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| Lease-Purchase Mortgage Loan |
A loan type that allows you to lease a home with the option of purchasing it at the end of the lease period. A portion of each month’s rent payment will be put into a savings account which will later be used as your down payment on the home. This option is generally used by people with a low income or with credit problems. |
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| Liabilities |
Your liabilities are any amounts that you owe to others, including your short-term and long-term debts. Liabilities include financial obligations such as car payments, credit card debts, student loans, judgments, collection accounts, alimony and child support. A lender will look at your liabilities to help them determine whether or not to approve you for a loan. |
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| Liability Insurance |
Usually a part of your homeowner’s insurance policy, liability insurance is insurance coverage that would protect you against any potential claims involving your negligence on your home's property or an action that caused bodily harm or property damage to someone else. The insurance policy will pay for claims against you and the legal costs you incur in relation to the claims. |
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| Lien |
If a property has a lien on it, it means that the property is being used to guarantee or secure a debt. The lien holder does not necessarily have a right to the actual property, but if you want to buy or sell the property, the lien must be paid off in order to receive a clear title. |
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| Lifetime Rate Cap |
When you have an adjustable rate mortgage, the lifetime rate cap is the maximum amount that your interest rate can go up or down over the life of the loan. For example, if your interest rate is 5 percent and the lifetime cap of your loan is 5 points, your interest rate will never exceed 10 percent. |
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| Limited Doc |
When you apply for a limited doc loan, you will need to state your income and employment information on the loan application, but will not need to provide the lender with proof of your income or employment. This type of loan is beneficial if you are self-employed or if you would otherwise have a hard time providing proof of your income. |
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| Line Of Credit |
An agreement between you and a financial institution that allows you to withdraw funds as you need them, up to the amount of the credit limit that was set by the financial institution. The terms of repayment and the interest rate are outlined in the agreement between you and the lender. Lines of credit can be either secured or unsecured, with secured lines of credit offering lower interest rates than their unsecured counterparts. |
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| Loan |
An amount of money that you borrow and then repay with interest. The money borrowed is referred to as the principal of the loan. You will usually need to make equal, monthly installments to pay the loan back. The payments will include a combination of principal and interest. Your payment amounts may change if the interest rate of your loan is adjustable. |
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| Loan Application |
A form that you fill out in order to obtain a loan from a lender. The information on this form lets the lender know how much money you want to borrow, what you need the loan for, and outlines your personal information such as your finances and employment history. The application also allows the lender to request a copy of your credit report in order to determine your creditworthiness and to assist in their decision whether or not to approve your loan. |
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| Loan Officer |
A loan officer is a representative of the lending institution and will represent you when you are applying for a loan. It is the person that will help you select the loan that is right for you and will help you through the loan process and closing. Loan officers are also referred to as loan representatives and account executives. |
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| Loan Origination |
Loan origination is the process of creating a new loan that is secured by real estate. At this point, your application will be reviewed and you will be provided with an interest quote. Most lenders will charge you an origination fee that goes towards processing all of the papers that are involved with your loan. |
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| Loan Origination Fee |
A lender will charge you a loan origination fee to cover the costs involved with processing the paperwork of your loan. The origination fee is usually charged as a percentage of the loan amount and is referred to in points, with one point equaling one percent of the loan amount. |
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| Loan Servicing |
When you make your mortgage payments each month, the company you pay is the company that services your loan. This company will process your monthly payments, send you your monthly mortgage statements and will handle your escrow account and pay the expenses out of the account. If your loan is sold, the company servicing your loan may change and you will start sending your payments to a different company. |
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| Loan-To-Value Ratio |
The amount of your mortgage divided by the fair market value of your home expressed as a percentage. For example, if your mortgage is $200,000 and your home is worth $250,000, your loan-to-value ratio is 80 percent. If your loan-to-value ratio were to exceed 80 percent, your lender would require you to have private mortgage insurance. |
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| Lock |
When a lender guarantees that the interest rate they have quoted you will remain the same for a specific period of time. If your rate is locked and interest rates were to rise from the time you applied for your loan to the time of closing, you would still pay the interest rate that you were initially quoted. |
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| Lock-In Period |
The length of time a mortage lender will honor an agreed upon loan interest rate. Once a lender locks in your interest rate, that rate lock is good for a specific period of time. In order to finance your mortgage at the locked-in rate, you’ll need to close the loan within the rate-lock period. For example, if you have a 45-day lock-in period, you’ll need to close within 45 days of receiving the rate lock. Lenders usually charge a fee to lock in an interest rate, and the longer the lock-in period, the higher that fee will be. |
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| Lock-In Rate |
The interest rate for a home loan that is guaranteed by a lender not to change for an agreed upon period of time if your loan closes within the lock-in period. It is not uncommon for a lender to charge you to lock in your rate. |
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