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Mortgage Glossary Terms: H-L

May 12th, 2004 · No Comments

Hazard Insurance – A form of insurance in which the insurance company protects the insured from specified losses, such as fire, windstorm and the like, it would not cover earthquake, riot, or flood damage.

Homestead – The dwelling (house and contiguous land) of the head of the family. Some states grant statutory exemptions, protecting homestead property (usually to a set maximum amount) against the rights of the creditors. Property tax exemptions are also available in some states.

Housing Expenses-to-Income Ratio – The ratio, expressed as a percentage, which results when a borrower’s housing expenses are divided by his/her net effective income (FHA/VA loans) or gross monthly income (Conventional loans).

Impound – That portion of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due. Also known as reserves.

Index – A published interest rate against which lenders measure the difference between the current interest rate on an adjustable rate mortgage and that earned by other investments (such as one- three-, and five-year U.S. Treasury Security yields, the monthly average interest rate on loans closed by savings and loan institutions, and the monthly average Costs-of-Funds incurred by savings and loans), which is then used to adjust the interest rate on an adjustable mortgage up or down.

Interest Bearing – A form of interest calculation where the loan is charged at a daily or monthly rate (1/365 or 1/12 of the annual interest rate) on the current outstanding balance.

Investor – Money source for a lender.

Joint Tenants – A form of holding title where the owners have 100% rights of survivorship unless redirected by a will.

Jumbo Loan – A loan which is larger (more than $300,700) than the limits set by the Federal National Mortgage Association and the Federal Home Loan Mortgage Corporation. Because jumbo loans cannot be funded by these two agencies, they usually carry a higher interest rate.

Land Contract – An agreement between the seller and the buyer where the title is withheld until a time where the required payments have been completed.

Leasehold Estate – A kind of real estate ownership where the lessor does not hold title to the property but has use of the property subject to the terms of the lease.

Legal Description – A method of geographically locating a piece or parcel of land, which is acceptable in a court of law.

LIBOR – London InterBank Offered Rate. LIBOR is the base interest rate paid on deposits between banks in the Eurodollar market.

Lien – A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

Loan Committee – Generally the Underwriting process.

Loan Risk – The rate category assigned to the loan, which estimates the probable risk of delinquency and loss in the future.

Loan-To-Value Ratio – The relationship between the amount of the mortgage loan and the appraised value of the property expressed as a percentage. (LTV)

Category: Mortgage