Photo of Steve Saggese, Ithaca RealtorSteve Saggese · Associate Broker, ABR
Serving Ithaca and Surrounding Communities

Financing Terms



Repayment of a mortage loan through monthy installments of pricinipal andinterest; the monthly payment amount is based n a schedule that will allow you to own your home at the end of a specific time period ( for example, 15 or 30 years)

Annual Percentage Rate
Caculated 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

The first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the unwriting process.

A document that gives an estimate of a property's fair market value: an appraisal is generally required by a lender before loan approval to ensure that the mortage loan amount is not more than the value of the property.

A qualified individual who uses his or her experience and knowledge to prepare and appraisal.

Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount however, is usually subject to a Cap

A government official who is responsible for determining the value of a property for the purpose of taxation.

Assumable Mortgage
A mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or credit package involved in the transfer of an assumable mortgage.


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.

A Federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually aoccurs when someone owes more than they have the ability to pay off.

A person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.

A detailed record of all income earned and spent during a specific period of time.


A limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.

Cash Reserves
A cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.

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 free of all liens or other claims.

Also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closings costs, and receives title from the seller.

Closing Costs
Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.

Conventional Loan
A private sector, one that is not guaranteed or insured by the U.S. government.

Credit History
History of an individual's debt payment; lenders use this informationto gauge a potential borrower's ability to repay a loan.

Credit Report
A record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.

Credit Bureau Score
A number representing the possibility a borrower may default; it is based upon credit history and is used to determine the ability to qualify for a mortgage loan.


Debt to Income Ratio
A comparison of gross income to housing and non-housing expenses. With the FHA, the monthly housing 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 the income.

The document that transfers ownership of a property.

To avoid foreclosure("in lieu of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time and effort associated with foreclosure.

The inability to pay monthly payments in a timely manner or to otherwise meet the mortgage terms.

Failure of a borrower to make mortgage payments under a loan agreement.

Discount Point
Normally paid at closing and generally calculated to be equivalent to 1% of the total 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.


Earnest Money
Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becoomes part of the downpayment if the offer is accepted, is returned if the offer is rejected, or could be forfeited if the buyer pulls out of the deal.

An owner's financial interest in a property: calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.

Escrow Account
A trust account created by a third party to hold money. A mortgage escrow account is an account set-up to pay taxes and insurance. Monthly mortgage payments may include 1/12 of annual property taxes and insurance. When the bills come due, lenders use the money in the escrow account to pay them.


Fair Housing Act
A law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national orgin, religion, sex, familial status, or disability.

Fair Market Value
The hypothetical price that a willing buyer and seller will agree upon when they are acting freely,carefully and with complete knowledge of the situation.

Fannie Mae
Federal National Mortgage Association (FNMA); a federally chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.

Federal Housing Administration (FHA)
Federal Housing Administration; established in 1934 to advance homeownership  opportunities for all Americans; assists homebuyers by providing mortgage insurnace to lenders to cover most losses that may accure when a borrower defaults. This encourages lenders to make loans to borrowers who might not qualify for a conventional mortgages.

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.

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.

A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.

Freddie Mac
Federal Home Loan mortgage Corporation (FHLM); a federally chartered corporation that provides residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.


Ginnie Mae
Government National Mortgage Association (GNMA); a government owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA insured and VA guaranteed loans to back securities for private investment; as with Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to elgible borrowers by lenders

Good Faith Estimate
An estimate of all closing cost fees including pre-paids and escrow items as lender charges; must be given to the borrower within 3 business days after submission of a loan application.


Homeowners Insurance
An insurance policy that combines protection against damage to a dwelling and it's contents with protection against claims of negligence or inappropriate action that results in soneone's injury or property damage.

The U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans. It does this by addressing housing needs, improving and developing American communities and enforcing fair housing laws.


A measurement used by lenders to determine changes to the interest rate charged on an adjustable rate mortgage.

The number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.

A fee charged for the use of money.

Interest Rate
The amount of interest charges on a monthly loan payment; usually expressed as a percentage.

Protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.


A legal decision; when requiring debt payment, a judgement may include a property lien that secures the creditor's clain by providing a collateral source.


Lease Purchase
Assists low to moderate income homebuyers in purchasing a home by allowing them to lease a home with an option to buy. The rent is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.

A legal claim against a property that must be satisfied when the property is sold.

Money borrowed that is usually repaid with interest.

Loan-To-Value (LTV)
A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock In
Since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.


An amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.

A lien on the property that secures the promise to repay the loan.

Mortgage Banker
A company that originates loans and resells them to secondary mortgage lenders such as Fannie Mae or Freddie Mac.

Mortgage Broker
A firm that originates and processes loans for a number of lenders

Mortgage Insurance
A policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment if less than 20% of the home's purchase price.

Mortgage Insurance Premium (MIP)
A monthly payment usually part of the mortgage payment paid by a borrower for the mortgage insurance.


