VA Loans - Glossary

Use the glossary below to find information about common VA Loan terms.

A B C D E F G H I J K L M N O P Q R S T U V W X Y Z

A

Acceleration Clause: This is written into mortgage contracts in case you miss a payment and go into default with your loan. If this happens, the lender can demand full payment of the balance due on your mortgage.

Acceptance: After you make an offer on a home and the seller accepts, a purchase agreement stating the purchase price and other terms of sale is drawn up and earnest money is put on the home.

ACE-Automated Certificate of Eligibility: This system is used by VA-approved lenders in order to help Veterans get the Certificate of Eligibility they need to take part in the VA Home Loan Guarantee Program.

Acreage: The amount of land that is being purchased as an empty lot or with a home pre-existing on the property. One acre is equal to 43,560 square feet.

According to Value: Refers to the value of your home and property upon which your property taxes are based on. Also called "Ad Valorem."

ARM-Adjustable Rate Mortgage: A mortgage in which you have a specified amount of time (usually 2 or 3 years) at the beginning of the loan when the interest rate is fixed. After that time period is over, the interest rate fluctuates with the current market rates. This type of mortgage is usually only a good idea if you plan to sell or refinance the home before the fixed interest rate time period ends.

Adjustment Date: The dates at which your adjustable rate mortgage interest rate can change. After the initial fixed rate period is over, the interest rate can usually be adjusted every 6 months.

Amortization: The process of paying off your mortgage with payments due every month for a certain amount of years.

Amortization Schedule: The statement from your mortgage lender that shows you exactly what your monthly mortgage payment is, how much is going toward your principal loan amount, how much is going toward interest, how much is going into your escrow account and your escrow account balance if applicable, and the remaining balance of your loan.

APR-Annual Percentage Rate: The percent you are paying for a full year that includes interest on your loan, mortgage insurance costs, and other fees that may be applied depending on your mortgage loan agreement.

Appraisal: The fair market value of a property based on a professional evaluation of real estate trends in the area and amenities of the home.

Appreciation: The amount of increase in value that takes place on a property due to real estate trends in the area, home improvements, and other factors that cause the market value of a home to increase.

Assessed Value or Assessment: The value a property given by a tax assessor in order to determine the cost of property taxes for that parcel.

Assets: Anything you own that has value.

Asset-to-Debt Ratio: The value of the assets you own minus the amount of debt you have.

Assumable Mortgage: A mortgage loan that can be taken over by the buyer rather than a new mortgage contract being written to purchase the home. In most cases, the seller of the home will still be liable to the mortgage company in the case that the buyer misses a payment. In some cases, the seller can allow the buyer to assume the mortgage without continuing to be liable.

Assumption: When the seller officially transfers the mortgage to the buyer of the property.



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B

Balloon Mortgage: When a buyer acquires this type of mortgage they are required to make payments for a certain amount of time. After this specified period of time, the buyers has to pay the mortgage loan in full. The time period is usually for 5 to 10 years, and this type of mortgage is good for buyers who do not plan to live in the home for the full term of the loan or plan to refinance the loan before the balloon payment is due.

Balloon Payment: The balance of the entire loan amount that is due in one final large payment at the end of a balloon mortgage.

Bankruptcy: The act of claiming you do not have the means or any way to acquire the means to pay off your current debt. This is a legal court proceeding in which you turn in all of your asset and debt information to the court, and the court rules if it thinks you are capable of paying your creditors. If you have no or very few assets, you will usually file for Chapter 7 bankruptcy. If you have assets you want to keep, such as a home, you will usually file for Chapter 13 bankruptcy. If you are required to make payments to the court, the court determines how much you can afford, and then distributes the money to your creditors. These payments last over the span of a few years, and you usually end up repaying close to half of your debt before you are relieved from further payments.

Binder: Once earnest money is put down toward the purchase of a home this agreement holds the home while the proper inspections and appraisals are conducted.

Bridge Loan: If you find the home you want to purchase before you have sold your current home, you can take out this type of loan in which the equity in your current property is used as the downpayment on the new property you are purchasing. Once your current home is sold, the lender on your bridge loan will take the downpayment money from the sale of your home along with any fees they charge for their service.

Broker: A person who is in the business of shopping for mortgage loans. A broker is the middle-man who takes the information from people looking to borrow money and shops around to different lenders in order to find a loan for their clients. Brokers get a paid a percentage of the loan as a commission for their services.

