Missouri Mortgage Terms Glossary:
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- K
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1003 Form
A document required for all mortgage applications that includes the borrowerโs income, assets, and a description of the home. Also known as the uniform residential loan application (URLA).
Acceptance
An agreement to enter into a contract and be bound by the terms of the offer. In relation to mortgages, acceptance typically refers to the buyerโs offer on a home being accepted by the seller.
Acquisition costs
Costs of purchasing a property other than the purchase price. Examples may include attorney fees, title insurance, and lender fees.
Addendum
A document used to modify or add to the terms of a purchase agreement. It is typically used to document changes such as sales price adjustments, seller concession changes, or conditions related to short-sale transactions.
Balloon mortgage
A mortgage loan in which a large portion of the principal is repaid in a single payment at the end of the loan term.
Balloon payment
A large one-time payment due at the end of the mortgage term that pays off the remaining loan balance.
Bankruptcy
A legal proceeding in federal court in which a debtor seeks to restructure their obligations to creditors pursuant to the Bankruptcy Code. This generally affects the personโs personal liability for a mortgage debt, but not the lien securing the mortgage.
Basis point (BPS)
A unit of measurement used to indicate changes in interest rates. One basis point is equal to 0.01%.
Cash reserves
Extra money some lenders require borrowers to have available after loan closing to help ensure they can make the payments and keep the home.
Cash to close
Money the borrower will bring to the closing to pay the closing costs for getting a mortgage.
Cash-out refinance
A type of refinance that allows homeowners to use the equity in their home to take cash out by obtaining a new mortgage for more than they owe on their existing loan.
Certificate of occupancy
A document issued by a local municipality that indicates a building is suitable for occupancy.
Certificate of occupancy
A document issued by a local municipality that indicates a building is suitable for occupancy.
Change of circumstance (COC)
A situation that requires the lender to provide a revised loan estimate or closing disclosure before closing that describes any changes in fees or other loan terms.
Closing
The last step in buying and financing a home. The closing, also known as settlement, is when all parties in a mortgage loan transaction sign the necessary documents. After signing these documents, the borrower becomes responsible for the mortgage loan.
Default
The failure to satisfy the terms as agreed in a contract.
Deed
A legal document that conveys ownership of a property.
Delinquency
A loan payment that is past due.
Escrow
Funds a lender collects and holds in an account to pay real estate taxes, homeowners insurance, other periodic debts against the property and mortgage insurance (if applicable), on behalf of a borrower. Also known as impounds or reserves.
Equity
The difference between the market value of a home and the amount owed to the lender who holds the mortgage. If a homeowner sells their home, equity is the money they would receive after paying off the mortgage.
Escrow account
An account in which a lender holds escrow money on behalf of the borrower.
Fixed-rate mortgage
A mortgage loan with an interest rate and monthly principal and interest payment amount that remains the same for the life of the loan.
Flood certification
A document that indicates whether or not the subject property is located within a designated flood zone.
Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Gross income
Total income before any expenses are deducted.
Gift letter
A written explanation stating that money was given to a homebuyer, free and clear of any obligation to repay it, as a gift for the purchase of a house.
Government National Mortgage Association (GNMA)
Created in 1968 by an amendment to Title III of the National Housing Act (12 U.S.C 1716 et seq.). This federal government corporation guarantees securities backed by mortgages that are insured or guaranteed by other government agencies.
Hard credit pull
Typically, this is an inquiry by a lender to receive a borrower's official credit score as part of an application for credit. These checks can negatively impact the credit score and remain on a credit report for up to 2 years.
Hazard insurance
Protects a property owner against damage to a property due to certain hazards such as fire, severe storms or other natural events.
Homeowners association (HOA)
A private organization that manages and maintains a residential community, including most condominiums and planned developments. It enforces rules to protect property values, collects dues for upkeep of common areas and amenities, and is governed by an elected board of residents.
Index
A published interest rate, such as the prime rate, that lenders use to establish interest rates charged on mortgages.
Inspection
An objective and unbiased visual examination of the physical condition, structure and various systems of a property from the foundation to the roof.
Interest
The amount a borrower owes a lender for the use of borrowed money.
Jumbo loan
Also known as a non-conforming loan. The amount of the loan exceeds standards that would make it eligible for sale to Fannie Mae and Freddie Mac. Certain geographical areas have temporary conforming loan limits higher than typical conforming limits.
Joint tenancy
A property owned by more than one person, each with equal rights and obligations.
Judgment
Final determination by a court of law regarding the rights and claims of the parties to a legal action.
