Glossary

A

Acceptance

An agreement between a borrower or seller to be bound by the terms of the loan or offer.

Adjustable-rate mortgage (ARM)

A mortgage where the interest rates can change during the lifecycle of loan such as at the initiation of the loan. Many ARMs do have rate caps that limit how much the interest rates can change.

Artificial intelligence

A facet of computer science where machines are able to demonstrate intelligence similar to human intelligence—making decisions, recognizing speech, performing translations, and improving over time.

Automation

A technique where a system automatically executes a task with minimal interaction or manual input.

B

Balance sheet 

A table-based financial statement conveying the borrower’s net worth, liabilities, and assets.

Business metric

A business metric is something quantifiable that can be used to determine the success of a business process such as external customer support processes.

Buyer’s journey

A process buyer’s go through from research to trial when deciding whether to purchase a product or service.

C

Cash-out refinance

A refinance option where the new loan is larger than the principal and the difference is paid out in cash.

Chatbot

A chatbot can be an AI-driven application that simulates human thinking, interaction, and conversation.

Closing costs

These include costs such as attorney’s fees, title search fees, appraisal fees, title insurance, credit report coasts, ownership transfer, and more. Closing costs can cost up to 3% of the loan amount.

Co-signer

Another individual who signs a loan and assumes the same payment responsibilities without the benefits of the loan.

Customer experience

The customer experience is based on interactions with the company over the lifetime of the relationship.

Customer service

Customer service is how a company delivers products and services to their customers.

D

Debt-to-income ratio

This is the monthly debt payment divided by gross monthly income before taxes. According to the Federal Housing Administration (FHA), monthly mortgage payments should not exceed 31% of gross monthly income before taxes.

Default

The inability to make mortgage payments on time, which can induce a forbearance or foreclosure.

Delinquency

When payments are not made on time, usually 45 days out.

Equity

The difference between the appraised value of the home vs. liens and mortgage balances.

F

Fair market value

The appraised (likely) value of a home.

Forbearance

A period where loan payment may be reduced due to a verifiable financial hardship. Interest still accrues.

Foreclosure

When a property is sold by the lender to cover the costs of a borrower defaulting on the loan.

I

Installment loan

Loan terms that require equal payments at specified times.

L

Line of credit

A lender agrees to extend credit for a specific amount of time.

Loan origination

When a mortgage lender provides a home loan.

Loan officer 

Loan officers evaluate, verify, and confirm or deny loan approvals.

Loan processing

The process of managing mortgage applications and preparing them for an underwriter.

M

Mortgage

A mortgage is a legal means of awarding a lender the lien on a property for loan repayment. Mortgages can last between 10 and 30 years.

O

Origination fee

The lender sends an origination fee to cover the costs of processing a loan and can add up to around 1% of the loan amount.

P

Pre-approval

A loan offered under specific terms.

R

Rate

The interest rate of a loan. 

Refinance

Acquiring a new loan to pay off the existing loan.

S

Secured loans

Loans awarded for collateral or property such as real estate, boats, and automobiles.

U

Underwriter

The individual who approves or denies a loan.

Underwriting

Taking a borrower’s creditworthiness, employment, assets, and other factors to determine loan approval based on specified requirements.

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