USDA Loans Glossary of Terms
Adjustable Rate Mortgage (ARM)
Also known as variable rate mortgage this type of interest rate is periodically adjusted on the basis on an index. However, the rate usually is not adjusted for the first two years of the loan.
Annual Percentage Rate (APR)
This is a figure that states or tells about the cost of the mortgage per annum as which is expressed by the actual rate of interest paid. The annual percentage rate includes points, base interest rate as well as other add-ons.
Appraisal
Done by state licensed appraisers these type of appraisal determine the value of the property that is based on recent sales value as well as information of similar properties.
Closing Costs
These are the prices or the fees that is paid by applicant or the loan burrower when the property is either refinanced or purchased.
Commitment
A documented letter that states in detail the conditions and terms as agreed between the lender and burrower as to how former will lend and the latter will borrow the funds.
Credit Rating
The rating that is given by the lender to the borrower based on the credit-worthiness or risk profile.
Credit Report
Report given to the lender informing him about the credit standing of a prospective borrower.
Debt-to-Income Ratio (DTI)
The ratio which tells about the aggregate monthly debt to aggregate monthly income on ones credit report.
Down Payment
The money that is paid by the borrower from his own pocket and not from the funds that which he receives from the bank as loan.
Earnest Money Deposit
A money deposit made by the borrower or the home buyer to show their commitment about buying the property.
Fixed Rate Mortgage
That mortgage where the interest rate can never change and is fixed.
FHA Loan
A loan that is backed or guaranteed by the Government and supported by Department of Housing and Urban Development (HUD) and the US FHA.
Homeowner’s Insurance
Insurance where the company providing the insurance protect the insured from losses like storms, fire, vandalism as well as other natural causes.
HUD
Department of Housing and Urban Development.
Interest Rate
Percentage of an amount of money that is payable for its use over a given time period.
Mortgage Insurance
Insurance that is responsible for covering the lender from the incurred losses that may result from a default on a home loan.
PITI
The term stands for interest taxes, principal as well as insurance.
Pre-Approval
Term stating that the borrower has concluded all the loan application and debt, income and savings information.
Short Sale
Properties that have not completed the foreclosure process but are in foreclosure.
Short sale homes are properties that are in foreclosure but do not have the foreclosure
Pre Qualification
A writer statement by a loan officer stating the chances of the borrower’s for qualifying for the home loan.
Qualifying Ratio
The ratio that calculates the borrower’s fixed monthly expenses to his gross monthly income.
Rural Development
A government agency also known as RD that issues final approval on USDA loans.
Seller Concessions
Concessions that help the buyer to avoid out of pocket expenses in a purchase transaction on a USDA loan.
Title
A document that is legal and states a person’s right or ownership of a property.
Total Debt Ratio
Also known as back-end ratio where the housing payments and monthly debt are divided by gross monthly income.
Underwriter
A licensed person that states whether a person is eligible for a mortgage loan.
VA Loan
Mortgage loan supported by US Veterans Administration and is government backed.
