deposit earnest money in an escrow account, the amount will be held until the transaction closes. On the day of closing, the funds will be released and applied towards your down payment. 

Escrow analysis

A period analysis to ensure that your escrow account retains the proper amount of funds to meet upcoming payments for insurance and property taxes.

What This Means for You: Escrow analysis helps ensure your escrow account is properly funded and that you’ll be able to make payments, helping you avoid possible non-payment fees. 

Escrow overage

An escrow overage occurs when you pay more than is necessary into your escrow account. Typically, this occurs when your mortgage company has miscalculated the cost of insurance and taxes. 

What This Means for You:  An escrow overage is greatly preferable to an escrow shortage, and when it occurs your mortgage lender will send you an overage check to make up the difference. 

Escrow shortage

An the opposite end from an overage, a shortage occurs when your account doesn’t have enough funds in it to meet your insurance and tax payments. Similarly to an overage, a shortage usually occurs due to a miscalculation by the mortgage company. It is much more common than an overage, as your taxes and insurance may be more than initially thought. 

What This Means for You: If you have an escrow shortage, reach out to your lender to determine the best course of action. Typically, you will have payment options to make up the shortage either in a lump sum or a monthly payment plan. 

See the How do you apply my home loan payment? FAQ in the Making mortgage payments section on our FAQ page.

F

Fair Credit Reporting Act (FCRA)

A federal law mandating that credit reporting agencies supply accurate, accessible credit information and requiring the provision for free annual credit reports. The law governs the conduct of credit reporting agencies.

What This Means for You: The FCRA helps protect you as a consumer, ensuring information is accurate when listed on your credit report, giving you the right to contest information you believe is inaccurate, and allowing you to access an annual report from each of the three major reporting agencies, Equifax, TransUnion, and and Experian. You can go to this website to access yours. 

Fair market value

The fair market value of your home is typically its selling price, assuming external factors and circumstances don’t affect the sale amount. To generate this number, an appraisal is required. 

What This Means for You: Remember that as the buyer, you’ll be responsible for appraisal fees and should be rolled into your buying budget. 

Fannie Mae

Federal National Mortgage Association is one of two federally established and backed mortgage companies. Fannie Mae, like Freddie Mac, does not originate its own loans. However, it does guarantee and back loans for the purpose of buying and selling them on the mortgage securities market. They help secure loans from financial institutions across the country, making loans more affordable as smaller lenders assume less risk. 

What This Means for You: Loans that are available to be backed by Fannie Mae or Freddie Mac are called conforming loans, and while they may have more stringent requirements to qualify for, conforming loans typically come with lower interest rates. 

Federal Housing Administration (FHA)

An agency of the Department of Housing and Urban Development, the FHA provides a variety of mortgage services. Their main responsibility is to provide mortgage insurance on loans made by FHA-approved lenders. These loans are known as FHA loans, and are a form of government backed loans. 

What This Means for You: FHA loans can be a great option for buyers, especially first time buyers who may struggle to come up with a full 20% of the purchase price for a down payment. 

Fee Simple

A fee simple is a term that refers to a property owner’s complete and total ownership of a piece of land. This is a technical term you may encounter during the mortgage process. 

What This Means for You: In the case of fee simple, you have the right to sell or pass down the property however you like. However, despite total ownership of the property, you are still subject to government rules regarding taxes, land use, etc. Fee simple can help understand the difference between a property with a loan on it vs. one that is fully paid off. 

FHA home loan

FHA loans are insured by the Federal Housing Administration, and are intended to help give more access to borrowers for whom large down payments and stringent loan qualifications may make home buying inaccessible. 

What This Means for You: If you qualify, FHA loans allow you to purchase a how with a downpayment as little as 3.5%. Credit score requirements are also lower than many conventional loan options. On the other hand, FHA loans do have caps on how much you can take out based on a lending ceiling set by the FHA. The market where the property is located, and property type, all affect how large the loan can be. 

FICO®

The Fair Isaac Corporation is well known for utilizing a formula to analyze credit worthiness. This is commonly know as your FICO score,  which can range between a low of 300 and a high of 850. When your rate is higher, you are considered a more attractive borrower. Your credit score can be raised by paying credit bills on time, making loan payments on time, and not taking out too many loans simultaneously.

What This Means for You: Your credit score is a crucial factor in analyzing your worthiness as a borrower. Ensuring you make payments on time will help raise your credit and allow you to access a better loan.

Finance charge

A finance charge (for instance an interest rate), that is assessed to you as the borrower when accessing the credit of a financial institution.

What This Means for You: The Truth In Lending Act requires all lenders to disclosure a full list of fees, including finance charges. 

Fixed-rate mortgage

A mortgage where your interest rate stays the same over the life of the loan. Fixed-rate mortgages are the most common form of mortgage loan, and come with different terms (or lengths of time). These can include 15, 25, or 30 year mortgages, which are the most common.

What This Means for You: Fixed-rate mortgages are a more stable alternative to adjustable-rate mortgages, where your interest rate goes through periods of adjustment based off the current market rate. 

Fixed-rate option (Fixed-Rate Loan Option)

An option available for some Home Equity Line of Credit (HELOC) loans where you may be able to lock in fixed rate for an additional fee. 

What This Means for You: As opposed to a traditional HELOC, when you have a fixed-rate option you aren’t shut off from access to additional credit. 

Floating rate

Also known as a variable rate or adjustable rate, a floating rate is a type of loan where your interest rate will go through adjustment periods. During these adjustment periods, your interest will be raised or lowered depending on market conditions. There are caps that determine how high or low a floating rate can vary in any given adjustment period. 

What This Means for You: Floating rate mortgages may benefit certain scenarios, while being less advantageous for others. They work better for short term loans or when you plan to sell in the near future so you can take advantage of low rates within the market. 

Flood certification

Also called a flood determination and certification, this is a document that determines whether or not a property is located within a FEMA-designated flood zone or not.

