3-Day Rule: a lender is required by law to give the borrower the Closing Disclosure (Pre) 3 days before closing, so they have plenty of time to go over the terms of their loan.

1031 Exchange: A way to defer or avoid paying capital gains taxes by investing the proceeds from the sale of an investment property for another new property of equal of higher value.

Adjustable-Rate Mortgage: If you’ve ever heard of 5/1 ARM or 7/1 ARM. The 1st number (5 & 7) represent how many years the interest rate is fixed for. The 2nd number (1) represents how often the interest rate adjusts after that: once per year. These rates are typically better than fixed rate mortgage.

Amortization: A breakdown of how much your payment is going towards paying down the principal and interest every month.

Annual Percentage Rate: Yearly loan cost, including interest and lender fees. The less fees you pay, the lower the APR.

Appraisal: A report to determine the current value of the home you’re buying based off of the  condition, comparable sales, upgrades, etc.

Area Median Income (AMI): A measurement used by government agencies and organizations to assess the income level of a specific geographic area: low-income, moderate-income, or higher-income – see Fannie Mae & Freddie Mac AMI tool.

Assets: Bank statements, 401k, stocks. Used to show proof-of-funds for down payment, closing costs, or reserves.

Asset Depletion Loan: A Non-QM Loan where your income is calculated based on your assets.

Bank Statement Loans: A Non-QM loan where the income is calculated by the deposits in your bank statements for the last 12 or 24 months and deducted by an expense factor based on your business. 

Bridge Loan: A short-term loan used when buying a new home before selling the current one. 

Buydown (Permanent): The process of buying your rate down for the life of the loan. You can qualify based off of this new rate.
Buydown (Temporary): The process of buying your rate down temporarily for 1-3 years. For example, in a 2/1 Buydown, your rate will be 2% less the 1st year, 1% less the 2nd year, and the quoted interest rate years 3-30. You must qualify off of the quoted rate, not the buydown.

California Housing Finance Agency (CalHFA): A California Organization that has supported the needs of low and moderate-income renters and homebuyers by providing financing and programs with a focus on equity

Closing Costs: Typically 3%-6% of the loan amount. Costs include: loan origination fees, title fees, recording fees, prepaids, escrow account, among other things.

Closing Disclosure (Pre): An estimated breakdown of your loan numbers including the fees. To prevent any delays with closing, sign this document as soon as possible to start the 3-day rule.
Closing Disclosure (Final): A finalized breakdown of your loan numbers including the fees. Your loan has been balanced with the Title company.

Contingency (Appraisal): Ensures the property is valued at or above the purchase price; may trigger renegotiation.
Contingency (Home Sale): Allows the buyer to proceed only if they successfully sell their current home.
Contingency (Inspection): Allows the buyer to hire professionals to inspect the property and request seller credits or repairs if needed.
Contingency (Loan): Ensures the buyer’s loan approval is obtained before proceeding with the sale.
Contingency (Sale of Other Property): Gives the buyer time to sell another property they own before finalizing the purchase.

Conventional Loan: A mortgage that is not insured or guaranteed by a government agency, but backed solely by the lending institution or private investors.

Debt-to-Income Ratio (front): ONLY the mortgage payment divided by your gross income.
Debt-to-Income Ratio (back): the sum of all your monthly debt including the mortgage divided by your gross income.

Debt Service Coverage Ratio (DSCR) Loan: A Non-QM Loan where no employment or income is required. So long as the rent covers most, if not, all of the mortgage payment, the loan can be done. 

Discount Points: Really ask your loan officer what this cost is for. I do not charge discount points, unless it’s needed to get the loan through by buying down the interest rate. However, some people will charge discount points to increase their commission. 

Down Payment: The amount of money you are putting towards the home you’re buying.

Earnest Money Deposit (EMD): The amount of money you have agreed to deposit to show you are committed to buying the home. You can still get this money back by keeping your contingencies.

Escrow Account: AKA: Impound account. An account created by the lender to hold your funds that will be used towards paying your property taxes and and homeowner’s insurance when it comes due.
Can you open escrow?: A notification to the Title company to start all title-related processes. 
We’re in escrow: A fancy way of saying we’re in contract.
Escrow Waiver: When a borrower declines to open an escrow account and would rather pay the property taxes and insurance on their own.

