Mortgage and Real Estate Terms – L

LENDER BUY-DOWN MORTGAGE – a convertible mortgage offering a discounted interest rate at the beginning of the loan that gradually increases to an agreed-upon fixed-rate over the first few years of the loan. It provides lower initial payments and a stable final monthly rate, but the final rate may be somewhat higher than on a standard fixed-rate mortgage.

LIABILITY INSURANCE – insurance covering the risks related to the property, and personal liability claims of other parties against the insured party.

LIBOR – see London Interbank Offered Rate below. Many popular adjustable rate mortgage products such as 5 year adjustable rate mortgages and 3/1 ARMs use this index.

LOAN APPLICATION – typically a combination of standardized government forms and forms provided by the lender – a 1003 form being the most common.

LOAN ORIGINATION FEE – the fee charged by a lender/loan agent (sometimes called “points”) to make the funds available to you, an off-set of its marketing and overhead expenses.

LOAN PROCEEDS – part of the money you borrow.

LOAN-TO-VALUE RATIO – the relationship between the amount of the consumer’s residential real estate mortgage loan and the appraised value of the property expressed as a percentage. In some cases, we fund loans at LTV’s in excess of 100%. Check out our 100% mortgage financing section for more information.

LOAN TYPES: Conforming – Conforming loans refer to a residential real estate loan in amounts that conform to CONSERVATIVE government lending standards as determined by Fannie Mae & Freddie Mac (the original government agencies, set up in the early 1940’s, established to help people finance new homes). Conforming loans (on single family homes) range in amounts up to $417,000. Although conforming loans are serviced by these government agencies, the mortgage industry has adopted the term to express loan quality standards and amounts in this range. These generally are “quoted” as the lowest mortgage rates you see around (to get your attention). Normally utilized for purchasing a home with a 5-20% down payment, full documentation, and decent credit is often required. The quoted low rates are wonderful sounding “BAIT”, but not everyone is “CONFORMING”.
Jumbo – Jumbo loans refer to those loan amounts outside of the “conforming” range or, above $417,001 (ask an Loan Advisor for state by state exceptions).
Non-Conforming – Can be an applicant with a ‘conforming’ type high quality credit history, but someone looking for a mortgage loan with more lenient standards, then the conservative ‘conforming’ guidelines. Also applies to customers with credit scores that are below the ‘conforming’ range. ‘Non-conforming’ lenders help over 60% of all loan applicants, however the rates will be higher.
No Documentation (No Doc) or Low Documentation Loans – In certain situations it is either difficult or impossible for potential borrowers to show a lender their “taxable” income on paper. In these instances any of the above described programs can be used, but under circumstances called NIV or No Income Verification. All of the other program parameters must be met, however, in the case of income, a borrower may only be required to show a operating license or business license and/or limited income information. With this type of financing, rates & fees offered tend to be slightly higher. This type of financing is recommended for self-employed borrowers or borrowers who have difficulty showing their income on paper, for one reason or another.
Cash-Out Refinances – Favorable only under low or dropping interest rate markets. This is a substitute for home equity (second mortgage) lending; usually more costly as well. Occasionally, when refinancing a first trust deed mortgage.

LONDON INTERBANK OFFERED RATE (LIBOR) – the rate at which banks in the foreign market lend dollars to one another. LIBOR varies by deposit maturity. This moving standard, is a common interest rate index, it’s one of the most valid barometers of the international cost of money. A guide used by many lender funding sources for ARM loans.

LOSS PAYABLE CLA– USE – an insurance policy provision for payment of a claim to someone, other than the insured, who holds an insurable interest in the insured property.