Late Charge
The penalty a
borrower must pay when a payment is made a stated number of days (usually
15) after the due date.
Lease
A written
agreement between the property owner and a tenant that stipulates the
conditions under which the tenant may possess the real estate for a
specified period of time and rent.
Lease-purchase Mortgage Loan
An
alternative financing option that allows low- and moderate-income home
buyers to lease a home from a nonprofit organization with an option to
buy. Each month's rent payment consists of principal, interest, taxes and
insurance (PITI) payments on the first mortgage plus an extra amount that
is earmarked for deposit to a savings account in which money for a
downpayment will accumulate.
Nonprofit
organizations may use the lease-purchase option to purchase a home that
they then rent to a consumer, or "leaseholder." The leaseholder has the
option to buy the home after a designated period of time (usually three or
five years). Part of each rent payment is put aside toward savings for the
purpose of accumulating the down payment and closing costs.
Lease-purchase Option
Nonprofit
organizations may use the lease-purchase option to purchase a home that
they then rent to a consumer, or "leaseholder." The leaseholder has the
option to buy the home after a designated period of time (usually three or
five years). Part of each rent payment is put aside toward savings for the
purpose of accumulating the down payment and closing costs.
Leasehold Estate
A way of
holding title to a property wherein the mortgagor does not actually own
the property but rather has a recorded long-term lease on it.
Legal Description
A property
description, recognized by law, that is sufficient to locate and identify
the property without oral testimony.
Liabilities
A person's
financial obligations. Liabilities include long-term and short-term debt,
as well as any other amounts that are owed to others.
Liability Insurance
Insurance
coverage that offers protection against claims alleging that a property
owner's negligence or inappropriate action resulted in bodily injury or
property damage to another party.
LIBOR-based ARMs
The London
Interbank Offered Rate (LIBOR) is based on the interest rate that major
international banks are willing to lend and borrow funds for a specified
period of time in the London interbank market. The LIBOR is similar to the
prime-lending rate posted by major U.S. banks.
You can
select an adjustable rate mortgage (ARM) that adjusts to the LIBOR at
specified periods, usually every six months. This type of ARM typically
has a per-adjustment period cap of 1 percent and is offered with either a
5 percent or a 6 percent lifetime rate cap.
Lien
A legal
claim against a property that must be paid off when the property is sold.
Lifetime Payment Cap
For an
adjustable-rate mortgage (ARM), a limit on the amount that payments can
increase or decrease over the life of the mortgage.
Also see "cap"
entry
Lifetime Rate Cap
For an
adjustable-rate mortgage (ARM), a limit on the amount that the interest
rate can increase or decrease over the life of the loan.
Line of Credit
An
agreement by a commercial bank or other financial institution to extend
credit up to a certain amount for a certain time to a specified borrower.
See home equity line of credit.
Liquid Asset
A cash
asset or an asset that is easily converted into cash.
Loan
A sum of
borrowed money (principal) that is generally repaid with interest.
Loan Application
The loan
application is a detailed form designed to provide information from you
that your lender will need. Lenders use the application to evaluate
whether or not they can give you a loan, and if so, the amount of money
they can lend you. The "four Cs" of credit come into play when filling out
an application -- they are capacity, credit history, capital and
collateral.
The loan
application form requests information such as:
-- bank
account balances and account numbers, as well as bank branch address;
-- information about where you work or what sources of income you have;
-- outstanding debts (including loans and credit cards with names and
addresses of creditors).
Information
needed for the loan application may vary from lender to lender, so prior
to filling out the application it's important to discuss with your lender
what items your lender will need.
If your an
approved lender uses Desktop Underwriter, an automated underwriting
system, they will not have to ask you for as much information regarding
your employment, credit, or residence history. As a result, you won't need
to provide as much documentation to back-up the information. Ask your
lender if the lender uses this time-saving system.
The
commitment letter states the dollar amount of the loan being offered, the
number of years you have to repay the loan, the loan origination fee, the
points, the annual percentage rate, and the monthly charges.
The letter
also states the time you have to accept the loan offer and to close the
loan. Make sure you understand all aspects of the commitment letter
because by signing it, you indicate your acceptance of its terms and
conditions.
Loan Limit
We operate
exclusively in the secondary mortgage market, where we help to ensure that
money for mortgages is available to home buyers in every state across the
country. In keeping with the mission to help more low-, moderate-, and
middle-income people buy homes, our loan limits are adjusted each year, in
response to changes in housing affordability nationwide.
The current
loan limit for a single-family home is $322,700.* The maximum amount for
any mortgage in Alaska, Hawaii, and the U.S. Virgin Islands is 50 percent
higher than our loan limits in the rest of the country.
Generally,
any mortgage above this limit is considered a "jumbo loan," and will carry
a higher interest rate. The amount of money you would save buying a home
with a 30-year mortgage financed by Fannie Mae can range from several
thousand dollars to as much as $24,600 over the life of a 30-year
mortgage.
*The loan
limit is $413,100 for a two-family home; $499,300 for a three-family home;
and $620,500 for a four-family home.
Loan Origination
The process
by which a mortgage lender brings into existence a mortgage secured by
real property.
Loan Origination Fee
The loan
origination fee covers the administrative costs of processing the loan. It
is often expressed in points. One point is 1 percent of the mortgage
amount.
For
example, a $100,000 mortgage with a loan origination fee of 1 point would
mean you pay $1,000.
Loan Terms and Conditions
With a
reverse mortgage, a lender can call in your loan under certain conditions.
But, if you occupy the property as your primary residence, are not absent
from the property for 12 consecutive months.
You may
instruct the lender to pay the taxes and insurance on your behalf from
your reverse mortgage funds. The lender will set aside funds from your
reverse mortgage to pay for future taxes and insurance, as long as funds
are available.
Furthermore, as long as you comply with the terms noted above, you can't
be forced to sell your home to pay off the reverse mortgage, even if the
loan balance grows to exceed the value of your property.
Loan-To-Value (LTV) Percentage
The
relationship between the principal balance of the mortgage and the
appraised value (or sales price if it is lower) of the property. For
example, a $100,000 home with an $80,000 mortgage has a LTV percentage of
80 percent.
A written
agreement in which the lender guarantees a specified interest rate if a
mortgage goes to closing within a set period of time. The lock-in also
usually specifies the number of points to be paid at closing.
Lock-in Period
The time
period during which the lender has guaranteed an interest rate to a
borrower.
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