First Mortgages

Jumbo Loan
Any residential or commercial mortgage with a loan amount exceeding the guideline of Fannie Mae and Freddie Mac. Rates tend to be slightly higher on jumbo loans because lenders generally have a higher risk.

Conforming Loan
A conforming mortgage is one that is packaged for resale on the secondary mortgage market to Fannie Mae or Freddie Mac, two quasi-governmental agencies that buy mortgages from cooperating lenders. Both agencies set limits annually on the size loans they'll buy. As of January 2004, the conforming loan limit is $333,700.

The interest rate quoted on a conforming loan is usually 1/4 to 1/2 percent less than it is on a jumbo mortgage from the same lender.

Conforming loans not only have the most competitive interest rates, they also tend to have the most stringent qualifying criteria.

Prime Loan
The interest rate a bank charges its best or "prime" customers. Each bank will quote a prime lending rate. Many institutions quote prime rates established by large money center commercial banks. There is also a prime rate average listed in the Wall Street Journal that is an average of the largest commercial banks. The rate given to consumers on their loans is often based as the prime rate plus a certain percentage, which represents the lender's assessment of the risk in lending, plus its profit margin.

Sub Prime Loan
A mortgage granted to a borrower considered sub prime, that is, a person with a less-than-perfect credit report. Sub prime borrowers have either missed payments on a debt or have been late with payments. Lenders charge a higher interest rate to compensate for potential losses from customers who may run into trouble or default.

Debt Consolidation Loan
The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. It's also called a consolidation loan.

PMI
PMI or Private Mortgage Insurance is normally required when you buy a house with less than 20% down. Mortgage insurance is a type of guarantee that helps protect lenders against the costs of foreclosure. Private mortgage-insurance companies provide this insurance protection. It enables lenders to accept lower down payments than they would normally accept. In effect, mortgage insurance provides what the equity of a higher down payment would provide to cover a lender's losses in the unfortunate event of foreclosure. Therefore, without mortgage insurance, you might not be able to buy a home without a 20% down payment.

The cost of PMI increases as your down payment decreases. Example: The cost of PMI on a 10% down payment is less than the cost of PMI on a 5% down payment. Your PMI premium is normally added to your monthly mortgage payment.

PMI Debt Relief
Refinancing of property with a new loan and without PMI, (Private Mortgage Insurance).

Cash Out
The taking out of a new mortgage on the same property in which the amount borrowed is greater than the amount of the previous mortgage. The difference is taken out in cash.

No-Income-Verification Loans
A mortgage in which the applicant provides a minimum of information -- name, address, Social Security number (so credit reports can be pulled), and contact information for an employer, if there is one. The underwriter decides on the loan based on the applicant's credit history, the appraised value of the house and size of down payment.

Second Mortgages

Home Equity Loan
A loan based on the amount of equity a homeowner has in the property. The interest paid on a home equity loan is usually deductible. Unlike a home equity line of credit (HELOC), the home equity loan features a fixed rate, payment and term, usually five to 15 years.

Above Equity Loan (up to 125%)
A second mortgage loan, that when combined with the balance of the first mortgage, exceeds the appraised value of the home.

Example:
Home value $200,000,
First mortgage balance of $175,000
Second mortgage of $75,000.

Add the first and second mortgage values ($175,000 + $75,000= $250,000), divide that by the value of the home. The result is the cumulative loans, are valued above the actual home value (in this example, the combined loan to value is 125%)

Debt Consolidation Loan
The replacement of multiple loans with a single loan, often with a lower monthly payment and a longer repayment period. It's also called a consolidation loan.

Cash Out
The taking out of a new mortgage on the same property in which the amount borrowed is greater than the amount of the previous mortgage. Restrictions may apply.