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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.
Equity
An owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loon(s)from the fair market value of the property.
Fair Market Value
The price which a willing buyer will pay a willing seller for a piece of real estate.
Interest rate
The amount of interest charged on a monthly loan payment; usually expressed as a percentage.
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.
Annual Percentage Rate (APR):
Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the 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.
Housing counseling agency
Provides counseling and assistance to individuals on a variety of issues, including loan default, fair housing, and homebuying.
Certificate of title
A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.
HUD1 Statement
Also known as the "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing.
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