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The ratio of the borrower's fixed monthly expenses to his gross monthly income.
The Front-End Ratio is the percentage of a borrower's gross monthly income (before income taxes) that would cover the cost of PITI (Mortgage Principal Payment + Mortgage Interest Payment + Property Taxes + Homeowners Insurance). In the case of a 28% Front-End Ratio, a borrower could qualify if the proposed monthly PITI payments were 28% or less of the borrower's gross monthly income.
The Back-End Ratio is the percentage of a borrower's gross monthly income that would cover the cost of PITI plus any other monthly debt payments like personal loans and credit card debt.
Please note that qualifying ratios are only a rough guideline in determining a potential borrower's credit-worthiness. Many factors such as credit history, down payment, and loan size will influence the decision to approve or disapprove a particular loan.
Real Estate Settlement Procedures Act
Also known as RESPA. Enacted by Congress to ensure that the consumer is provided with advance disclosure of the costs involved in the real estate settlement process. The law requires lenders to furnish this information after application only.
Money paid to the local authorities for recording a home sale, thereby making it part of the public records.
Obtaining a new mortgage loan on a property already owned (often to replace existing loans on the property).
The cancellation of a contract. It gives the homeowner three days to cancel a refinancing contract once it is signed if the transaction uses equity in the home as security.
See Real Estate Settlement Procedures Act.
A contract between a purchaser and a seller of real estate to convey title after certain conditions have been met.
A collection of agencies that buy mortgages from primary lenders. These mortgage funds are then pooled and sold to investors, much like a mutual fund. By purchasing loans from primary lenders, the secondary market supplies money for additional mortgages.
A mortgage made subsequent to another mortgage and subordinate to the first one.
An agreement in which a seller provides financing needed by a buyer to purchase the seller's home. The agreement often is reached when the buyer has insufficient funds for a down payment.
See Closing Costs.
A measurement of land prepared by a surveyor showing the location of the property and its dimensions and the location and dimensions of any improvements.
Equity created by a purchaser performing work on a property being purchased.