Purchase

For majority of borrowers, the main aim for taking the loan is to buy a property.

Prepurchase

Customer is approved for a mortgage before they sign a sales contract with a seller for a specific property.

Refinance

This is taken to payoff of an old mortgage with a new mortgage. Normally home refinancing is done when you have a mortgage on your home and apply for a second loan to pay off the first one.

Rate and Term

Customer refinances their old mortgage in order to obtain a lower interest rate or a different term.

Cash out

Customer refinances their old mortgage and borrows more than the outstanding balance in order to walk away with extra money.

Example; payoff other debts or to do home improvements.

Occupancy Types

Primary Residence

This is where the owner physically lives.

Second Home

It is the vacation home that the customer has in addition to their primary residence.

Investment Home

This is the property that the customer will not live in. This is bought only for an investment purpose.

Mortgage terms

Sales Contract

It is the written agreement between buyer and seller stating terms and conditions of the sale of a property. This contract will include the agreed upon price which is also called the ‘Sales Price’.

Appraised Value

An opinion or estimate of worth of a property based on how much similar homes in the area have sold for. The appraised value is determined by a licensed Real Estate Appraiser.

LTV or Loan to Value

The ratio of the amount borrowed compared to the lower of the appraised value or sales price of real property expressed as a percentage. The LTV is used to determine the level of risk a lender is taking when lending funding for the home. The percentage of the sales price that the customer is borrowing.

Formula

Loan to Value = Mortgage Amount or loan amount

Sales price of Appraise Value (whichever is lower)

Ex;

Mortgage amount : 72,500

Sales price : 88,000

Appraised value : 90,000

72,500 x 100 = 82.38 % LTV

88,000

PMI or Private Mortgage Insurance

PMI protects mortgage lenders against loss in the event of default by the customer.This allows lenders to make loans with lower down payments without taking too much of a risk. PMI is required in conventional loans with less than a 20 % down payment or when the LTV is over 80 %