What This Means for You: Depending on the determination, a flood certification may lower the property value, or require you to pay more in insurance fees to protect from possible flood damage. 

Flood insurance

Insurance purchased to protect from possible flood damage. In federally identified flood hazard zones, flood insurance is often a legal requirement for property ownership. 

What This Means for You: It’s important to consult with your realtor and mortgage broker if purchasing a house in a flood hazard zone is a good investment. Flood zones may 

Forbearance and forebearance agreements 

If a short-term crisis affects your ability to make mortgage payments, you may into enter forbearance, or a forbearance agreement. During forbearance, your payment amount may be reduced or paused. When you enter into a forbearance agreement, your lender agrees to not take legal action, such as a foreclosure, against your property in exchange for a payment plan or structure to bring your current on your mortgage payments over time.

What This Means for You: While payments may be paused, it’s important to remember that interest will still accrue during forbearance. 

Foreclosure

Foreclosure may occur when you default on your loan (fail to make payments). Foreclosure is a legal process that gives lenders the right to evict you and reclaim the home based on the unpaid loan. Foreclosures may make it more difficult to obtain a loan in the future. 

What This Means for You: On average, four payments are missed before foreclosure is initiated. However, this can vary greatly by lender, market, and other factors. Avoiding forclosure is crucial, so if you’re having trouble making payments discussing forbearance, government assistance, and deferred payments may be crucial. 

Forfeiture

Forfeiture of an asset occurs when you violate an obligation or legal agreement. 

What This Means for You: Forfeiture can result from several scenarios, including land use violations, violation of will terms, or as an agreement to avoid foreclosure, which is a more costly process for you and the lender. 

Form 1098

[skip to next word listed in the glossary]

A legal tax form that reports the amount of interest and points paid during the previous year.

Freddie Mac

The Federal Home Loan Mortgage Corporation is a government-established agency responsible for securitizing mortgages, as well as selling and buying them on the secondary mortgage market. They are one of two federally-founded companies that serves this role, along with Fannie Mae.

What This Means to You: Like Fannie Mae, Freddie Mac helps provide more affordable loans to you by securing loans from thousands of lenders across the country, providing them with more security and incentive to provide more affordable mortgages. 

Funding date

The official date when funds are released from a loan for the borrower to access. 

What This Means for You: Keeping track of your funding date will help you manage your mortgage closing process. 

G

Good faith estimate (GFE)

A detailed document your lender must provide you with when you apply for a reverse mortgage. It includes all estimated costs of the mortgage to give you an accurate estimate of mortgage expenses. 

What This Means for You: A good faith estimate does not require you to accept a loan offer. In fact, it is valuable to use your GFE to shop around for the best mortgage rate. 

Government loan

A loan insured through a federal agency to provide greater loan access for more Americans. Government-backed loans are insured through either the Federal Housing Administration, Department of Veterans Affairs, or the US Department of Agriculture. 

What This Means for You: Government-backed loans are designed to help buyers who may not qualify for traditional loans, or have trouble meeting down payment obligations. A primary hallmark of government backed loans is reduced down payments, such as a 3.5% down payment for FHA loans or nothing down for VA loans. 

Government National Mortgage Association (GNMA or Ginnie Mae)

Overseen by the Department of Housing and Urban Development, Ginnie Mae guarantees timely payments on mortgage-backed securities. Ginnie Mae helps stabilize the mortgage market and allow for more affordable housing across the nation.

What This Means for You: Unlike Fannie Mae or Freddie Mac, Ginnie Mae is managed directly by the US government to help ensure stability and availability of more affordable housing. 

H

Home equity line of credit (HELOC)

A second mortgage than can provide up to 85% of the equity amount in your home. To generate how much loan you can get, lenders will look at the current value of your home against what you currently still owe on your loan. The difference between these two numbers is your equity. HELOC’s typically have a 30 year term, with a 10 year draw period (where you can access funds) followed by a 20-year repayment period where you reimburse the lender.

What This Means for You: HELOCs are popular among homeowners looking to take on large home renovation projects. It’s important to weight the pros and cons of a HELOC, as it essentially serves as a second mortgage. Discuss with your broker and financial planner if a HELOC is a financially viable option for you. 

Homeowners insurance

Insurance that protects your home from natural disaster, house fire, and other damage. Homeowners insurance may also cover liability (if someone is injured in your home), theft and vandalism, and more. 

What This Means for You: Homeowners insurance is a crucial part of your home-owning journey, and is not something you should pass up on. While not required by law, in most circumstances you will be contractually obligated by your mortgage agreement to purchase homeowners insurance. This is so lenders can protect their investment in the event of a disaster.

House hacking: The process of purchasing an investment property, occupying a unit, and renting out the other units to tenants to mitigate your own mortgage costs and generate passive income. 

What This Means for You: House hacking has become a popular way for buyers to start their property investment journey as it both provides a place to live while providing long-term income. 

HUD

An acronym for the US Department of Housing and Urban Developement. This federal agency serves a variety of roles, from administering the Federal Housing Administration to overseeing Fannie Mae and Freddie Mac. 

What This Means from You: HUD provides a variety of housing services for US citizens, from providing low income housing to securing FHA loans so you can access lower borrowing standards and access lower down payment structures. 

I

Impound account

An account where escrow funds are placed by a lender.

What This Means for You: See impounding.

Impounding

The process of collecting and placing (or impounding) funds from a borrower into an escrow account by the lender. These funds are then used to pay property taxes and insurance costs on your home.

What This Means for You: Impound accounts and impounding typically costs you nothing, and is simply a safeguard set up by the lender to ensure there are enough funds to pay necessary taxes and insurance. 

Income

Any form of profit generated from wages, compensation, commission, dividends, investment income, or any other form of money you earn or generate. 

