Mortgage Terms

A, B, C, D-E, F-G, H-K, L-M, N-Q, R-S, T-Z

 

Debt-to-Income Ratio
the ratio of a borrower's monthly payment obligation, divided by his or her monthly income. The ratio is expressed as a percentage and is used by lenders as a measure of eligibility for a loan. A front-end ratio compares all monthly housing expenses to the gross income. A back-end ratio also figures in other debts, such as auto loans and credit cards.

Deed
the legal document conveying title to a property.

Deed of Trust
a document, used in some states, given by the borrower to a third party (trustee) vesting title to the property in the trustee as security for the borrower's repayment of the mortgage loan.

Default
failure to make mortgage payments or violations other provisions of the mortgage note.

Discount Points
a type of point paid by the borrower that reduces the interest rate of the loan.

Down Payment
the lump sum paid to the seller when the property is purchased. This is usually 10 to 20 percent of the purchase price, although some loans may allow a lower down payment.

Earnest Money
a cash deposit paid by the buyer during negotiations to demonstrate serious interest in purchasing the property.

Equity
the difference between the fair market value of the property and the homeowner's mortgage debt. Equity increases as a mortgage is paid and/or the property appreciates.

Escrow
usually refers to an account set up by the lender in which money is held to pay taxes and insurance.

Escrow Payment
the portion homeowner's monthly payment held in trust by the lender to pay for taxes and insurance. Also known as "impounds" in some states.