Bundle Of Rights: Your rights as a property owner.

Buy Down: When someone makes a payment to a lender in order to obtain a lower interest rate.



C

Cap: The limit for how much the interest rate can rise on an adjustable rate mortgage.

Cash Reserve: In order to get a mortgage loan some lenders require that the borrower have money in savings or in easily liquefiable assets.

Certificate of Eligibility: You need this in order to prove your entitlement to participate in the VA Home Loan Guarantee Program. In order to get a Certificate of Eligibility, you should contact a VA-approved lender who, in most cases, can use the ACE system on the Internet to prove eligibility in minutes.

Certificate of Reasonable Value: This certifies the fair market value of the property once the home is appraised.

Clear Title: The title or deed to a particular property that is completely free of all debts, liens, and encumbrances. The owner holds the title free and clear.

Closing: When the buyer officially signs all the mortgage paperwork and pays for the property they are purchasing. At this time the property is transferred to the buyer and the sale is final.

Closing Costs: Also called settlement costs, these are all of the costs associated with the buying and selling of property.

Commitment Letter: The letter given from a lender to a potential borrower that specifies the terms being offered for a mortgage loan. Related Article: VA Certificate of Commitment

Condominium: A type of home where you own the specific unit you buy. Your unit may be attached to other units owned by many different people. The condominium may have specific associations that include monthly or annual fees, owner rules, and common areas in the community.

Consumer Credit Counseling: Where a consumer can get help in the case that they have over-extended or developed derogatory credit.

Contingency Clause: When associated with a mortgage this is when the seller can back out of the purchase contract if the buyer cannot obtain financing within a specified amount of time.

Convertible Adjustable Rate Mortgage: An ARM that can be converted into a fixed-rate mortgage under the terms of the loan agreement.

Co-operative: A type of housing arrangement where all of the owners in a housing complex own part of the unit and agree to occupancy arrangements, necessary improvements, maintenance, and more.

Counter Offer: When a potential buyer makes an offer on the purchase price and terms to the seller of a property, the seller may then make a counter offer of a different price and new terms.

Covenant: Restrictions that are placed on the borrower about what can be done with the property the borrower purchases. Mortgage lenders may do this in order to sustain the value of the home.

Credit Bureau: An agency that keeps track of an individual's credit history and updates their payment history when borrowing money. The three largest credit bureaus are Equifax, TransUnion, and Experian.

Credit Report: A person's personal payment history of how they repaid borrowed money in the past.

Credit Score: The number that can fluctuate depending on your payment history. If you pay your creditors on time your score will rise. If you pay late or are delinquent, your score may fall. Related Article: Learn More About Repairing Credit Before Obtaining a VA Loan



D

Debt to Income Ratio: The monthly or annual amount of income compared to your monthly or annual debt owed.

Deed: Also called a Title, this document shows legal proof of ownership for a property.

Deed of Trust: When the deed is overseen by a trustee who works as a liaison between the borrower and lender in some states.

Default: When you do not make a mortgage payment on time, you are in default of your loan terms and agreement. At this time, the lender can choose to make a payment plan available to you for repayment of the amount owed from your missed payment, or the lender can request all of the balance due on the loan. If this happens, you must pay or foreclosure may occur.

Delinquency: The period of time, up to 30 days, between when your mortgage payment is due and when you pay it. If you are late with a mortgage payment, you are considered delinquent until the payment is officially thirty days late, at which time the loan goes into default.

HUD-Department of Housing and Urban Development: A department within the federal government that aids people with the purchase of property through guaranteed loans, energy efficient home improvement loans, general home improvement loans, refinancing options, loans for the disabled and elderly to renovate their housing, and much more. The HUD also has a program where it sells homes for less than their market value to people who are looking to become homeowners. Visit www.hud.gov for more information on the many services offered by the Department of Housing and Urban Development.

Depreciation: When the value of a property gets lower due to the real estate market in the area or the property owner not keeping up with home repairs and allowing the property to fall into disrepair.

Discount Points: When you get a mortgage loan, you may pay these discount points in order to get better terms on your long-term mortgage loan. One point is usually equal to 1% of the loan value, so if you are taking out a loan for $200,000, one point would be $2,000. Points are paid out of pocket by the borrower in order to give the lender an incentive to offer a lower overall interest rate.