What This Means from You: Income is a key indicator of your ability to pay off your loan and is something lenders look thoroughly at. Having a consistent form of income is important to illustrating for lenders you will be able to sustain payments on your loan. 

Income property

See investment property. 

Index

In the mortgage industry, index refers to a benchmark rate used determine interest rates for adjustable or variable rate loans in a given adjustment period. 

What This Means for You: When you have an adjustable-rate mortgage, the you should keep an eye on the index rate so you can try to anticipate how your rates might change in a given adjustment period and plan for them. 

Inflation rate

A general increase in prices for goods and services over time, usually represented by a percentage. 

What This Means for You: Inflation can affect the cost of nearly everything, from consumer goods such as groceries to housing prices and services such as appraisal, inspection, and more. A variety of macro and microeconomic factors can affect inflation. 

Initial advance

The first advanced disbursement of funds from a loan.

What This Means for You:  Your initial advance may be funds that go towards your initial mortgage payments at closing. 

Initial draw amount

The initial amount you can draw from a Home Equity Line of Credit (HELOC) or construction loan at closing times.

What This Means for You: The initial draw amount will be negotiated directly with your lender. 

Initial rate

An opening rate for an adjustable-rate mortgage, sometimes called a teaser rate, that is lower than standard rate. This is offered as a means to incentivize you to sign on. 

What This Means for You: The initial rate may remain for a varied period of time, from a few months to a few years. It will be adjusted back to the higher mean rate during the first adjustment period. 

Inquiry

A credit check that appears on your credit report acknowledging that potential lenders have pulled your credit. 

What This Means for You: There is a misconception that all inquiries can adversely affect your credit score. However, soft credit inquiries for processes like pre-approval rarely do this. However, if you are having inquiries for multiple loan types at once, this may cause your score to drop as it is considered negative borrower behavior. 

Installment loan

A taken out in a lump sum and then repaid to the lender in installments. Technically, all mortgages are a form of installment loans where you have the purchase price of a house provided for you and you pay it back in monthly installments.  

What This Means for You: A variety of personal finance loans function as installment loans. 

Insurance

Insurance refers to the process of paying a third party a monthly fee to have them protect your assets in the event of accident, theft, or other adverse events. 

What This Means for You: Insurance can be purchased for a variety of investments, from cars and motorhomes to expensive electronics. In the real estate industry, mortgage lenders require you to purchase homeowners insurance to protect their investment in the property. 

Insurance binder

A temporary proof of coverage provided by an insurance company showing that you have purchased coverage for a potential home. An insurance binder is replaced by the actual policy once you close on a home.

What This Means for You: An insurance binder is helpful as it informs potential lenders that you have completed your obligation to acquire homeowners insurance. 

Insured mortgage

An insured mortgage protects the lender in the event that you default on your mortgage. 

What This Means for You: Some borrowers may confuse an insured mortgage with homeowners insurance, which protects your property in the event of disaster or accident. An insured mortgage, however, is for the benefit of the lender, not the borrower. 

Interest accrual rate

A rate at which interest accrues on the principal amount of a mortgage. 

What This Means for You: An interest accrual rate is primarily used to determine monthly payments you’ll make on your mortgage. 

Interest-only loan

A type of non-conforming loan where you as the borrower begin the loan term by only paying down on the interest of the loan. After this initial period, typically 5-10 years, you begin making payments on both the interest and the principal. 

What This Means for You: Because they are non-conforming (not backed by Freddie Mac or Fannie Mae), interest-only loans may be hard to come buy. Most typically also include a form of rate adjustment, where your interest rate may change after the locked-in interest only period you began the loan with. 

Interest rate

The annual amount a lender charges a borrower on the principal of their loan. Interest rates are typically expressed as a percentage. 

What This Means for You: Interest rates are one of the fundamental components of mortgage expenses. They can be thought of as the fee a lender charges you for access to their funds. Interest rates are influenced by a variety of market factors, and can go up and down from day to day, though they tend to follow general trends of raising or lowering. Most borrowers hope to buy when interest rates are low, but this also means the housing market is likely more competitive. Additionally, your creditworthiness and general finances affect the interest rates you can access. 

Interest rate cap

During adjustment periods for adjustable-rate and variable rate mortgages, an interest rate cap 

determines how high a mortgage rate can be raised. 

What This Means for You: The interest rate cap helps protect you as the borrower from facing an astronomical hike in your interest rate during a single adjustment period. The benchmark rate is determined by the mortgage market, so a rate cap serves to mitigate extenuating fluctuations that can happen.

Investment property

A property purchased for the specific purpose of generating passive income through tenancy. Investment properties are a growing method of wealth investment.

What This Means for You: Investment properties can be a single house rented out, or multi-family apartment buildings with hundreds of units. Like a traditional property, most investment properties require mortgage loans for buyers to afford. The terms and requirements of these loans may differ from those when you are seeking a house to live in. 

J

Jumbo loan

Jumbo loans are a type of non-conforming loan that exceed the loan limits set by the FHA. These loans are not able to be securitized or guaranteed by Freddie Mac or Fannie Mae. Because they’re non-conforming, jumbo loans are harder to get than traditional mortgages. 

What This Means for You: Primarily, jumbo loans are used to purchase luxury properties or to compete in highly competitive local markets. Because of their unique status, jumbo loans often come with different requirements to qualify for one, as well as unique stipulations within the loan agreement itself. 

K

No entries for this letter.

L

Liabilities

Your outstanding debts, whether short term (like a car loan) or long term (like a mortgage).

What This Means for You: Lenders will look at your outstanding liabilities to determine your debt-to-income ratio when applying for a mortgage. 

Liability insurance

See: Homeowners insurance

Lien

A legal term for a creditor or lender’s claim to your property for outstanding debts. 

What This Means for You: A lien can be either a neutral or bad thing. When you take out a mortgage, you will have a lien on your home until it is fully paid off with the lender. Liens entitle lenders to initiate foreclosure proceedings if you fail to make payments on time. 

