Mortgages & Loans

A loan that "bridges" the gap in time between the purchase of a new residence and the sale of the borrower's current residence. The borrower's current residence is used as collateral and the money is used to close on the new residence before the current residence is sold. Some are structured so they completely pay off the old residence's first mortgage at the closing of the bridge loan, while others add on the new debt on top of the old debt. A bridge loan usually runs for a term of four to eight months.

A mortgage amortization schedule is a timetable for the periodic repayment of a mortgage loan. An amortization schedule indicates the amount of each payment that is applied to interest and principal. It also indicates the remaining balance after each payment is made.

The buydown option is a process of trading money for a lower mortgage interest rate. The borrower "buys down" the interest rate on a mortgage by paying additional discount points up front.
It is also a mortgage in which an initial, lump-sum payment is made to temporarily reduce a borrower's monthly payments during the first few years of a mortgage.

The mortgage debt to income ratio is the percentage of a person's monthly earnings used to pay off all debt obligations. Lenders usually consider two ratios when making a loan. The ratios are constructed in different ways. The first is called the front-end ratio. It is the ratio of the monthly housing expenses including principal, interest, property taxes and insurance and that amount is compared to the borrower's gross monthly income. The second is called the back-end ratio. It is when a borrower's other debts, such as auto loans and credit cards are taken into account. Lenders usually look at both ratios to determine an acceptable ratio. Some lending institutions take into account only the back-end ratio.

The mortgage loan to value ratio is the ratio of the mortgage loan amount to the property's appraised value or sales price, whichever is less. An example of this is if a residence is sold for $200,000 and the mortgage amount is $150,000, the house has a 75 percent loan to value ratio.

A mortgage "roll-in" loan option is a refinanced loan that rolls any of the closing costs or additional fees into the mortgage loan. Generally, this option best serves people who have a reasonable amount of equity and want to reduce their overall interest expense and plan to stay in their homes for the balance of their mortgage term.

Your house equity is the value of your homeowner's unencumbered interest in the house. Equity is the difference between the home's fair market value (FMV)and the unpaid balance of the mortgage and any outstanding liens. Equity increases as the mortgage is paid down over the years or as the property appreciates.

An escrow payment is the portion of a homeowner's monthly mortgage payment that is held by the loan provider to pay for taxes and insurance. It is also known as prepaid reserves. The loan provider holds the escrow funds in a separate account from the money identified to pay off the principal and interest.

Fannie Mae is the nickname for the Federal National Mortgage Association. It is a government-chartered, non-bank financial services company and is the nation's largest source of financing for home mortgages. It was started to make sure mortgage money is available in all areas of the country.