Down Payment: The amount of money you put down on the purchase of a home. The amount of a down payment is usually a certain percentage of the price of a home which varies from lender to lender, but is anywhere from 3-10%. Some lenders accept gift funds for down payment assistance from third party organizations. VA Home Loan Guaranteed mortgages do not require a down payment because the VA guarantees the loan.

Due on Sale: When you sell a property which has a mortgage lien, the remaining balance of the loan is paid to the lender at the time of the sale.


E

Earnest Money: The money placed on a purchase agreement that shows a buyer wants to purchase a home. This money is given to the real estate or title agent so that the seller holds the home until necessary appraisals and inspections can be completed and the closing of the loan takes place.

Easement: Part of the property that is not the sole property of the owner and must be made available to the local town, city, township, or community. Typically, this allows the local government to have access to portions of the property it needs for utility lines, road extensions, sewer and water pipeline installations, hazardous tree removals, and more.

Employment Verification: A lender requires employment verification of potential borrowers to verify their income and job security.

Entitlement: The amount in which you are allowed to use in a program depending on your status. In the case of the VA Home Loan Guarantee Program, once you receive a Certificate of Eligibility, you are entitled to a flat guarantee amount of $36,000 for homes under $144,000. For homes over this amount, you can get up to 25% of the loan guaranteed on the purchase of a home with a maximum loan amount of $417,000. The VA does raise and change these limits and terms over time, so go here for the most current information. Related Article: Time Limits and VA Loans

Escrow: A middleman account, usually with a title agency, that holds money and distributes the funds in a manner that both parties agree upon. Earnest money is often held in an escrow account, and some mortgage companies require borrowers to pay their property taxes and homeowner's insurance as part of their mortgage payment, which is also put into an escrow account for distribution when due.

Escrow Company: Also called a Title Company or Title Agency. They hold the money in an escrow account until funds need to be distributed correctly. They also help with the closing of a home purchase, the mortgage paperwork, the transfer of money from the lender to the seller, and the title changes.

ECOA-Equal Credit Opportunity Act: An act created by the federal government that forbids lenders to discriminate on any basis.



F

Fair Housing Act: An act created by the federal government that makes it illegal for lenders, sellers, agents, brokers, and anyone involved in the sale or purchase of a home to discriminate against a buyer for any reason.

FHA-Federal Housing Authority: In connection with the Department of Housing and Urban Development, the FHA is a department of the federal government that encourages homeownership by offering loan guarantees, home improvement loans, consumer counseling, information for purchasing and selling homes, and much more. FHA Home Loans are perfect for first time home buyers with less than perfect credit. Go to the official site for more information about the Federal Housing Authority and its programs. Related Article: Other Types of Government Insured Loans

Fees: The costs that are associated with getting a mortgage loan, including servicing fees, loan origination fees, title fees, appraisal fees, and home inspection fees. The VA also charges a fee for using their Home Loan Guarantee Program.

Foreclosure: When a borrower fails to meet the obligations agreed upon in the mortgage loan agreement and the lender repossesses the property in order to get the money they loaned to the borrower back.

Funding Fee: The name of the fee the VA charges when a Veteran uses its Home Loan Guarantee Program. This fee is generally around 2% to 3% depending on whether it is your first VA Loan. Disabled Veterans may be exempt from this fee. Related Article: VA Loan Funding Fees



G

Gift Funds: Free down payment assistance that is given to a buyer in order to help them purchase a home. VA Loans allow the use of gift funds to make the down payment on a home. There are third party organizations that offer this assistance, although they have recently come under scrutiny.

Gift Letter: If you are given money for a down payment from a friend, relative, or employer, you must have a letter stating that the person giving you the money does not expect to be paid back. If you borrow money that you are expected to repay, the mortgage lender will need to calculate this into your income to debt ratio.

GPM-Graduated Payment Mortgage: A type of mortgage loan where payments start out low and increase with time. This type of loan is good for people who expect their income to increase over time.

Grantee: The legal term for a buyer in mortgage loan paperwork.

GEM-Growing Equity Mortgage: A type of mortgage where the payments increase overtime, but the extra money is applied to the principal of the loan in order to pay off the loan faster.



