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Flood insurance
Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.
HUD1 Statement
Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing.
Cap
A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.
Balloon Mortgage
A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.
Fixed-rate mortgage
A mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
Discount point
Normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.
Down payment
The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.
Debt-to-income ratio
A comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.
Good faith estimate
An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.
Interest rate
The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
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