Mortgage Terms

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The mortgage industry has many unique and confusing terms and acronyms. We hope these descriptions help you to better understand the lending process.

Team Souther Glossary

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There are 8 names in this directory beginning with the letter R.
Rate Cap
Some lenders include a rate cap with their rate locks. These caps give lenders the ability to give borrowers a slightly higher interest rate if rates rise considerably before closing.

Rate Lock
A binding commitment that locks a borrower to a specific interest rate. Borrowers can typically lock their interest rate as soon as they sign a purchase agreement and up to five days before the loan closing. Rate locks are good for specific blocks of time. The most common lock periods are for 15 days, 30 days, 45 days and 60 days.

A real estate agent who is a member of the National Association of Realtors.

A loan that replaces an existing mortgage to finance at a lower interest rate and/or take out cash. The most common reason for refinancing is to take advantage of interest rates lower than when the loan was originally made.

This is cash set aside to cover costs and expenses. Having additional money set aside can help strengthen a loan application.

Residual Income
This is a lending standard unique to VA loans. Residual income is the amount of money a borrower retains each month after covering all monthly debts and obligations. Veterans must hit a minimum level of residual income (depending on geography and family size) in order to satisfy VA requirements.

This stands for Real Estate Settlement and Procedures Act, a 1974 law that increased transparency and disclosures involving the home-buying process. The loan application paperwork is sometimes lumped together as RESPA documents or RESPA packets. Lenders have three days to send you the paperwork once they've pulled your credit.

Retail Rate
This is a flat, non-negotiable mortgage rate offered by banks, credit unions and other lending institutions. The retail institution must be VA-approved in order to offer VA purchase loans.

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Down payment is cash that you pay upfront for your home.
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Number of years you have to pay.
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Interest rate (per year)
The percentage of interest that you will pay on your mortgage for a specific term.
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Property tax
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Home insurance
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PMI is Private Mortgage Insurance which is usually required to pay if your Down payment less than 20%.
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