H

Hazard Insurance: Insurance that pays to repair a property in the case of damage from fire, ice, floods, storms, acts of vandalism, and more. This type of insurance is usually required by your mortgage lender and can be included in your homeowner's insurance policy.

Home Loan Guarantee Program: A program within the Department of Veterans Affairs that guarantees a loan for Veterans to purchase homes. Because the loans are partially guaranteed by the VA Veterans are able to get home loans easier and under better terms. This is one of many benefit programs offered to Veterans. Related Article: Information on Your VA Benefits

Home Warranty: A warranty that covers any problems that occur with your home within a specific amount of time. Some real estate companies offer a one year home warranty when you purchase your home that covers main systems such as heating, ventilation, air conditioning, and appliances. If you build a new home, the builder offers a limited warranty on the home.

Homeowner's Insurance: Insurance that covers damage to your property or home. This type of insurance also covers your personal belongings and contents of your home. Homeowner's Insurance is required by your mortgage lender.

HUD- The Department of Housing and Urban Development: A government agency that aids people with purchasing homes, getting financing for a home mortgage, counseling and education for the home buying process, and much more.

HUD-1 Form: A list of the purchases and transactions involved when you buy a home through The Department of Housing and Urban Development and The Federal Housing Authority.

Hybrid Mortgage Loan: A loan to purchase a home that combines an adjustable rate mortgage with a fixed rate mortgage. Most hybrid mortgages have a fixed interest rate for the first ten years after which time the interest rate becomes adjustable. This type of mortgage is good for people who are not planning to live in the home during the adjustable interest rate period or who plan to refinance the mortgage before the interest rate begins to rise.



I

Income: Any money that you receive in a given period of time. For the purposes of obtaining a mortgage, you should consider your steady monthly income when determining your affordable mortgage payment amounts. You may not want to include income such as child support, interest on investments, or other variable amount types of income.

Interest: The money paid to a lender for the use of their money. In the case of a mortgage, the interest is a percentage rate over a certain period of time paid to the mortgage company.

Interest Only Loan: A mortgage loan that allows the borrower to pay only the interest on the mortgage for a set amount of time before they start paying towards the principal. People use this type of mortgage when they expect an increase in income in the future, do not plan to live in the home for a long period of time, or plan to refinance the mortgage on the home once their current mortgage begins requiring them to make larger payments. Often, once the interest only period is over, the mortgage converts to an adjustable interest rate which is also undesirable if you plan to stay in the home for a long period of time.

Interest Rate Cap or Interest Rate Ceiling: The highest amount of interest that can be charged according to a legal agreement. With adjustable rate mortgages, there is an interest rate cap that allows the mortgage lender to raise the interest rate to a certain point, and then the lender is not allowed to raise the rate any further.

IRRRL- Interest Rate Reduction Refinancing Loan: This is a VA Mortgage Loan that takes mortgages in the VA Home Loan Guarantee Program and allows the owner to refinance the loan for a lower interest rate. The loan can either be an adjustable rate mortgage refinanced to a fixed rate mortgage or a fixed rate mortgage refinanced to another fixed rate mortgage as long as the new interest rate is lower and your monthly mortgage payment decreases. The VA does not allow you to take cash out of an IRRRL, but you may finance to pay for energy efficient home improvements or to take advantage of lower interest rate trends in the market.



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J

Joint Tenancy: When more than one person lives in a home and they both have equal rights to ownership of the property. Usually this occurs in the case of marriage or co-ownership and each of the entitled property owners has the right of survivorship.



K



L

Late Charge or Late Fee: An extra amount of money you have to pay when you are late making your mortgage payment. This also may be called a penalty fee or penalty payment.

Lease-Purchase Agreement: A way to purchase a home by renting the home for a set amount of time before purchasing. This is also called rent-to-own and is extremely useful to people who need time to repair their credit or want to wait for lower interest rates before obtaining a mortgage loan.

Lease-Purchase Mortgage Loan: A way for low income families to purchase a home by first leasing the home and then purchasing it. This option, offered by Fannie Mae, allows families to lease the property from the not for profit organization with the opportunity to purchase the home later. Part of the monthly rental payments are saved in order for the renters to have down payment money at the end of their lease in case they want to purchase the home.

Lender: The company that loans you the money to purchase a home.

