Loan Services: Mortgage Loans
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Back end ratio
A calculation of your total living expenses, including housing costs, divided by your income
Lenders use back end ratios as a guideline to see if you can qualify for a loan. The acceptability of a back end ratio is set by each individual lender.
To calculate your back end ratio, add up all of your monthly expenses, including any debt, as well as the expected housing costs. (Housing costs are broken down into four parts - the mortgage’s principal, the mortgage’s interest, taxes and insurance.) Then, divide the total by your gross monthly salary.
See: Front ratio
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Balloon mortgage
A loan, with a fixed interest rate and monthly payment at the beginning of the loan, that becomes due in full after a set amount of time
A balloon mortgage generally has a lower interest rate than a fixed rate mortgage which can save you money at the beginning. However, when the loan becomes due you have to pay it in full either by paying for it out of pocket, refinancing, or selling, otherwise the bank will foreclose. Home buyers typically choose this type of loan because they plan to sell their home before the balloon payment is due.
See: Fixed rate mortgage, Adjustable rate mortgage
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Balloon note
A written agreement to pay a balloon mortgage's full balance when it becomes due
See: Balloon mortgage
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Balloon payment
The final lump-sum payment to pay off a balloon mortgage's balance
See: Balloon mortgage
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Bankruptcy
When you file for proctection from creditors due to insurmountable debt
You can either enter bankruptcy voluntarily or you can be forced to petition for bankruptcy after your creditors bring an involuntary petition against you.
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Before-tax income
Your income earnings before federal and local taxes are taken out.
Before-tax income, also called gross income or pre-tax, is used to calculate your tax bracket and other items that you have to report on your annual income tax forms.
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Blanket insurance policy
One insurance policy that covers more than one piece of property
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Blanket mortgage
A loan that covers more than one piece of property
Land developers commonly use blanket mortgages when they buy a plot of land and divide it into many separate lots. They spread the mortgage across the entire property rather than over each individual lot.
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Bond
A note that a government or corporation gives an investor, which promises to repay the borrowed amount plus interest on a specific date
Bonds help finance large, expensive projects, such as building new bridges or highways. When you buy a bond, the seller agrees to repay the bond principal to you when it matures and to make interest payments.
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Breach of contract
When someone breaks a part (or whole) of a written agreement
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Bridge loan
An interim loan for buyers who need more time to finish the long term financing
Bridge loans are short-term, usually up to 1 year. Often bridge loans are made to provide the buyer money to close on a new home before they sell their present home and get their long term financing. When the old home sells, the buyer pays off the bridge loan and looks into permanent financing. Bridge loans are also called interim financing, swing loans or turnarounds.
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Building code
A set of government rules, which control the construction of buildings
Building codes are based on safety and health standards and lay down the law on design, material used, construction, use, repair, remodeling, and other similar matters. Building codes vary from place to place, but remodeling on a house, such as adding a new bathroom, may require a permit. The Building Department at your City Hall is the best source of information if you have any specific questions on building codes.
See: Zoning ordinances, CC&Rs
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Buydown
A payment made to the lender by the buyer, seller, or third party in exchange for a lower interest rate
Buydowns are commonly used to make qualifying for a loan easier since they lower a loan's interest rate. Sometimes, the builder, seller or lender who want to make the housing more attractive to buyers, will pay for the buydown. The payment is also called paying points or discount points.
See: Discount point
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