Allows the lender to call your entire loan balance due if you should default on the loan.

The APR is found on the Truth In Lending Statement, which is a legal size page that goes hand in hand with the Good Faith Estimate(GFE). APR is a measure of the cost of credit, expressed as a yearly rate. It includes interest, as well as other charges. Because all lenders are supposed to follow the same rules to ensure the accuracy of the annual percentage rate, it helps provide consumers with a better basis for comparing the cost of loans, including mortgage plans. Items on the Good Faith Estimate marked with the letters "PFC" are used in calculating the APR by subtracting these amounts from the loan amount giving you the "AMOUNT FINANCED" located on the Truth In Lending. The APR is not your interest rate. Your interest rate is found at the top of the Good Faith Estimate.

A mortgage where the interest rate is not fixed, but changes during the life of the loan in line with movements in an index rate. You may also see ARMs referred to as AMLs (adjustable mortgage loans) or VRMs (variable-rate mortgages). For more information on ARM loans see ARMs located on our "Loan Programs" page.

This is the loan payment required to pay off your loan amount over a fixed period of time, i.e., 30 years, 15 years at a specific interest rate. An amortization schedule lists each payment broken down into the amount that goes to principal, interest and your remaining balance after the payment is posted.

An estimate of the value of your home and property by a state licensed appraiser. The appraisal value is usually determined by a comparison of other similar properties that have recently sold in your area.

Some loans allow the buyer of a home to assume the sellers existing mortgage. VA loans are assumable with restrictions.

Also called LP for Loan Prospector, the computer system developed for Freddie Mac and DU for Desktop Underwriter, developed for Fannie Mae. Both of these systems are computer models established from the statistics of many thousands of past loans and how those loans performed during the life of the loan. Meaning, were there late pays, foreclosures, perfect payment history, etc. and what statistics were present for each of these issues. The affect of these electronic underwriting systems is qualifying ratios are not as important as they used to be and less documentation may be required. These systems can compensate for higher ratios, in some cases much higher ratios, and still qualify you for the loan approval. Items that are considered compensating factors would be high credit scores, good cash reserves after closing, larger down payments, long term employment with the same employer, etc.

Automated underwriting is used for conventional loans, certain investor loans, FHA loans and VA loans. There are also several enhanced loan programs designed specifically for LP or DU.

This type of loan allows you to make the equivalent of a 30 year loan payment for 5 or 7 years. At the end of that time period the entire balance remaining on the loan must be paid to the lender or must be refinanced.

Broker compensation is determined by the points associated with the interest rates. For example, a $100,000 loan at 6.0% interest rate and zero points pays no broker compensation. If this loan is sold on Wallstreet the lender will get $100,000 for the loan. However, if the same loan at an interest rate of 6.25% that pays 1.0% in points to the lender when it is sold on Wallstreet it will net the lender $101,000 because the interest rate is above the going rate on Wallstreet, thus Wallstreet pays a premium to buy that loan. That premium is passed on to the broker as Broker Compensation.

Texas One Mtg. uses broker compensation to offset the amount we charge to originate your loan. If the broker compensation is greater than the amount we charge to originate your loan, we will credit the balance towards your closing costs.

Broker compensation is paid to the broker by the lender. IT IS NOT PART OF THE CLOSING COSTS PAID BY THE BORROWERS.

Any broker compensation the broker is receiving should be listed at the bottom section of your Good Faith Estimate. Our Good Faith Estimate list it as Anticipated Broker Compensation.

With a buydown, the seller pays an amount to the lender so that the lender can give you a lower rate and lower payment. The seller may increase the sales price to cover the cost of the buydown. Buydowns can occur in all types of mortgages.

A term used with ARM loans. A cap is the limit on how much the interest rate or the monthly payment can change, either at each adjustment or during the life of the mortgage. Payment caps don't limit the amount of interest the lender is earning, so they may cause negative amortization. Usually expressed as 2/6 Caps, this would be an ARM loan with a maximum payment adjustment of 2% per adjustment and a maximum life time change of 6%.