Lender Appraisal Processing Program: A program through which the Department of Veterans Affairs allows VA-approved lenders to conduct their own value appraisals on a property. The VA may also require one of its own appraisers to appraise the property as well in order to determine value for the VA Home Loan Guarantee Program. Related Article: Lender Appraisal Processing Program

Lien: The legal right to ownership of a property or part ownership of a property. In the case of a mortgage loan on your home, the lender has the legal right to the amount of money your home is worth up to what you still owe as your principal balance. Any lien on a home is paid when the home is sold.

Lifetime Cap: This is the highest interest rate than can be charged over the life of the loan with an adjustable rate mortgage.

Loan: When money is given to a second party with the legal stipulation that the second party pay back that money in accordance with the terms of the agreement.

Loan Approval: When the lender agrees to loan money to a borrower based on information such as income, debt, assets, employment, and credit worthiness.

Loan Servicing: The maintenance required for any given loan. In the case of a mortgage loan with an escrow account, the servicing is needed to take the monthly mortgage payment and split the money between the principal, interest, and the escrow account. Then, when the time comes for the homeowner's insurance and property taxes to be paid, the loan servicer is responsible for making those payments on time. This fee is usually added to your monthly mortgage payment.

Loan Guarantee Entitlement: The amount of money that you can get from the VA for guaranteeing your home mortgage loan.

LTV- Loan to Value Percentage: The amount of a home you own compared to the amount of a home you still owe to a mortgage lender, expressed as a percentage. For instance, if you put 25% down on a home, your Loan to Value Percentage is 75% because that is what you still owe to the mortgage lender.

Lock-In: An agreement with a mortgage lender that a specific interest rate will be guaranteed, or locked in, as long as the borrower closes within a certain period of time.



M

Market Value: The value you home will sell for depending on the current real estate market trends in your area.

Mortgage: A loan that allows you to purchase a home in return for monthly payments over a set period of time that pays back the loan with interest.

Mortgage Banker: A company that makes mortgage loans to people in order to sell the mortgages for a profit. Once the mortgage is closed, the company will sell it on the secondary loan market to another company that wants to invest in the mortgage in order to get the interest money.

Mortgage Broker: A person who takes the financial and credit information of people who are looking for a mortgage lender and facilitates the mortgage process by shopping for a mortgage loan for the borrower. You will usually pay a commission fee for the services of a mortgage broker who, in essence, is the "middle man" of a mortgage loan transaction.

Mortgagee: A term used in mortgage loan paperwork that refers to the lender.

Mortgage Insurance Premium: The amount of money you pay, either monthly included as part of your mortgage payment or annually out of an escrow account, that insures your mortgage from default. The FHA requires mortgage insurance for any borrower that is financing a loan through them and puts less than 20% of a down payment on the home.

Mortgage Interest Rate: The percentage of interest you agreed to pay in your mortgage loan terms.

Mortgage Margin: With an adjustable rate mortgages, this is the set amount of how much your interest rate can increase at each adjustable period of time. For instance, if your loan agreement states that your interest rate cannot increase more than .5% in any 6-month period of time, this is your mortgage margin.

Mortgage Note: The legal paperwork of a mortgage loan that specifies the terms of the loan, including the monthly mortgage payment amount, the interest rate, the amount of the loan, and the length of time the term of the loan is for.

Mortgagor: A term used in mortgage loan paperwork that refers to the borrower.



N

Negative Amortization: If the monthly mortgage payment is not enough to cove r the interest and principal amount due on the loan, the negative difference will be added to the loan. This means that the amount you owe will increase instead of decrease. A good example is a graduated Payment Mortgage in which the monthly payments start out low and grow overtime. This means that at the start of your mortgage, your payments may not be high enough to cover the principal and mortgage payments, but the difference is added to the total principal of the loan, which you will pay off in time as the monthly mortgage payments gradually increase.

Notice of Default: If a borrower goes into default, the mortgage lender will send the borrower this notice informing them that the mortgage contract agreement has been broken. At this time, the borrower should contact the mortgage lender to work out a forbearance or terms of repayment for the missed mortgage amount.



O

Origination Fee: The fee the lender charges the borrower for the services required to create a mortgage loan agreement. This usually includes underwriter costs, legal fees, and other fees associated with originating the mortgage loan.