Lien holder

The entity responsible for placing a lien on your property. 

What This Means for You: Commonly, your bank or lender will place the lien when it comes to a lien on your home. 

Lifetime adjustment cap

Similar to other adjustment caps, a lifetime adjustment cap dictates how high a rate can raise on during your loan. In this case, it doesn’t just determine the maximum during a given adjustment period but throughout the course of the entire loan term. 

What This Means for You: A lifetime adjustment cap helps protect you in the event that mortgage rates continue to rise. After a certain point, your rate will not be able to rise anymore for the life of the loan.

Line of credit

A line of credit is extended by a lender for a borrower to use, and is typically borrowed against the value (equity) of their home.

What This Means for You: Lines of credit are commonly seen in Home Equity Lines of Credit (HELOC), and are commonly used for home renovations or other similar ventures. 

Loan commitment

A formal document indicating that you of the borrower have agreed to the loan terms and commit to meet them under penalty of foreclosure. 

What This Means for You: A loan commitment is one of the final steps in your closing process, and indicates that you are ready to take on the loan. 

Loan Estimate (LE)

A standardized form intended to give you a transparent understanding of what kind of loan you may qualify for. You submit your name, income, social security number, property address, estimated property value and desired loan amount, and a lender is then required to deliver a loan estimate to you.

What This Means for You: Loan estimates are required to be standardized to reduce predatory or unscrupulous lending practices, and make it easier for you as the borrower to understand and compare loan offers.

Loan modification

A change applied to one or more aspects of a loan agreement.

What This Means for You: Either you or the lender may request loan modifications depending on the circumstances.

Loan origination

There are two ways this term is commonly used. The first is a more broad definition that applies to the complete process of a lender taking your application, and originating a loan option from the information you’ve given. The term is also used to discuss the role of mortgage brokers, who help originate loans from different lenders for you.

What This Means for You: Always be sure to get clarity on how the term is being used if you don’t understand the context in which its being given. 

Loan term

See: Term

Loan-to-value ratio (LTV)

A measure meant to compare the value between the amount of your mortgage and the appraised value of your home. When you put more down on your principal through a larger down payment, you have a lower loan to value ratio, which is considered a positive. 

What This Means for You: When you have a higher loan to value ratio, you may be required to purchase mortgage insurance, which can be costly. 

Lock period

A lock period determines the amount of time before closing a loan when you can lock in an interest rate. This allows you to have some leeway with which rate you may be able to lock in depending on the market. 

What This Means for You: The lock period rangers from lender to lender, but typically allows for 60-90 days to make your decision. 

M

Manufactured housing

A home that is constructed fully at a separate location and then moved to a new location. 

What This Means for You: While mobile homes are the most commonly thought of form of manufactured housing, not all manufactured homes are mobile and many “mobile homes” are too expensive to move once attached to water and electricity lines. 

Margin

Margin refers to the percentage points added or subtracted from a adjustable-rate mortgage during adjustment periods.

What This Means for You: Margin is expressed as a percentage for clarity on both sides. 

Maturity date

The final date at which your loan must be repaid, including the principal, interest, and fees. 

What This Means for You: While it may seem far away, it’s important to always keep an eye on your maturity date and stay on track for all payments to avoid any issues when that date arrives. 

Mobile home

See: Manufactured Home

Modular home

Modular homes are a cheaper home alternative, where the house is assembled on site from prefabricated pieces, and is made to appear like a custom new build home.

What This Means for You: Modular homes have grown more popular in some areas across the country thanks to their ease of construction. 

Mortgage

A legal document that indicates a loan agreement for a home between you and a lender. The lender provides up-front financing for you to purchase a home, and you pay this agreement off in installements over a set term. The most common mortgage is a 30-year fixed rate mortgage.

What This Means for You: While 30-year fixed-rate mortgages are the most common type of home loan, there are a vast number of options to explore with your broker and lender. 

Mortgage insurance

Mortgage insurance helps protect lenders from scenarios where a borrower defaults. Mortgage insurance is commonly required if you cannot pay 20% down on a loan.

What This Means for You: This can be the downside of government-backed loans. While they allow you to put less down, you will often be required to pay mortgage insurance. 

Mortgage points

See: Points

Mortgage type

Generally, there are three common types of loans you may encounter. The conventional loans come in two varieties, conforming and non-conforming. Conforming loans are the most common type of loan, and are able to be guaranteed and securitized by Fannie Mae and Freddie Mac. Conventional non-conforming loans are those that do not fit the standards Fannie Mae and Freddie Mac, and thus cannot be guaranteed. An example of these is a jumbo loan. This loan type can be more expensive because of the risk associated with it. The final category of loans are government-backed loans. These are loans insured by a federal agency, including FHA, VA, and USDA loans. Government-backed loans exists to help potential borrowers who may struggle to meet the requirements of a conventional loan, or cannot meet down payment standards.

What This Means for You: An advantage of working with a mortgage broker is that they can help you sift through the wide variety of loans out there, and guide you to the option that best fits your financial and buying needs. 

Multi-family property

Multi-family properties have multiple units where tenants can live. They can be duplexes, condo buildings, apartment buildings and more. 

What This Means for You: Multi-family properties are a good form of investment property for those looking to expand their portfolio into real estate. 

N

Negative amortization

If your monthly payments are not enough to also cover the full interest, you may experience negative amortization. This that the interest is added on to the loan, meaning the amount you owe will continue to increase because you are not reducing the interest.

What This Means for You: To avoid the costly effect of negative amortization, always try to ensure you have enough funds to cover your full monthly payments. 

No closing cost loan

A loan where you are not required to pay up front for closing costs on your closing date. Instead, the closing costs are added to the principal or interest of the loan and are paid off over time.

What This Means for You: If you’re struggling to meet all of the closing costs, it may be worth exploring a no closing cost loan with your lender. 

