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A rental agreement between a landlord and a tenant that lasts for an agreed period of time
A lease must include a property's description, the date the lease expires, the price of rent and the signatures of the landlord and tenant. A landlord may take back a property when the lease ends.
A tenant’s right to use a property for a fixed period of time
If you pay rent, you hold a leasehold estate, commonly called a lease or leasehold. This means that you can freely live and use the facilities of a rented property, which can be an apartment, house or condo, under the terms of a lease until it expires.
See: Lease, Estate
All types of debts and obligations
Lenders want to know your liabilities. Liabilities include loans, credit card debt, child support, insurance premiums, alimony, etc.
See: Acceptable debt
A claim placed on a property to secure a debt
The mortgage on your home is a voluntary lien - you agree to put up your home as security that you'll repay the loan. Creditors, such as the IRS or someone who has won a civil court suit against you, can have an involuntary lien put against your home. All liens must be paid off before you can transfer the property to someone else.
See: Judgment lien, Mechanic's lien, Foreclosure
Lifetime rate cap
An upper and lower limit on the interest rate on an adjustable rate mortgage (ARM) for the life of a loan
The upper and lower limits are often called the ceiling and floor respectively.
See: Cap, Adjustable rate mortgage (ARM)
Any valuable item that is easily turned into cash
Your liquid assets are the easiest to cash, which is helpful in gathering money for a down payment. Certificate of deposits (CDs) and money market accounts are liquid assets. Antique furniture, real estate, boats and star-studded baseball card collections are not liquid assets since they take time to sell.
A sum of money that a lender gives to a borrower that must be repaid along with interest
There are many types of loans to choose from in financing your new home. Each loan will have a different interest rate and term, which will affect the monthly payments. How much you put towards a down payment will also affect your monthly payment. The three most common types of loans are fixed rate, adjustable rate and balloon mortgages.
See: Fixed rate mortgage, Adjustable rate mortgage (ARM), Balloon mortgage
Loan origination fee
The lender and broker’s service fee due on the closing date as part of the closing costs
See: Closing costs
The person who collects and organizes all the documents required by the lender to approve a loan
The loan processor ensures that a lender has all the information needed to approve your loan, including your credit report, income and asset documentation and signed loan application. The loan processor may also order your title insurance and arrange the property's appraisal. The processor works for either a lender or a broker.
Loan-to-value ratio (LTV)
The amount of the loan compared to the selling price expressed as a percentage
LTV compares how much a person plans to borrow versus the property's value. All lenders use LTV as a guideline. If your LTV is over 80%, the lender usually requires that you buy Mortgage Insurance (MI). The LTV cut-off will vary depending on the lender and the type of loan. To lower your LTV, you will need to provide a larger down payment.
See: Down payment, Equity, Mortgage insurance
A lender’s guarantee for a specific interest rate on a loan
Until you request a rate lock, a loan’s interest rate quoted by either a lender or broker is apt to change due to market fluctuations. Typically you can request a rate lock after you submit your signed loan application/1003 and other requested forms. Once you’ve settled on a rate, the lender usually guarantees the rate for 30, 45 or 60 days.
The amount of time that a lender will guarantee a loan’s interest rate
After locking in the interest rate, the lender will guarantee that rate for a certain period of time, usually for 30, 45 or 60 days (Normally, the longer the lock period, the more points that you have to pay up-front since the lender is taking a greater risk when they guarantee a rate for a long time).
The lock period determines the amount of time you have to complete the financing. If you need extra time, you may have to pay up to 1 point (1% of the loan amount) or more, and there’s no guarantee that you can keep your original interest rate after the expiration date.
See: Rate lock