K
There are no commonly used glossary terms starting with the letter K in mortgage-specific terminology.
Late charge
The penalty a borrower must pay when a payment is made after its due date or courtesy period.
Lender-paid mortgage insurance (LPMI)
When the down payment is less than 20% of the homeโs value, the lender can pay the insurance costs upfront, in which its cost is included in the interest rate. This helps provide protection against financial loss.
Lien
A legal right granted by the owner of the property, by a law or otherwise acquired by a creditor. A lien serves to guarantee an underlying obligation, such as the repayment of a loan.
Mortgage
A type of loan specifically used to purchase real estate. Mortgages are typically repaid over 15 to 30 years. The monthly mortgage payment usually includes both principal loan payments and interest but may also include property taxes and homeowners insurance.
Mortgage loan originator
Someone who works with a borrower to complete a mortgage loan application or to negotiate its terms.
Mortgagee
The lender in a mortgage that is secured by real property.
Mortgage insurance
A policy that protects lenders by reducing their risk when providing loans, allowing borrowers to qualify for financing with a down payment of less than 20%. It is typically required for conventional, FHA and USDA loans.
Negative amortization
A loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of interest due. The unpaid interest is added to the principal balance.
Nationwide Mortgage Licensing System and Registry (NMLS)
A mortgage licensing system operated by state financial regulators. Its purpose is to streamline the licensing process, improve supervision and increase transparency in residential lending.
Non-conforming loan
A loan that doesnโt meet the guidelines established by Fannie Mae or Freddie Mac due to the loan amount, insufficient credit, underwriting guidelines or other factors.
Offer/purchase contract
An agreement between a buyer and seller of a property that states the price and terms of the sale. Also known as an agreement.
Origination
The entire process of working with a borrower to complete a mortgage, from application through underwriting to final loan closing.
Origination charge
Compensation (other than discount points) that the lender receives for processing a loan application and putting the loan in place.
Principal balance
The amount owed on a loan, not including interest, fees, or taxes.
Primary residence
The home the borrower(s) live in day-to-day. Typically, the property must be occupied for the majority of the year to be considered a primary residence.
Private mortgage insurance (PMI)
Insurance written by a private company that protects a mortgage lender against loss if the borrower defaults on the loan.
Processing
The act of ensuring that the loan application and supporting documentation are in order and ready to be reviewed by a lender.
Qualifying ratios
Guidelines used by lenders to determine how much money a person is qualified to borrow. The two main qualifying ratios are debt-to-income and the housing expense ratio.
Quitclaim deed
A legal document that releases a personโs interest, title or claim in a property.
Rate lock
An agreement between the borrower and lender that โlocks inโ the interest rate on a mortgage over a specified time.
Refinance
The process of obtaining a new mortgage to replace an existing one, often sought when interest rates drop to achieve lower monthly payments.
Rate buydown
This mortgage loan option reduces the borrowerโs interest rate for a set number of years (usually between 1โ3 years) at the start of the loan.
Satisfaction of mortgage
This lender-issued legal document verifies that a mortgage has been fully paid.
Seasoning period
The minimum time frame, typically 6โ12 months, that homeowners must wait after the close of the loan before refinancing.
Second mortgage
An additional mortgage taken out on a property while the current mortgage is still in effect.
Title insurance
Protects a buyer's or lenderโs financial interest in real property against loss due to title defects, liens or other matters.
Title search
Reviewing documents evidencing the history of a piece of real property to determine relevant interests in and regulations concerning that property.
Transfer tax
A transaction fee when the title of a property changes hands.
U.S. Department of Agriculture (USDA) home loan
A government-backed mortgage program offered by the USDA to assist low- to moderate-income borrowers in purchasing homes in rural and suburban areas.
Underwriting
The process of deciding whether a loan should be approved or denied. It requires the verification of a borrowerโs information and assessment of their creditworthiness.
Underwriter
Someone who reviews the application, documentation and property information before making a loan decision.
VA home loan
A home loan partially backed by the U.S. Department of Veterans Affairs (VA) and issued by private lenders, offering benefits like no down payment, no mortgage insurance, and lower interest rates for veterans and their families.
Variable rate
An interest rate that changes periodically in relation to an index.
Warehouse lending
A line of credit given to a loan originator to pay for a mortgage the borrower used to purchase a property. The life of the loan generally extends from its origination to the time it is sold into the secondary market, either directly or through securitization.
Zoning ordinance
Local laws that establish building codes and usage regulations for properties in a specified area. This creation of districts specifies different types of property uses, such as commercial or residential.