Nonconforming loan

See: Jumbo loan

Nonowner occupied

A property where the owner is not currently living or occupying. Usually used to differentiate types of rental properties.

What This Means for You: If you are a property investor, any property you own but do not occupy will be considered nonowner occupied. Some owners will purchase a property and live in it while renting other units out (see house hacking). 

Note

A legal document identifying the agreed upon terms between the borrower and lender for a mortgage agreement.

What This Means for You: Your mortgage note will include the necessary information about your loan and serves as a binding agreement between you and the lender. 

Note rate

The interest rate identified within the mortgage note.

What This Means for You: Your note rate will be the previously agreed upon interest rate for your mortgage. 

Notice of default

A formal written notice to a borrower that a default has occurred and that legal action may be taken.

O

Option ARM

An option adjustable-rate mortgage (ARM) allows borrowers to choose between several types of payments. Borrowers can choose between a 30-year full rate, a 15-year higher interest rate loan, or interest only payments.

What This Means for You: An option ARM may be a viable option if you want flexibility on how you pay off your loan. 

Origination

Origination refers to the process of your lender working with you to craft and deliver a mortgage loan. Alternatively, there are originators such as mortgage brokers who facilitate the origination process for you. 

What This Means for You: The mortgage process can be complicated which is why many borrowers choose to work with loan originators to help the navigate. 

Origination fee

A fee charged by a broker or lender institution for the process of origination. This cost is usually presented as a percentage of the mortgage amount. 

What This Means for You: Origination fees are yet another closing cost you need to prepare for and ensure you can meet when your closing date aririves. 

Owner-occupied

A property currently occupied by the owner of the property. 

What This Means for You: This may refer to investment properties where the owner also lives (house hacking) or simply refer to any home you own that you also occupy. 

P

Payment cap

A payment cap limits how much a monthly payment can be raised by during any given monthly payment period. They’re typically seen in conjunction with rate caps for adjustable-rate mortgages (ARMs) that cap how high a rate can raise annually or within a given adjustment period. 

What This Means for You: Payment caps help protect you in the event that rates skyrocket rapidly.

Payment change date

For borrowers that have an adjustable-rate mortgage, a given payment change date is when your rate will adjust. Typically your lender provides 30 days notice ahead of the change date to inform you of the incoming adjustment. 

What This Means for You: Paying attention to your payment change date is crucial to properly managing your mortgage payments and avoiding payment jumps your were unaware of. 

Per diem interest

The amount of interest accrued on a mortgage per day. 

What This Means for You: Typically, per diem interest is used to charge interest on the loan for the days in between your closing date and the official start date of the mortgage loan. Inquire with your lender about their per diem interest policies. 

PITI

An acronym for principal, interest, taxes and insurance. Sometimes called a monthly housing expense, this is a way to comprehensively understand the expenses you’ll have to pay on your home each month. 

What This Means for You: PITI can be a valuable way to budget for your home expenses, ensuring you cover all of your bases and understand your monthly payments. 

Points

Points (also called mortgage points) are fees you pay to a lender at closing to help lower your overall interest rate, often referred to as “buying down the rate.” Typically, each point costs 1% of the total mortgage. So, for a $500,000 loan, you’d pay $5,000 for one point.

What This Means for You: When you purchase a mortgage point, it usually lowers your overall interest rate by 0.25 percent. Points are advantageous because they help reduce the total interest that can accrue long term on your mortgage. 

Pre-approval

A starting process where a borrower submits financial information so that a lender can deliver an estimated loan amount they qualify for. This estimation will be listed in a Letter of Pre-Approval, which can be used to show sellers creditworthiness and your intention of moving forward with the purchase of a property.

What This Means for You: Pre-approval is a valuable tool for borrowers. It allows you to more accurately shop for homes by having a cursory understanding of the loan amount you may qualify for. However, it is important to remember that pre-approval is not a guarantee of a loan. 

Prearranged refinancing agreement

An agreement between a lender and a borrower where the lender agrees to incentives such as reduced mortgage costs on a later refinance transaction to make the initial mortgage more appealing.

What This Means for You: If you work with a lender that you like and trust, a prearranged refinancing agreement may be a good way to access a more affordable refinance down the line.

Preforeclosure sale

See: Short sale

Prepaid expenses

Expenses separate from closing costs paid ahead of time on your mortgage. These may include initial escrow deposit, homeowners insurance premium, real estate property taxes and mortgage interest.

What This Means for You: Buyers sometimes get prepaid expenses mixed up with closing costs. It’s always important to consult with your lender to ensure every fee is accounted for and listed ahead of time. 

Prepaid interest

Also called interim interest, prepaid interest accrues during the period between signing your loan and your first mortgage payment. 

What This Means for You: Prepaid interest is charged upfront by the lenders as part of your closing costs. 

Prepayment

A form of payment where you exceed the monthly payment, reducing the total principal amount to shorten a loan’s term and pay it off in fewer years. 

What This Means for You: Prepayment can be advantageous if you have the budget to make increased payments. However, be aware that depending how quickly you pay off your loan, you may be required to pay a prepayment penalty. 

Prepayment penalty

A penalty you may face for paying your mortgage off ahead of its agreed upon term (paying it off early). Prepayment penalties usually don’t kick in when you simply make higher monthly payments on occasion to reduce your overall principal. Instead, they’re usually seen when you pay off large portions of your mortgage at a single time.

What This Means for You: Not all mortgage lenders require pre-payment penalties. Check with each lender you’re interested in to see their prepayment penalty policy.

Prequalification

See: Pre-approval

Prime rate

An interest rate charged by banks when working with their “best” clients for loans. Best is defined by a borrower with an extremely low likelihood of default who thus represents a safer bet for the mortgage lender. 

What This Means for You: Generally, prime rates are the lowest amount of interest a lender is willing to charge a borrower, allowing the best qualified borrowers to access the most affordable rates. 

