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.
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