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The Home Buyer's Dictionary

Affordability
A consumer's capacity to afford a house. Affordability is usually expressed in terms of the maximum price the consumer could pay for a house, and be approved for the mortgage required to pay that amount.


Agreement of Sale
A contract signed by buyer and seller stating the terms and conditions under which a property will be sold.


Amortization
The repayment of principal from scheduled mortgage payments that exceed the interest due.


Amortization schedule
A table showing the mortgage payment, broken down by interest and amortization, the loan balance, tax and insurance payments if made by the lender, and the balance of the tax/insurance escrow account.


Application
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the solicited lender needs to make a decision.


Approval
Acceptance of the borrower's loan application. Approval means that the borrower meets the lender's qualification requirements and also its underwriting requirements.

Balance
The amount of the original loan remaining to be paid. It is equal to the loan amount less the sum of all prior payments of principal.


Co-Borrowers
One or more persons who have signed the mortgage deed, and are equally responsible for repaying the loan.

Collateral
Assets pledged as security for the repayment of a loan.


Credit report
A report from a credit bureau containing detailed information bearing on credit-worthiness, including the individual's credit history.

Debt consolidation
Rolling short-term debt into a home mortgage loan, either at the time of home purchase or later.

Down payment
The difference between the purchase price and the loan amount, expressed in dollars, or as a percentage of the price. For example, if the house sells for $100,000 and the loan is for $80,000, the down payment is $20,000 or 20%.

Equity
In connection with a home, the difference between the value of the home and the balance of outstanding mortgage loans on the home.

Possible Available Equity in your Home

Value of Home/Property

Length of Mortgage

Number of Years Paid to Date

Available Equity

$ 5 Million

20 years

5 years

$ 2.8 million

$ 5 Million

20 years

10 years

$ 4 million

Fees
The sum of all upfront cash payments required by the lender as part of the charge for the loan.
Peril insurance
Insurance purchased by the borrower, and required by the lender, to protect the property against loss from fire and other hazards.

Processing fee
The fee that some lenders charge to accept an application. Currently Victoria Mutual does not charge a processing fee for mortgage applications.

Refinance
Paying off an old loan while simultaneously taking a new one. This may be done to reduce borrowing costs under conditions where the borrower can obtain a new loan at an interest rate below the rate on the existing loan. It may be done to reduce the monthly payment.

Term
The period used to calculate the monthly mortgage payment.


Underwriting
The process of examining all the data presented about a borrower, the property and the transaction to determine whether the mortgage applied for by the borrower should be issued.


Underwriting requirements
The standards imposed by lenders in determining whether a borrower qualifies for a loan. These standards are more comprehensive than qualification requirements in that they include an evaluation of the borrower’s creditworthiness and ability to repay.

Valuation
A written estimate of a property's current market value prepared by an appraiser.


Valuator
A professional with knowledge of real estate markets and skilled in the practice of appraisal. When a property is appraised in connection with a loan, the appraiser is selected by the lender, but the appraisal fee is usually paid by the borrower. Lucky for you, appraisals connected to a VMBS mortgage application attracts a 50% discount once done through Victoria Mutual Property Management Limited.

Valuation fee
A fee charged by an appraiser for the appraisal of a particular property.

Variable Rate Mortgage
A mortgage on which the interest rate, after an initial period, can be changed by the lender.