Principal & interest

These two terms will commonly appear in your mortgage discussions. Principal is the full amount of a mortgage loan you take out. Interest is a percentage of the principal over time as a sort of service fee from lenders for allowing you to access their funds.

What This Means for You: Paying down the principal can help reduce your interest as it reduces the total dollar amount the interest can be charged on, for instance a 3.85% average annual interest rate on a $500,000 loan vs. the same interest rate on a $400,000 loan. However, it is important to ensure you still pay 

Principal balance

The remaining balance of left on your mortgage. This number does not include interest or other fees. 

What This Means for You: Monitor your principal balance to get a good understanding of your loan timetable and analyze steps you can take to pay down the principal faster.

Principal payment

Each month, your mortgage payments go to both the principal and the interest. A principal payment refers to the part of your payment that lowers the principal amount. 

What This Means for You: Always keep in mind that the principal payment is only one part of what you will owe within a given month. 

Private mortgage insurance (PMI)

See: Mortgage insurance

Processing fee

A fee assessed by lenders for the act of processing loan agreements. 

What This Means for You: Processing fees can greatly vary depending on your particular lender. Always confer with your lender to get a full picture of all fees that are associated with your loan. 

Purchase agreement

An agreement between the buyer and seller of a property that outlines details of the property purchase including things like purchase price, title transfer details, date of the transaction, and more. 

What This Means for You: A purchase agreement is an important legal document that you will want to keep with your other mortgage documents. 

Q

Qualifying ratios

A method of calculating if a borrower qualifies for a loan from a financial institution as part of the underwriting process. Underwriting is the process of accepting liability on the part of the lender. A qualifying ratio uses different metrics such as debt-to-income ratios and the housing expense ratio to determine the viability of a given borrower.

What This Means for You: Qualifying ratios are one of the most important determinations in your loan eligibility. However, they’re generally made up of different information you will have already submitted to your lender throughout the application process. 

R

Rate

Also referred to as an interest rate, a rate is the amount of interest you are required to pay annually on the principal balance of your loan. It is expressed as a percentage of the total loan amount. 

What This Means for You: Rates come in different forms and functions. The most popular rate is called a fixed-rate, and is locked in when you sign your mortgage. Through the life of that mortgage, the interest rate you pay will be the same through the life of the loan. Alternatively, you may get an adjustable-rate or variable-rate mortgage, where the interest rate is locked for a shorter amount of time before interesting into a series of adjustment periods where the rate is matched to the current market rate. 

Rate cap

See: Interest rate cap

Rate lock

An agreement made between lender and borrower that your interest rate on your mortgage will not be changed between an offer and closing. Typically, rate locks can be made available for 30, 45, or 60 days depending on the lender and specific agreement. 

What This Means for You: While rate locks can be advantageous, there are some things you should consider. If your transaction ends up taking longer, you may need to pay a fee to extend the offer. Alternatively, if rates go down between your lock and closing date, you will still be obligated to sign at the agreed to rate. 

Rate reduction option loan

A form of a loan that hybridizes a fixed-rate mortgage with an adjustable-rate mortgage. In this loan, borrowers may be able to access a lower interest rate if average rates fall below a specific amount in a given year. You can then lock in this rate for the remainder of your loan. 

What This Means for You: Reduction-option loans are less common, but may still be worth considering if you believe the market is headed in a fortuitous direction. 

Real Estate Settlement Procedures Act (RESPA)

A federal law that requires proper disclosure of all information related to a settlement or closing agreement by the lender. It was enacted to help protect you as the buyer from untoward actions as well as hidden fees and provisions. 

What This Means for You: In addition to settlement and closing disclosures, lenders are also required to inform you of your rights under consumer protection laws, and limits excessive usage of escrow accounts. 

Reamortize

Sometimes called a mortgage recast, reamortization occurs when you pay a lump sum to bring your total principal down. Your lender may then reamortize the loan, where you have lower monthly payments because the principal has gone down but your interest rate and loan term remain the same. 

What This Means for You: Recasting your mortgage can help reduce monthly payments, but you should also ensure that you won’t be subject to any prepayment fees, which sometimes occur when you pay too much on your loan at once or when you pay off the total loan early. 

Recording fee

A charge, typically applied by a registrar of your local or county government. This fee is paid for the process of recording your real estate transaction, such as the change on a title or deed to a property. The person who conducts this process is called the recorder.

What This Means for You: While recording fees are typically significant, they should still be factored into your overall closing cost budget. 

Reduced documentation

A loan option for borrowers with non-traditional financial situations. Typically, you can acquire a reduced documentation loan when by providing some proof of income but not its source. In these scenarios, lenders tend to put a higher emphasis on credit score. 

What This Means for You: Typically, reduced documentation borrowers have non-traditional streams of income such as self-employment or investment-based incomes. 

Refinance

When you refinance, you utilize a new loan to pay off the balance of your existing loan, and take on a new loan term. Borrowers typically refinance to lower their overall monthly payments and shorten the remaining loan term. 

What This Means for You: Refinancing can be useful for a variety of scenarios. Typically, borrowers are interested in reducing monthly payments or loan term, but refinancing may also allow you to tap into home equity to assist with financial emergencies, or so you can fund remodeling projects.

Rehab Loan

Rehab loans allow borrowers to purchase dilapidated or damaged properties, and helps fund both the purchase and rehabilitation process of the property. 

What This Means for You: Unlike a fix-and-flip loan, intended for property investors, rehab loans are typically granted for borrowers who plan to occupy the property they plan to occupy or are currently occupying. Rehab loans may also be available in the form of refinancing, helping you cover the costs when a disaster or other situations have caused significant damage to your home. 

Repayment period

The given period you have to repay a loan back to the lender. This is typically established within the loan agreement and is typically called the “term.”

What This Means for You: Repayment periods can vary from loan to loan. Always communicate with your lender about what it means for you. 