Owner Financing: If the buyer cannot get a mortgage loan due to lack of down payment or derogatory credit, the seller may make arrangements to finance the loan for the buyer. In this case, the buyer would sign an agreement with the seller as to the loan terms.



P

Payment Cap: Some adjustable rate mortgages have a limit as to how high a monthly mortgage payment can increase, even when the interest rate is increased. For instance, you may have a payment cap that does not allow the monthly payment to go over $800, but the mortgage company has increased the interest rate to where the payments should be $855 per month. In cases such as these, the additional money owed would be added to the principal of the loan, creating negative amortization.

PITI- Principal, Interest, Taxes, and Insurance: These are the four monthly costs that are combined into a mortgage payment. Some mortgage loan agreements do not include these additional housing costs, so make sure you know what your monthly mortgage payments include before you choose a loan.

PUD- Planned Unit Development: An association in a neighborhood of homes that shares some common property in exchange for monthly or annual fees for the association to maintain the common property. An example of a PUD is a condominium development where each homeowner pays a monthly maintenance fee that is used for the upkeep of the property(mowing grass and removing snow), and the upkeep of any shared facilities such as playgrounds, tennis courts, or pools.

Points: Usually one point is 1% of the mortgage loan amount that is paid as an up front finance charge. Points are paid in order to negotiate lower interest rates on a loan. Sometimes, if you pay more points at the beginning of your mortgage when you originate the agreement, you can save a lot of money overtime in unpaid interest.

Power of Attorney: A legal document that gives one person the full legal right and authority to act for another person.

Prepayment Penalty: The fee paid to a lender if you pay off your mortgage loan before a certain amount of time has gone by. This penalty may or may not be written into a mortgage loan agreement. It is designed to deter the borrower from refinancing the loan so that the lender is guaranteed a certain return on their investment. If you are financing through the VA Home Loan Guarantee Program, you cannot have a prepayment penalty written into your mortgage contract.

Pre-purchase Counseling: First-time buyers should get counseling on the process of purchasing a home and obtaining a mortgage prior to beginning the process. This is done in an attempt to give the borrower the knowledge to make informed decisions throughout the purchasing process. With FHA Loans, you are required to obtain pre-purchasing counseling before you can get a loan.

Pre-qualification: A borrower can give all of their financial and credit information to a lender. This lender will use this information to inform the borrower about what type of loans they qualify for and how much of a monthly payment they can afford based on the borrower's personal situation. This way, the borrower knows exactly in what price range they can shop for a home and is assured they can get a mortgage loan.

Principal: The amount of money that is loaned to a borrower. With most types of mortgages, the principal loan amount decreases every time a mortgage payment is made.

PMI- Private Mortgage Insurance: If borrower puts down less than 20% of a down payment when purchasing a home, the lender usually requires mortgage insurance until the amount of equity is built up to or surpasses 20%. Related Article: A Lesson for Vets: Use the VA Loan Program

Promissory Note: The legal document a borrower and his or her spouse must sign indicating they agree to pay the mortgage loan back to the lender.

Property Taxes: The amount of money you pay to the local government depending on the assessed value of your home and the local cost of levies and tax rates. This payment may be part of your mortgage payments.

Purchase and Sale Agreement: An agreement between the seller and buyer of a property that states the terms of the sale of the home. Related Article: Purchase Agreement Information

Purchase Contract: The contract that is signed once the buyer and seller finish negotiating the terms of the sale of the home.



Q

Qualifying Ratios: Lenders look at asset-to-debt and other ratios in order to determine exactly how much the borrower can financially afford as a maximum mortgage amount. The more you owe in debt, the less you will be able to borrow. This is because the lender considers your total monthly expenses when determining how high of a mortgage payment you can afford. This is why it is important to rid yourself of as much unnecessary debt as possible, such as unsecured credit card debt, as possible before you apply for a mortgage loan to purchase a home.



R

Rate Lock: A specific fixed interest rate for a specified amount of time that is guaranteed by the mortgage lender.

Real Estate Agent: A licensed professional who can help with the procedures involved in the purchase or sale of real property. Real estate agents accept a percentage of the sale price of a home as their commission payment for their services.

RESPA- Real Estate Settlement Procedures Act: This states that borrowers must be informed in advance of all of the charges for closing costs of the loan. There is usually a meeting where the borrower sits down with the lending agent while the agent reviews all of the associated costs and fees of the mortgage loan.

