FHA Loan and Mortgage Glossary - Terms Beginning with 'L'

  • Lease Purchase: This is an arrangement between a seller and a buyer where the buyer is allowed to rent the home for a specific period of time before they purchase. This is usually done to give the buyer time to save a larger down payment or clear up derogatory credit issues.
  • Lender: The company, like a credit union, bank, or mortgage lender, that offers loans to borrowers.
  • Lien: This is a claim that is put on a property for a certain amount or value that is owed to a creditor or lender. These types of claims can be agreements between the property owner and lien holder, such as a mortgage loan, or court orders, such as a debt.
  • Lifetime Cap: This is the highest interest rate that a borrower with an adjustable rate mortgage loan can be charged. The interest rate may vary, but it can never go higher than the cap.
  • Loan to Value Ratio: Also known as LTV. This is the amount of the fair market appraised value of the home compared to the amount of the mortgage loan on the property. For instance, if the home is currently appraised at $100,000 and the borrower owes $60,000 on the mortgage loan then it is a 60% loan. Lenders like to see higher owner equity which leads to more favorable terms and interest rates during refinancing because there is less risk of default and foreclosure when an owner is more financially invested in a home.
  • Lock Period: This is the period of time in which a borrower can get a mortgage loan for a specific interest rate. A lender will lock an interest rate for a borrower in order to give them time to find a home they want to purchase after pre-qualifying, or to get the paperwork they need to finalize the loan.
  • Lock-In: This is a written agreement between a buyer and a lender that locks in a specified interest rate and loan terms as long as the loan is closed by a certain date.