Rescission

The cancellation of a mortgage contract. 

What This Means for You: Typically, you have a set period of time where you can cancel an agreement with a lender, though this may vary from institution to institution. 

Reserves

Money set aside by you as the borrower, separate from your down payment and closing costs, that can cover unforeseen expenses and financial circumstances. 

What This Means for You: Some lenders may require proof of reserves before proceeding with the lending process. The amount may vary but typically you’ll be required to have enough for at least two mortgage payments. 

Right of first refusal

An agreement between two parties where the seller of a property is required to give anothe party the first opportunity to purchase before offering it to other buyers. 

What This Means for You: The specific scenario where this situation occurs can vary widely by county or locality. One common scenario is that owners of rental properties may be required to offer tenants the opportunity to purchase a property before selling to other investors. 

Rural housing loan

Also called a USDA loan, rural housing loans are administered by the US Department of Agriculture and help provide loans to buyers who want to purchase properties in qualifying rural areas across the country. 

What This Means for You: Rural housing loans come with several incentives, such as lowered down payment requirements, for low to moderate income buyers who qualify. 

S

Second home

A secondary home, such as a vacation home, only occupied part time by an owner.

What This Means for You: Second homes may be subject to different mortgaging requirements due to the residency status of the owner. 

Secured loans

Loans where the borrower securitizes the loan through collateral assets, such as real estate, or vehicles. 

What This Means for You: Secured loans may make it easier to get lower interest rates. However, if you default on your loan, the lender can seize your securitized assets as collateral to cover the loan expenses. 

Security

When you take out a loan on a property, it serves as a security for lenders. If you fail to pay back your loan, they may foreclose on the property and resell it to recoup their investment. 

Settlement

The completion of an agreement for a property purchase which sets in motion loan funds to be distributed. 

What This Means for You: Always confer with your lender to better understand the period between settlement and when loans will be distributed.

Settlement agent

The person responsible for overseeing and finalizing the legal obligations of a settlement on a property.

What This Means for You: A settlement agent can be a number of different parties, but are usually attorneys that help ensure every legal statute of transferring property ownership is correctly met. 

Settlement costs

See: Closing costs

Short sale

An alternative sometimes offered to foreclosure. In this scenario, a lender allows a borrower to list the property that is being foreclosed on for sale as a form of loan repayment. In this scenario, the lender has agreed that the borrower has experienced financial hardship and thus is willing to accept less than the full loan amount in return. 

What This Means for You: Not all lenders accept short sale options. Speak with your lender about their short sale policies ahead of purchase. 

Single-family residence

A residence not integrated into any other structures, also known as a detached residence. Single-family homes often are built in specifically zoned areas where they are separated from commercial or multi-family housing units. 

What This Means for You: The type of residence you purchase may entitle it so specific purchase incentives depending on your area. 

Start rate

The first rate you’re given for an adjustable-rate mortgage (ARM). Typically, this rate is lower at the beginning to help incentivize you to sign on. Also called an intro rate.

What This Means for You: While the start rate can be tantalizing, keep in mind that after an adjustment period you may not have the same low rate. 

Swing loan

See: Bridge loan

T

Term

The lifetime of your loan, or in other words the total number of years you will be expected to pay off your mortgage. 

What This Means for You: Mortgage terms are one of the fundamental aspects of a mortgage agreement that you will be negotiating. The most common mortgage term is 30 years, which typically offers lower, more stable monthly payments. Another common term is 15 years, which is an accelerated schedule that typically requires higher monthly payments. 

Third-party fees

These fees are charged by external parties involved in the mortgage process, such as for appraisals or credit reports. 

What This Means for You: Third-party fees are an integral part of your closing costs, and should be factored into your total budget for closing. 

Title

A document that specifies ownership of a property. Titles are transferred during the purchase process to identify a change of ownership. 

What This Means for You: You may be responsible for the fees that come with changing the information on your title with your local recorder. 

Title company

A title company investigates the status of a property’s title and establishes if there are inconsistencies with its history.

What This Means for You: Finding a reputable title company is important to ensure a transparent and timely process. 

Title insurance

Title insurance helps protect you from inconsistencies or issues that may be discovered during the titling process. 

What This Means for You: When you have title insurance, the titling agency works to remedy problems that may arise. 

Total expense ratio

See: Debt-to-income ratio

Transaction fee

A fee that is applied when you draw on a line of credit. 

What This Means for You: Transaction fees can range by the type of lender or type of credit you’re currently accessing. 

Treasury index

See: Prime rate

Trustee

If you have a deed of trust as opposed to a mortgage, you will encounter a trustee. The trust is tasked with holding on to the title of your property until the mortgage is paid off.

What This Means for You: The trustee serves a vital role in the foreclosure process. When you are foreclosed upon with a deed of trust, the lender does not need to go through the courts to complete the foreclosure. 

Truth in Lending Act

A federal law intended to help protect borrowers from predatory or unfair lending practices. Primarily, it determines what information has to be disclosed by lenders and credit companies. Additionally, it illegalizes loan originators from receiving kickbacks for steering borrowers towards loan options with more unfavorable rates or stipulations. 

What This Means for You: The Truth in Lending Act is vital in protecting you from unfair lending practices. However, it does not govern the rates lenders are able to charge you. 

U

Unapplied Funds

If you don’t make full payments on your mortgage, the funds might instead be put into a separate part of your account as unapplied funds.


What This Means for You: If you’re making partial payments at a small time, you need to direct your lender to apply these funds to your account.

Underwriter

The underwriter is responsible for approving or denying your loan based off of the available information and the standards of the lender.

What This Means for You: Your underwriter holds an important role in the loan process. To meet lending standards, it’s important to confer with your broker to ensure you have all of the necessary information. 

Underwriting

The underwriter for your lender undergoes a process where they review and verify your assets, income, debt, and property details to make an educated decision about whether or not to grant you a loan. 