Real Property: Any land, improvements to land or structures, and physical structures or buildings that someone is entitled to by ownership of a title or deed.

Refinancing: Getting a new mortgage loan that replaces and pays your existing mortgage loan in full. This is like getting an entirely new mortgage loan, and is usually done in order to lower interest rates on a current mortgage loan or take cash out of the equity in a home. If you have a VA Home Loan, you can refinance with the VA through its Cash Out Refinance option or its Interest Rate Reduction Refinancing Loans, IRRRLs, which allow Veterans to refinance their current VA mortgage to a lower interest rate in order to save them money and lower their monthly payments. Related Article: Refinancing an Existing Loan

Rent and Mortgage Payment History: A lender will look into the history of other dwellings you have inhabited in order to see if you make your payments on time and are credible in the area of housing payments. Lenders will contact past landlords or look at your credit history from any previous mortgages to make sure you were never delinquent.

Rescission Agreement: The legal document that both parties sign in order to cancel a previously signed legal contract. If, in the case of real estate transactions, there was a signed purchase agreement and then the buyer or seller changed their minds about the home then a rescission agreement would have to be signed.

Residual Income: What is left of your earnings after you have paid you fixed expenses, variable expenses, and a future mortgage payment. Lenders look at this in order to determine how much of a monthly mortgage payment you can afford.



S

Second Mortgage: Another loan on the equity of a home. The second mortgage takes secondary authority to the first mortgage on the lien to the home. When the home is sold or foreclosure upon (in the case of a default), the first mortgage lien holder is paid first and the second mortgage lien holder is paid later. Second mortgages usually have higher interest rates since they are higher risks because in the case of a foreclosure, the lender may not fully be able to redeem their investment.

Secondary Mortgage Market: Where mortgages are purchased and sold by companies.

Seller Concessions: The seller may put a valuable asset into the purchase agreement for the buyer. An example of a seller concession is leaving all of the appliances in the home as an additional benefit to the buyer.

Seller Take Back: When the seller agrees to finance the property for the buyer which could also include assuming a mortgage contract.

Settlement: Also known as the closing of the loan, in which the title of the home is transferred to the new owner and the sale of the property is finalized.

Settlement Sheet: A document that lists all of the details of the sale of the home. A real estate agent will normally go over this document with the buyer and seller and explain the fees or costs, including previous years' property taxes, points, insurance, title insurance, commission fees, and loan and financing fees.

Survey: The land layout of a property that shows the exact legal boundaries of the property. This survey is done so that the buyer know their legal property boundaries and to ensure there are no legal property boundary disputes with adjacent property owners.

Statement of Service: This document shows your service record, including when you entered the service, how long you served. It is usually provided by the Military unit with which you served.



T

Tenancy by Entirety: This is a legal entitlement to a property to a spouse in the case the other spouse dies.

Tenancy in Common: This is a legal entitlement to only your portion of a property in the case the other property owner dies.

Title: Also called a deed. This is the legal document that specifies who owns a particular property.

Title Company: A company that researches titles and the history of titles, liens, and encumbrances in order to make sure all entitlements to a property are fulfilled before the title can be transferred to a new owner.

Title Insurance: A protection you pay for when you purchase a home. It protects the buyer and the lender if there is a dispute over the ownership rights to a property.

Title Search: A title company will perform this service to make sure there are no legal rights to a property that have not been settled before a title can be transferred to a new owner.

Transfer Tax: State and local taxes that need to be paid when a title is transferred to a new owner.

Truth in Lending Act: A government act that insures all lenders fully disclose the costs associated with the money being borrowed.



U

Underwriter: A person employed by a lending company who evaluates a borrower's loan application and all of the paperwork involved to determine if the borrower can receive the loan or not.



V

Variable (v): The word variable is the same as a variable interest rate on your loan. The APR on your loan is your annual percentage rate. If it has the letter "V" next to it, then it means that your interest rate is subject to change in the future.

Variable Interest Rate: This is the type of interest rate on a mortgage loan that usually starts out fixed, but can begin to increase and fluctuate with market trends after a set period of time, usually 3 -5 years.

Variable Rate: Also called an adjustable rate, this is an interest rate that changes. The changes in interest rates usually occur with fluctuation in the current market.

