#1
What is an amortization schedule?
A table detailing periodic loan payments
ExplanationSchedule showing how much of each payment goes towards principal and interest.
#2
What does LTV stand for in real estate finance?
Loan-to-Value
ExplanationRatio representing the loan amount compared to the property's value.
#3
What is a lien in real estate?
A legal claim against a property for the satisfaction of a debt
ExplanationCreditor's right to hold or take ownership of a property until a debt is repaid.
#4
What does 'escrow' mean in real estate transactions?
A trust account held by a third party to manage funds during a transaction
ExplanationAccount used to hold funds temporarily, typically for property-related transactions.
#5
What does the term 'underwater' mean in real estate finance?
A property with a mortgage balance higher than its market value
ExplanationSituation where the property value is less than the outstanding mortgage.
#6
What is the purpose of a home appraisal in the mortgage process?
To determine the property's market value
ExplanationAssessment to establish the fair market value of a property.
#7
What is Private Mortgage Insurance (PMI)?
Insurance protecting the lender in case of borrower default
ExplanationInsurance required when the down payment is less than 20% of the property's value.
#8
What is a 'balloon payment' in real estate financing?
A lump-sum payment due at the end of a loan term
ExplanationLarge payment made at the end of a loan, typically after a series of smaller payments.
#9
What is a mortgage-backed security (MBS)?
A bond secured by a portfolio of mortgages
ExplanationInvestment backed by a pool of mortgages, providing cash flows to investors.
#10
What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage (ARM)?
Fixed-rate mortgages have constant interest rates, while ARMs have rates that can change over time
ExplanationInterest rates remain constant in fixed-rate mortgages, while they fluctuate in ARMs based on market conditions.
#11
What is a prepayment penalty in mortgage loans?
A fee charged for paying off the mortgage early
ExplanationCost incurred for settling a mortgage before its scheduled payoff date.
#12
What is a loan origination fee?
A fee paid to the lender for processing a loan application
ExplanationCharge for initiating a new loan, covering administrative costs.
#13
What is the debt-to-income ratio (DTI) used for in mortgage lending?
To evaluate the borrower's ability to repay the loan
ExplanationComparison of a borrower's debt payments to their gross income.