Negative Amortization
This happnes when the interest due on the loan is more than the monthly payments. The balance unpaid interest is added to the balance of the loan. In negative amortization the loan of the borrower increases and thus he or she ends up owwing more than the original loan.

Net Income
The amount of your income after taxes have been paid.

New Home Sales
New home sales is an economic indicator that tracks the number and proces of new homes sold during a month. The new home sales metrics are published by the U.S. Department of Commerce's Census Bureau.

No Doc Loan
A no documentation loan, also called a no doc, is a real estate property loan that doesn't require the borrower to present paperwork to verify his or her's income during the loan approval process.

A legal document stating the obligation of the borrower to repay the stated sum of money at a specified interest rate at a specified date or on demand.


Indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

The process of preparing, submitting and evaluating a loan application; generally includes a credit check, verification of employment and a property appraisal.

Origination Fee
The charge for originating a loan; is usually calculated in the form of points and paid at closing.


Principal, Interest, Taxes and Insurance - the four elements of a monthly payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowners and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

Lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

A lender informally determines the maximum amount an individual is eligible to borrow.

An amount paid on a regular schedule by a policyholder that maintains insurance coverage.

Payment of the mortgage loan before the scheduled due date; may be subject to a prepayment penalty.

The amount borrowed from a lender; doesn't include interest of additional fees.


Qualifying Ratios
This is a ratio of all fixed monthly expenses including PITI and other costs like students' loans, credit card payments and car loans to the total monthly income. This is calculated to determine the borrowers capacity.

Quitclaim Deed
The document that transfers the ownership of a title to property and is filed with the government. It often is used among family members and can be used to clear up a gap in the chain of title or inheritance questions.


Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (such as a lower interest rate)

Rehabilitation Mortgage
A mortgage that covers the costs of rehabilitating (repairing or improving) a property; some rehabilitation mortgages such as the FHA's 203(k) allow a borrower to roll the costs of rehabiltation and home purchase into one mortgage loan.

Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices and relationships.


Sallie Mae
The largest originator of student loans

Satisfaction of Mortgage
A document provided by the lender as evidence that the loan has been paid off. Usually, it is up to the borrower to remove the lien from the public record.

Satisfaction of Debt
Satisfaction of debt is the fulfillment of an obligation to repay borrowed money.

Second Mortgage
A mortgage made subsequent to the previous one or subordinate to the first one. The lenders of the second mortgage gets paid after the first mortgage is paid.

Seller Financing
Seller financing is a type of real estate financing that involves a loan made by the seller to the buyer. This arrangement might be made if the buyer doesn't qualify for a traditional bank loan in the full amount of the purchase. The seller earns interest on the debt, and takes a security position in the property, just as a bank lender would. Seller financing is also called seller take-back.

Another name for closing.

Sweat Equity
Using labor to build or improve a property as part of the down payment.


Title 1
An FHA insured loan that allows a borrower to make non-luxury improvements (such as renovations or repairs) to their home; Title 1 loans less than $7,500 don't require a lien.

Title Insurance
Insurance that protects the lender against any claims that arise from arguments about ownership of property; also available for homebuyers.

Title Search
A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.

Transfer Tax
A tax issued on the transfer of title in a real estate transaction.

Treasury Index
A grouping of indexes that are used to determine the interest rate changes on adjustable rate mortgages.

A person who manages the assets.

A federal law obligating a lender to give full written disclosure of all fees, terms and conditions associated with the initial loan period and then adjusts to another rate that lasts for the term of the loan.


Unearned Income
Income which comes from interest, dividends, capital gains or rents, as opposed to earned income, such as wages, tips and salaries.

The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgement of the property value.

Unsecured Debt
Debt that is not guaranteed by the pledge of any collateral. Most credit cards are unsecured debt, which is a main reason why their interest rate is higher than other forms of lending, such as mortgages, which employ property as collateral.

Illegal and excessive interest.


Department of Veterans Affairs; a ferderal agencywhich guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

Variable Interest Rate
An interest rate which fluctuates up and down based on the rate index.

Variable Rate Mortgage
A mortgage in which the interest rate is changed periodically based on a financial index. Also referred to as an adjustable-rate mortgage.

Verification of Deposit
A document signed by the borrower's financial institution verifying the balance of the applicant's financial accounts.

Verification of Employment
A confirmation that the loan applicant is being truthful about where he or she works and their income.


Walk Through
Walk-through, in a real estate sale, is the buyer's final property inspection prior to the close of the transaction.

Wraparound Mortgage
A consolidation of balances on all mortgages into one loan.




Yield Curve
A yield curve is a graph that shows the relationship between interest rates and time.


Zero Balance
The wonderful appearance of a zero balance occurs when a borrower has paid of their loans and there is nothing left to repay.

Zero Down Payment Mortgage
A zero-down-payment mortgage is a real estate property loan that finances 100 percent of the purchase price. A borrower who funds a zero-down-payment mortgage will be required to purchase private mortgage insurance.












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Information deemed reliable but not guaranteed.

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Warren Real Estate
301 East State Street
Ithaca, New York 14850
Tel: 607-330-5212