Variable Rate Mortgage: This is like a variable interest rate mortgage because the interest rate changes based on the current market standards in real estate.

VA Eligibility Center: Where Veterans submit their requests for a Certificate of Eligibility. Once a VA Form 26-1880 and a Form DD 214 have been completed, a Veteran can either contact a VA-approved lender and submit this information electronically through the ACE system or send the completed forms to the VA Eligibility Center at:

VA Loan Eligibility Center
PO Box 20729

Winston-Salem, NC 27120M

Related Article: Are You Eligible for a VA Loan?

VA Form 26-1880: The request for Certificate of Eligibility form. Veterans must complete this form in order to be eligible for many VA Benefits including the VA Home Loan Guarantee Program. You can find a copy of VA Form 26-1880 by going to http://www.vba.va.gov/pubs/forms/vba-26-1880.pdf

VA Home Loan Program: This program is a benefit to Veterans that allows them to take a home loan mortgage with a guarantee from the VA. The VA guarantees that a certain percentage of the loan will be paid back to the lender even in the case of borrower default.

Variable Rate: Also known as an adjustable rate, this is an interest rate that can change over time. Usually variable or adjustable interest rates can only change a specified amount within a certain amount of time. Variable rates also usually have a cap to prevent the interest rate from going too high and a floor to prevent the interest rate from going too low. The terms of a variable or adjustable interest rate are found in the mortgage loan contract.

Verification of Deposit: This is a financial document that the borrower gives to the lender which verifies the amount of money the borrower has in reserve in the bank. Sometimes lenders want to see a certain amount of money in reserves in order to approve a mortgage loan.

Verification of Employment: This is when a mortgage lender contacts the potential borrower's place of employment in order to verify the information on the loan application.

Veterans Administration: The government agency that offers benefits to Military Veterans and in the case of home loans, offers a guarantee that a portion of the loan will be repaid if the borrower defaults.

Voluntary Claim: When the owner of a property contends that a legal claim for payment can be placed against the property.



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W

Waiver: This is when a person signs a contract to give up their rights or claims to an asset or liability.

Walk Away Lease: In the case of a lease to own agreement on a home, this allows the person leasing to decide at the end of the lease if they want to walk away without purchasing.

Walk Through: This is the final step before moving into a home. After the sellers have moved out of the home, the buyers get to walk through the home with the selling agent and make sure it is in the condition it was when they agreed to purchase the property.

Wall Street Journal Prime Rate: This is the rate that banks set on interest for mortgage loans. It is posted in the Wall Street Journal and is based on various banks in order to get an average current market interest rate.

Wrap Around Mortgage: This is when you take all of the mortgage loans you own, in the case you are buying before you sell, and consolidate all of the outstanding balances into one loan.



X



Y

Yield Curve: This is a graph that helps people see interest rates and when they occurred at different periods in time.



Z

Zero Balance: This is when there is nothing left to repay on your mortgage loan.

Zero-Lot Line: This is when a house is constructed on the boundary line of the property.

Zoning: There are certain zones in the community that allow for residential construction, commercial construction, and industrial construction. These zones are determined by the local government.

Zoning Ordinances: These are the laws regarding zoning and what is allowed to be built where as well as the codes that must be followed to ensure safe construction practices.



We are still in the process of adding to our glossary, please check back soon.

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VA Mortgage Center.com Customer Service Survey

We recently completed a survey of over 10,000 prospective home buyers and those looking for a VA Loan provider. Here is a snapshot of the results.

Survey Question: Other Loan
Providers
Would you recommend
us to a friend?
90% 66%
Are you satisfied with
the service provided?
92% 60%

Top 5 Reasons People Choose VAMC

Based on the survey results, here are the top 5 reasons people chose to work with us.

  1. Great Communication
  2. Trust as a VA Loan Specialist
  3. Fantastic Customer Service Record
  4. Personal Experience
  5. Easy & Convenient

Survey Methodology

We surveyed over 1,000 VAMC customers and non-customers about their experience with our company versus the competition.

Read VA Mortgage Center.com Customer Reviews.

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"Working with VA Mortgage Center was fantastic. We got to closing on time. We had a very short deadline to get there and they made it happen for us. Our broker was really knowledgeable with everything going on in the market. He knew when to lock in the interest rate and how to get us to closing fast."

Rachel Gotts
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