Glossary of Terms
It is often said that mortgage financing has a language of its own. To help you through the process, we have assembled a dictionary of common terms you’re likely to come across during the home financing process. Of course, if you’re unsure about a term, or you see something you’re unfamiliar with, give us a call at 888-509-2867.
The number assigned to the form all potential customers must complete to apply for a home loan. This application is commonly referred to as "the 1003" and is produced by the federal government. See LOAN APPLICATION (1003).
1040 FEDERAL TAX RETURN
The federal tax form used by U. S. citizens and residents to report their annual income to the federal government. The 1040 tax return must be accompanied by any applicable schedules, which provide line-item detail of various sources of income. Schedule A details itemized deductions. Schedule B details investment income. Schedule C details business income. Schedule D details capital gains/losses. Schedule E details supplemental income, such as rental income. Schedule F details farming profit/loss.
1065 FEDERAL TAX RETURN
The federal tax form used by U. S. partnerships to report their annual income to the federal government.
A document that reports to the federal government gross and net income earned by individuals who receive pension, social security or miscellaneous income, such as income from contract work. 1099s must be mailed to recipients by January 31 of each year for the previous year.
1120 FEDERAL TAX RETURN
The federal tax form used by U. S. corporations to report their annual income to the federal government.
1st POSITION LIEN
A secured claim against a property that will be the first claim to be repaid should the property owner declare bankruptcy or default on the secured loan.
2-4 UNIT PROPERTY
A property that consists of a structure that provides living space for 2 to 4 families, although a single mortgage or deed of trust evidences ownership of the structure.
Lenders consider three factors — credit, capacity, and collateral — when considering a credit application. Credit is the borrower's proven willingness to repay a debt. Capacity is the borrower's financial ability to repay a debt. Collateral refers to the property used to secure a loan transaction.
30-DAY LATES, 60-DAY LATES, ETC.
Designations of the severity of mortgage delinquency. A mortgage payment is considered 30 days late when 2 payments are due. A mortgage payment is considered 60 days late when 3 payments are due.
A home loan split into a first and second lien requiring a 10% down payment. With a first mortgage at 80% and a second mortgage at 10%, homebuyers may avoid paying private mortgage insurance (PMI) or higher Jumbo interest rates. A common variation of this loan is the 80-15-5 program, which lowers the down payment to 5%.