Glossary of Mortgage Terms

key terms for mortgages - house key

Want to better understand the mortgage application process? Here are a few terms that you are likely to hear from real estate pros and loan officers:

adjustable-rate mortgage (ARM): otherwise known as a variable-rate mortgage, a mortgage with an interest rate that is changed at set intervals (typically once a year) according to an index.

amortization: the schedule with which repayment of the mortgage loan is intended to occur.

annual percentage rate (APR): the cost of your mortgage loan as a yearly rate, including the entire finance charge and stated as a percentage of the loan.

appraisal: prepared by a specialist who typically holds a state license, an estimate of a property’s value on a certain date.

closing costs: fees and costs necessary to receive a home loan, which generally total 3 to 5 percent of the loan.

debt-to-income (DTI) ratio: a consumer’s total monthly debt payments divided by their gross monthly income.

escrow: a process in which an unbiased third party holds funds and handles documents on the buyer and seller’s behalf.

fixed-rate mortgage (FRM): a mortgage that maintains the same monthly payment and interest rate for its entire term.

loan-to-value (LTV) ratio: a percentage that is calculated by dividing the mortgage loan amount by the home’s appraised value.

mortgage: an agreement in which a creditor is given the title to a borrower’s home in exchange for money at interest, with the title returning to the borrower once the loan is completely paid.

origination fee: a fee that covers the lender’s processing costs for the loan.

point: one percent of the loan amount.

principal: the amount left due on a loan, excluding interest.

private mortgage insurance (PMI): a type of mortgage insurance that protects the lender in the event a borrower defaults, typically required when down payments are under 20 percent.

settlement costs: costs beyond the down payment that a borrower pays at closing.

survey: a registered surveyor’s description and measurement of a plot of land.

title: document that provides evidence of a real property’s ownership rights.

title insurance: insurance that protects lenders and homeowners against any damage or loss resulting from property ownership disputes or title-search mistakes.

Truth in Lending ACT (TILA): federal law that mandates lenders must provide borrowers with full cost information for loans.

The best mortgage rate & clear communication

Are you in need of a new home loan or refinance? At Ted Bougie – First Equity, we can help you find the lowest rate, and we pride ourselves on making the mortgage process understandable. Apply now.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>