Most of the fees listed on your Good Faith Estimate are considered closing costs. Fees such as, escrows, prepaid homeowners insurance, prepaid interest, etc. are sometimes called closing costs, but are actually "Prepaid Items" even though you have to pay them at closing along with the other closing fees. The Good Faith Estimate provides you with an estimate of your fees. Please submit the Online Pre-Qualification form to us so we can email you a Good Faith Estimate for your review.

A provision in some ARMs that allows you to change the ARM to a fixed-rate loan at some point during the term. Usually conversion is allowed at the end of the first adjustment period. At the time of the conversion, the new fixed-rate is generally set at one of the rates then prevailing for fixed-rate mortgages. The conversion feature may be available at extra cost.

Used in place of a mortgage to secure the payment of a Note.

Often called "points" the Discount Points are a one-time charge used to adjust the yield on the loan to what market conditions demand or to lower (buy-down) the interest rate. Negative discount(-0.250), which appears on the rate sheet from time to time, is a credit to help pay the borrower's closing costs, down payment, etc. depending on the terms of the loan program being used. Each "point" is equal to 1% of the mortgage loan amount. For example, if you get a mortgage loan for $100,000, one point is equal to 1% of $100,000 or $1000.

Money given to the seller and usually held by the Title Company as a deposit on the purchase of the home.

A federal law that requires lenders and creditors to make credit equally available to all borrowers without discrimination based on race, color, religion, national origin, sex, age, marital status or receipt of income from public assistance programs.

The difference between the value of your property and the amount you owe on your property.

Usually a title company or real estate attorney that carries out the settlement or Closing of the loan for the seller, buyer and lender. The escrow deposit is usually held by the escrow agent.

The funds collected each month by the lender and held for the purpose of paying the borrowers property taxes and home owners insurance when due. Escrows are required on loans with a loan to value greater than 80%.

E-signatures is an electronic digital signature service that allows you to securely review and sign your initial loan application and loan documents online through DocuSign's secure document service. It's easier and quicker than signing by hand, saving time and money.

Federal National Mortgage Association (FNMA). This is a quasi-governmental agency that purchases and sells conventional mortgages and sets the regulations used to underwrite and approve loans. Fannie Mae regulates & operates the DU automated underwriting system.

Federal Home Loan Mortgage Corporation (FHLMC). This is a quasi-governmental agency that purchases conventional mortgages and sets the regulations used to underwrite and approve loans. Freddie Mac regulates & operates the LP automated underwriting system. This is the system most used by Texas One Mtg. for AUS approvals.

A mortgage where the monthly principal and interest payments are fixed for the term of the loan; i.e., 15 or 30 years fixed.

The Federal Housing Administration is a federal organization to administer low down payment home loans. More information on FHA Loan programs can be found on our "Loan Programs" page. Links to FHA can be found on our Helpful Links page.
** Texas One Mortgage does not offer FHA loans.

Government National Mortgage Association (GNMA). This agency buys and sells insured or guaranteed by VA or FHA loans.

This is an estimate of all the fees and costs for your loan. Some fees may change during the loan process, such as property taxes or homeowners insurance, since many times the borrower doesn't know the actual amounts for these items when applying for the loan.

A new Good Faith Estimate should be provided to the borrower whenever the loan terms change or when the costs on the Good Faith Estimate change by more than $200 from the most recent Good Faith Estimate provided to the borrower. The Good Faith Estimate and Truth In Lending Statement are generally provided together.

Click here to view a detailed description of each item listed on the Good Faith Estimate.

Click here if you need a Good Faith Estimate emailed to you.

Generally called "homeowners insurance", it is required on all mortgage loans. It is purchased by the borrower to cover the cost of property damage to the home and property. The lender that holds the mortgage on your property is required to be listed on your homeowners insurance policy. Once you have chosen the insurance company and agent you wish to use you will need to provide us with their name and phone number. The cost for homeowners insurance is normally paid at closing.

