United States
Hong KongMortgage terminology you need
The exam assumes fluency in terms like note, security instrument, escrow, PITI, lien and consummation. Several pairs are routinely confused, and questions are built on the confusion.
Not a glamorous topic, and a candidate who is shaky on the vocabulary loses marks across every other area.
The pairs most often confused
| Term | Not to be confused with |
|---|---|
| Note - the promise to repay | Mortgage or deed of trust - the security instrument |
| Interest rate - the cost of borrowing | APR - the total cost expressed yearly |
| Consummation - when the borrower becomes contractually obliged | Closing - the meeting, and funding - when money moves |
| Pre-qualification - based on stated information | Pre-approval - based on verified documentation |
| Appraisal - value for the lender | Inspection - condition for the buyer |
Each of those pairs appears in questions where picking the wrong half is the mistake being tested.
Terms with fixed contents
PITI is principal, interest, taxes and insurance. The three Cs are capacity, credit and collateral. Both are asked for by their count as well as their contents. Learn the pair.
It is when the consumer becomes contractually obliged, which state law defines. It is not necessarily the same day as closing or funding, and every TRID deadline that runs backwards runs from consummation.
Words that mean something specific
- Seasoned - funds that have been in the account long enough to count as the borrower's own
- Sourced - funds whose origin the lender can identify
- Reserves - funds remaining after closing, counted in months of PITI
- Overlay - a lender requirement stricter than the program minimum
How to learn them
In pairs and with the distinction attached. A flashcard reading "APR" is useless. One reading "How does APR differ from the note rate" is not.
Common questions
What is the difference between the note and the mortgage?
The note is the promise to repay. The mortgage or deed of trust is the security instrument giving the lender a claim on the property.
What is consummation?
The point at which the consumer becomes contractually obliged, as defined by state law. TRID deadlines that run backwards run from it.
What does PITI stand for?
Principal, interest, taxes and insurance.
What is an overlay?
A lender requirement stricter than the program minimum.
How should I learn the terminology?
In pairs, with the distinction attached, rather than as isolated definitions.