A B C
D E F
G H I
J K L
M N O
P Q R
S T U
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Y Z
Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate
is adjusted periodically based on an index. Also called a variable rate
mortgage.
Adjustment Interval
For an adjustable rate mortgage,
the time between changes in the interest rate charged. The most common
adjustment intervals are one, three or five
years.
Amortization
Literally to "kill off" (root: mort) the
outstanding balance of a loan by making equal payments on a regular schedule
(usually monthly). The payments are structured so that the borrower pays both
interest and principal with each equal payment.
Annual Percentage Rate
(APR)
The interest rate which reflects the cost of a mortgage as a yearly
rate. This rate is usually higher than the stated loan rate for the mortgage,
because it takes into account points and other charges.
Application Fee
The fee charged by the lender to the borrower for
applying for a loan. Payment of this fee does not guarantee that a loan will be
approved. Some lenders may apply the cost of the application fee to certain
closing costs.
Appraisal
The determination of property value
based on recent sales information of similar properties.
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Balloon Mortgage
Behaves like a fixed-rate mortgage for a set number
of years (usually five or seven) and then must be paid off in full in a single
"balloon" payment. Balloon loans are popular with those expecting to sell or
refinance their property within a definite period of
time.
Broker
An individual in the business of assisting in
arranging funding or negotiating contracts for a client but who does not loan
the money himself. Brokers usually charge a fee or receive a commission for
their services.
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Caps
A set percentage amount by which an adjustable rate mortgage may
adjust each adjustment period. For adjustable loans, caps are usually quoted as
two numbers as in 2/6. The first number indicates how much a loan may adjust at
each adjustment period while the second number indicates how much a loan may
adjust over its lifetime.
Loans like the 3/1 and 5/1 adjustable which
have an initial fixed period are quoted with 3 numbers as in 3/2/6 which would
mean that the first adjustment may be as much as 3%, subsequent adjustments are
capped at 2% each, and the lifetime cap is 6%.
Two-Step loans are quoted
with a single cap, which is the amount by which the loan may adjust at its
single adjustment date.
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Deed
A legal document which affects the transfer of ownership of
real estate from the seller to the buyer.
Default
The failure
to make payments on a loan.
Down Payment
Money paid by a buyer
from his own funds, as opposed to that portion of the purchase price which is
financed.
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Escrow Fee
These costs cover the preparation and transmission of
all home purchased-related documents and funds. Escrow fees range from several
hundred to over a thousand dollars, based on the purchase price of your home.
Not all states require funds to be put into escrow accounts for
closing.
Equity
The difference between the current market value
of a property and the principal balance of all outstanding loans.
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FHA Loan
A government-backed mortgage loan supported by the US FHA
and the Department of Housing and Urban Development (HUD).
Finance
Charge
The total dollar amount your loan will cost you. It includes all
interest payments for the life of the loan, any interest paid at closing, your
origination fee and any other charges paid to the lender and/or broker.
Appraisal, credit report and title search fees are not included in the finance
charge calculation.
Fixed-Rate Mortgage
A mortgage where the
interest rate does not change for the life of the loan.
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Good Faith Estimate?
An estimate of charges which a borrower is
likely to incur in connection with a loan closing.
Gross Monthly
Income
The total amount the borrower earns per month, not counting any
taxes or expenses. Often used in calculations to determine whether a borrower
qualifies for a particular loan.
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Hazard Insurance
A form of insurance in which the insurance company
protects the insured from certain losses, such as fire, vandalism, storms and
certain other natural causes.
Housing Ratio
The ratio of the
monthly housing payment to total gross monthly income. Also called
Payment-to-Income Ratio or Front-End Ratio.
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Interest Rate
The percentage of an amount of money which is paid
for its use for a specified time.
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Lender
The bank, mortgage company, or mortgage broker offering the
loan. Many institutions only "originate" loans and then resell the obligation to
third parties.
Loan-To-Value Ratio
The relationship between the
amount of the mortgage loan and the appraised value of the property expressed as
a percentage. A LTV ratio of 90 means that a borrower is borrowing 90% of the
value of the property and paying 10% as a down payment. For purchases, the value
of the property is assumed to be the purchase price, for refinances the value is
determined by an appraisal.
Lock noun
The period, expressed in
days, during which a lender will guarantee a rate. Some lenders will lock rates
at the time of application while others will allow the borrower to lock the rate
after the application is taken.
Lock verb
The act of
committing to a mortgage rate. This action, taken by a borrower some time
between the application and the closing dates, is sometimes accompanied by a
payment by the borrower to the lender.
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Monthly Housing Expense
Total principal, interest, taxes, and
insurance paid by the borrower on a monthly basis. Used with gross income to
determine affordability.
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Prepaids
Expenses such as taxes, insurance and assessments which
are paid in advance of their due date and which must be paid by the buyer on a
prorated basis at closing.
Prepayment
The ability to pay off
the remaining balance of a loan.
Prepayment Penalty
Lenders who
impose prepayment penalties will charge borrowers a fee if they wish to repay
part or all of their loan in advance of the regular
schedule.
Principal
The amount of debt, not counting interest,
left on a loan.
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this website is for informational purposes only. Although the site owner and
creators assume the information to be correct, and attempt to keep information
in the pages of this website as current as possible, they do not warrant the
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