A term used with ARM loans. The index is the measure of interest rate changes that the lender uses to decide how much the interest rate on the ARM will change over time. No one can be sure when an index rate will go up or down. Some common indexes used are: 1 year Treasury rate, COFI (Cost of Index Funds) & 6 month LIBOR (London Interbank Offered Rate).

This is the monthly principal and interest payment rate. Taxes and insurance need to be included to arrive at the total monthly payment. Not to be confused with the APR or Annual Percentage Rate.

Loans with a loan amount greater than the Conforming Loan Limits set by Fannie Mae and Freddie Mac.

The ratio expressed as a percentage of the loan amount to the sales price or appraised value, whichever is less. A $100,000 sales price with 20% down means the LTV is 80%.

A term used with ARM loans. The number of percentage points the lender adds to the index rate to calculate the ARM interest rate at each adjustment.

Insurance obtained on a conventional or FHA loan to protect the lender in the event of default by a borrower. Normally used when the down payment is less than 20%. Monthly mortgage insurance is added to the borrower's monthly payment. Mortgage insurance is not tax deductible. (Also called Private Mortgage Insurance.)
** We use a combined 1st and 2nd lien to avoid mortgage insurance on many of our loans. This usually gives you a lower monthly payment, a higher tax deduction and you build equity in your home faster.

Amortization means that monthly payments are large enough to pay the interest and reduce the principal on your mortgage. NegAm occurs when the monthly payments do not cover all of the interest cost. The interest cost that isn't covered is added to the unpaid principal balance. This means that even after making many payments, you could owe more than you did at the beginning of the loan. NegAm can occur when an ARM has a payment cap that results in monthly payments that are not high enough to cover the interest due.

If the property will not be occupied by the borrower it is considered a NOO or Investment(Rental) property.

To be an Owner Occupied property the borrower must be living in the property. Properties that have 2 to 4 units with the borrower living in one of the units and the remaining units are rented is considered an Owner Occupied property.

This fee is paid to us for the loan. Often expressed as a percentage of the loan. Each "point" is equal to 1% of the mortgage loan amount. For example, if you get a mortgage loan for $100,000, one point is equal to 1% of $100,000 or $1000. Generally the buyer pays this fee unless other arrangements have been made with the seller and written into the sales contract. The amount of the origination fee paid by the borrower can be reduced with Broker Compensation paid to us by the lender. See "Broker Compensation" for details.

Most loans are now Conditionally Approved using our Automated Underwriting Systems. A pre-approval takes the approval process one step further by having an underwriter review and approve you loan in addition to the AUS approval.

This is a credit only loan approval - subject to an acceptable appraisal, title commitment and survey when you find the home you wish to buy. At this point you will be fully approved to buy a home for a specific amount, usually the high end of the sales prices you will be looking to purchase a home for. Pre-Approval provides the borrower with several advantages.
1. Faster closing when you find the home you want. Completion of an acceptable appraisal, title commitment and survey and your ready to close on your new home.
2. Greater negotiating power with the seller because you are an Approved Buyer. Studies show a pre-approved borrower can save an average of 7% on the sales price.
3. Your pre-approval will allow you to purchase your home with confidence knowing your ALREADY approved to by a house costing X amount of dollars. No guess work. No anxiety.

Complete our Online Loan Application and submit it to us.

After reviewing your application your loan information will be run through our Automated Underwriting System for a Conditional Approval.

Your complete loan application, Good Faith Estimate, Truth In Lending and disclosure forms for your review and signatures will be overnighted to you along with copies for your records. A written list of the required documents needed and a return overnight envelope for you to return the documents and a check for the required fees. Usually $325 for the appraisal and from $39.00 for your credit report.