Equity: The difference between your loan balance and your home value. Example: your loan balance is $300,000 and your home value is $450,000. Your equity is $150,000.

FHA Loan: A mortgage loan insured by the Federal Housing Administration. 

Fire Insurance: If you’re in a high risk fire zone, some lenders may require you to purchase fire insurance to assist with the rebuild of your home in the event it is burned down.

Fixed-Rate Mortgage: Loan with a constant interest rate. 

Flood Insurance: If the house your buying is in a flood zone, you will have to get flood insurance. To find out if the home is in a flood zone or not, visit the FEMA website.

Home Equity Line of Credit (HELOC): a credit card using your house as collateral. Unlike a home equity loan, your rate is variable & you only pay on what you borrower. 
Home Equity Loan: an upfront loan using your house as collateral. Unlike a HELOC, your rate can be fixed & you pay based off of the full amount that you were given.

Home Inspection: Examination of a home’s condition to identify issues. If there are any big issues identified on the report, you can re-negotiate or back out of your contract and get your EMD back.

Homeowners Association (HOA): An organization that establishes & enforces rules and collects fees for property maintenance and amenities.  

Homeowners Insurance: Protection against damages to the home.

Jumbo Loans: A Non-QM Loan where the loan amount exceeds conventional loan limits.

Loan Estimate: A disclosure of of your loan information.

Loan Term: Length of time you’ll pay the loan – 30 years, 20 years, 15 years, etc.

Loan-To-Value (LTV): your loan balance divided by your home’s value is your Loan-To-Value, expressed as a percentage.. Example: your home is worth $500k and you owe $400k. Your LTV is 80%. 

Mello-Roos: Additional taxes you’ll have to pay, on top of property taxes, that’s used to fund public infrastructure in growing areas. Mainly charged in new-construction homes.

Mortgage Insurance Premium (MIP): monthly insurance payments that’s added to your mortgage payment in an FHA loan.

Non-Qualified Mortgage Loans: Mortgage loans that do not meet the standards set by Fannie Mae or Freddie Mac.

PITI: Principal Interest Taxes Insurance

Pre-Approval Letter: Document showing how much you can borrow. A realtor will require this document prior to showing you homes.

Pre-Qualification Letter: Document showing how much we think you’ll qualify based off of what you tell us verbally. A realtor may not accept this document.

Private Mortgage Insurance (PMI): monthly mortgage insurance payments that’s added your mortgage payment in a Conventional loan.

Property Taxes: Taxes you pay for owning a home to help fund public necessities & community development projects.

Property Type: Single Family Home (SFR), Planned Unit Development (PUD), Condo, Multi-Family Home, Manufactured Home.

Real Estate Agent: Professional helping you buy or sell a home. 

Refinance (Rate & Term): replacing an existing loan with a new loan without taking any equity.
Refinance (Cash-Out): replacing an existing loan or creating a new loan to pull out equity.

Seller Concessions: The amount of money you have negotiated the seller provide you, from the proceeds of their sale, to cover your closing costs or buydowns.

Underwriter: The person who will review your application and documentation to determine if you qualify for a mortgage loan.

Upfront Mortgage Insurance Premium (UFMIP): An upfront fee paid by borrowers for using an FHA Loan. The fee is 1.75% of your loan amount and can be financed into your loan.

USDA Loan: A mortgage loan guaranteed by the U.S. Department of Agriculture’s Rural Development Program.

VA Funding Fee: A one-time fee paid by borrowers for using a VA loan. This fee is waived if you are a disabled veteran.

VA Loan: A mortgage loan guaranteed by the U.S. Department of Veterans Affairs and is available to to eligible veterans, active-duty service members, and certain members of the National Guard & Reserves, as well as some surviving spouses. 

Variable Income: Earnings that are not fixed and will require two years of earnings to utilize in their income calculation. Example: part-time income, bonus, commission, overtime, gratuities, self-employed income, & investment income.