What This Means for You: The timetable for underwriting is partially determined by how quickly you are able to submit all of the necessary documentation needed for them to make their relationship. 

Uniform Residential Loan Application (1003)

This is a standardized form published by Fannie Mae and also utilized by Freddie Mac. Because of its high pedigree, this is the application form many lenders across the country utilize when you seek a loan. 

What This Means for You: While not required for every single mortgage type or from every lender, this will generally be the form you utilize when seeking a conforming loan. 

Unpaid Principal Balance

A portion of the loan that is outstanding to your lender, or in other words, the portion of your loan left to be paid back.

What This Means for You:  Your unpaid principal balance only represents one part of your outstanding mortgage payments, as it does not factor in interest still owed on that remaining balance. As such, it’s important to not get misled into thinking the unpaid principal balance is the only money left that you owe. 

Unsecured lines of credit

A form of credit loan not backed by collateral, such as a home or other asset. 

What This Means for You:  Because they don’t protect risk to the lender, unsecured lines of credit often come with much higher interest rates than secured lines of credit. 

Upfront costs

Costs you incur and are required to be paid at the start of your mortgage process. The most common form is an application fee. Some lenders may have you pay a portion of closing costs upfront, but this is less common. 

What This Means for You: Budgeting for a mortgage involves various stages where you must plan payments. Upfront costs are just one form of these charges outside of the expense associated with the loan itself. 

V

VA loan

A government-backed loan administered by the Department of Veterans Affairs that allows active-duty service members, veterans, and surviving spouses to get loans with small or no down payments.

What This Means for You: To prove your validity for a VA Loan, you must acquire a Certficate of Eligibility from the VA to deliver to your lender.  

Vacation home

A second property that is occupied by the owner for part of the year. Vacation homes are different from rental properties and not eligible for loans targeted specifically to investment properties. 

What This Means for You: While they are not considered income-generating properties, you may be able to rent out your vacation property for some of the year depending on local statutes. 

Variable rate

Also known as an adjustable rate, a variable rate applies to a specific type of loan where your interest rate will be locked into for a set amount of time, typically 3-5 years, before going through adjustment periods and fluctuating based on the market interest rate annually. 

What This Means for You: Variable rate loans can be advantageous for those hoping to acquire favorable rates when they’re low. However, they can also become expensive if rates rise during adjustment periods.

W

W-2

An annual tax form that outlines your earnings in a given year, as well as the taxes withheld by your employer. 

What This Means for You: Your W-2 is used in the mortgage process to verify your income for lenders, so it’s important to have addressed any inconsistencies you may believe are present. 

Walk-through

An inspection conducted prior to settlement of your contract that ensures the condition of the property has not been altered since the initial agreement. 

What This Means for You: Your final walkthrough is important, and should be conducted carefully to ensure you take into account every detail of the property’s condition. 

Windstorm insurance

A specialized kind of insurance sometimes contractually stipulated for properties in certain areas subjected to high winds, wind storms, and other similar hazards.

What This Means for You: When looking at homes in coastal areas especially, be sure to inquire about windstorm insurance requirements. 

X

No entries for this letter.

Y

Year-end statement

A statement that outlines your payments throughout the year that also identifies the outstanding balance on your loan. It records interest, points, and property taxes. 
What This Means for You: This statement is most commonly used to incorporate home payments into your annual tax filing.

Z

No terms for this letter.

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Preparing Your Home for a Spring Sale

You’ve probably heard that we’re currently experiencing a seller’s market. What this means is that as a seller, you have a lot of leverage when it comes to negotiating prices, fees, repairs, and more. In a seller’s market, you may be able to get above market rate for your home. And this prospect may only improve in spring when the seasonality of home buying kicks into full swing. If you’re ready to sell and move on to your next home, here are our tips to get your home ready for a spring sale.

Tip 1: Start Now

You don’t have to wait for the flowers to bloom and the weather to warm up to get your home ready for sale. In fact, one of the most important things you can do is get started right now so you stay ahead of the curve. Too many sellers wait until the last minute to begin taking care of their properties for sale. We recommend starting early, so you can be first on the market when the season kicks into full swing.

Tip 2: Depersonalization

One tip sellers sometimes struggle with is depersonalization. This is the process of removing or limiting personal effects you have around the house, including family photos or sentimental items that don’t necessarily add to the overall aesthetic of the home. The reason this recommendation is made is that buyers want to be able to imagine themselves making a life within your home. Person effects can negatively inhibit this desire. When preparing your home for a spring sale, depersonalization is a great starting point.

Tip 3: Weigh the Pros and Cons of Repairs

Typically when selling your home, it’s important to conduct all necessary repairs. We recommend you weigh the pros and cons of individual repairs and how they could affect your sale price. Minor fixes such as a leaking sink, chipping paint, or a drafty door may be in your best interest to replace if the price is right. However, within a seller’s market, larger ticket items may not be necessary if buyers are willing to eat some of the cost to get a home off the market faster. Meet with your real estate agent and weigh the pros and cons of the decisions and how they affect the marketability of your home for a spring sale.

Tip 4: Great Landscaping and Other Touches

One of the best things about selling in the spring is that you can lean into the natural beauty of the season to help boost the hominess and attractiveness of your home. Boosting the curb appeal of your home helps set the right expectations of buyers when coming in. Hiring professional landscapers can be more than worth the money, especially in spring when you’ll likely be competing with other well-landscaped homes. You can really lean into the seasonal theme once buyers move inside. For instance, using fresh spring flowers within the home and other botanical decorations can go a long way to bring the splendor of the season inside.

When preparing your home for a spring sale, it’s always important to start early, set your expectations, and be ready to work with buyers to achieve your mutual goals. When you’re ready to move on to your next home, contact the team at Federal Hill Mortgage for fantastic rates and an unbeatable team that will help you through every step of the process.