We also offer e-signatures, an electronic digital signature service that allows you to securely review and sign your initial loan documents online through DocuSign's secure document service. It's easier and quicker than signing by hand, saving time and expense.

Once you have returned your loan package or e-signed your to our office we will complete the loan process and submit your loan for an underwriter to review and approve your file.

Normally we can provide you with a "Conditional Loan Approval Letter" for your realtor or seller so you can start house hunting right away.

When you find a property you wish to buy we will need a copy of the sales contract and the appraisal(usually $325) fee. $350 for VA loans.

Some times referred to with closing costs, the prepaids are escrows for taxes and insurance, prepaid interest, mortgage insurance, etc. Refer to your Good Faith Estimate for your prepaid items.

You will find several items on the Good Faith Estimate marked with PFC. These items are added up and used on the Truth In Lending to calculate the "Amount Financed" by subtracting the total PFCs from the loan amount. The Amount Financed is then used to calculate the APR.

We have made the Pre-Qualification process fast and easy for you. Just complete our Online Pre-Qualification form and submit it to us.

Prequalifying is simply a review of your income & debt ratios and the amount of money available for down payment & closing costs to determine if you will qualify for a certain loan amount or how much you will qualify for.

Generally, a prequalification assume you have fairly good credit. If not, at least a "Conditional Approval" will be required to prequalify you.

A Good Faith Estimate is prepared and emailed to you for your review along with an email cover letter.

The insurance obtained on a conventional or FHA loan to protect the lender in the event of default by a borrower. Normally used when the down payment is less than 20%. Monthly mortgage insurance is added to the borrower's monthly payment. Mortgage insurance is not tax deductible.
** We use a combined 1st and 2nd lien to avoid mortgage insurance on many of our loans. This usually gives you a lower monthly payment, a higher tax deduction and you build equity in your home faster.

Qualifying ratios are not as important as they used to be due to Automated Underwriting Systems we use for loan approvals these days. They are generally used for prequalification purposes prior to submitting your loan for an AUS approval. They are also used on specialty loan programs or when a loan is not eligible for an AUS approval.

One or two ratios may be used, depending on the loan program requirements. The TOP or first ratio is the ratio between your gross monthly income and the total monthly payment(PITI). The BOTTOM or second ratio is the ratio between your gross monthly income and the total monthly payment(PITI) plus all other monthly debt payments for car loans, credit cards, student loan, etc. It does not include payments for cable TV, auto insurance, etc. If only one ratio is used, it is the BOTTOM ratio.

Typical ratios are for manual underwriting:
Conforming loans with a loan to value greater than 90% - 28/36.
Conforming loans with a loan to value of 90% or less - 33/38.
FHA loans  - 29/41.
VA loans  - 41.

AUS loan approvals - 50% or higher.
** Most purchase loans approved using AUS will allow ratios up to 50%+ with excellent credit. Refinance loans can be much, much higher if the LTV is low and the borrower has real good credit. With our zero down conventional loan program the AUS system has approved loans with ratios up to 65%!

The insurance obtained on a conventional or FHA loan to protect the lender in the event of default by a borrower. Normally used when the down payment is less than 20%. Monthly mortgage insurance is added to the borrower's monthly payment. Mortgage insurance is not tax deductible.

Title insurance is issued by a Title Company to insure the borrower against errors in the title to your property.

A disclosure required by federal law to be provided to the borrower within three business days of applying for a home mortgage loan or when the loan terms change or when the cost on the Good Faith Estimate changes by more than $200 from the most recent Good Faith Estimate provided to the borrower. The Good Faith Estimate and Truth In Lending Statement are generally provided together.
Click here to view a description of the items listed on the Truth In Lending. <Details>

Loans provided to qualified veterans by the Department of Veteran Affairs. No down payment is required, but a VA Funding Fee is required unless the veteran is exempt. Exemptions for the VA Funding fee are usually provided to veterans with service related disabilities of 10% or more. See VA Loans on our Loan Programs web page.