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Common Mortgage Terms:
Adjustable Rate Mortgage (arm, also called Variable
Rate Mortgage) -- A mortgage with an
interest rate that is adjusted periodically to reflect changes in
market conditions. Your mortgage payments are adjusted up or down as
the interest rate changes.
Annual
Percentage Rate (APR) -- An interest rate
that reflects the actual cost of a mortgage as a yearly rate.
Because APR includes points and other costs, it's usually higher
than the advertised rate. The APR allows you to compare different
mortgages based on actual annual costs.
Appraisal --
An estimate of the value of a home, made
by a professional appraiser. The maximum amount of the mortgage is
usually based on the appraisal.
Closing Costs
(Settlement Costs) -- All the charges
associated with getting your mortgage, including the origination
fee, discount points, appraisal fee, title search and insurance,
survey, taxes, deed recording fee, charges for credit reports and
other costs. Costs of closing usually add up to 3 to 6 percent of
the mortgage amount.
Equity --
The value of your home after the
outstanding balance of any loans are subtracted.
Escrow --
A special third-party account set up by
the lender in which your funds are held to pay for taxes and
insurance. "Escrow" can also refer to a third party who carries out
the instructions of both the buyer and seller to handle the
paperwork at the settlement.
Fixed Rate
mortgage -- A mortgage with an interest
rate that stays the same (fixed) for the life of the mortgage.
Monthly payments for a fixed rate mortgage are very stable. (See the
Low-down on Loans on page 12 for more information.)
Interest --
The sum paid for borrowing money, which
pays the lender's costs of doing business.
Origination
Fee -- The fee charged by a lender to
prepare all the documents associated with your mortgage.
PITI
(Principal-Interest-Taxes-Insurance) --
Shorthand for the separate parts of a typical monthly mortgage
payment
Points (Loan
Discount Points) -- Points are prepaid
interest on your mortgage, charged by the lender at the time of the
closing. Each point is one percent of the loan amount — that is, 2
points on a $100,000 mortgage would be $2,000.
Prepaids
-- The expenses that are put into escrow
at closing, usually including real estate taxes, insurance, and
interest.
Principal --
The amount of debt, not including
interest, left on a loan; also 77 the face amount of the mortgage.
Private Mortgage Insurance (PMI) -- An
insurance policy the borrower buys to protect the lender from
non-payment of the loan. PMI policies are usually required if you
make a down payment that is below 20% of the appraised value of the
home.
Title Insurance -- An insurance policy
which insures you against errors in the title search, essentially
guaranteeing your and your lender's financial interest in the
property.
My Philosophy as Your
REALTOR
Should I work with a Buyer's
Agent?
Pre-Qualify and Get Pre
Approved Today
(Courtesy of Gilpin Mortgage)
Wondering if
you can afford that home you have your eye on??? You may be
surprised by the answer! With interest rates at historic lows,
and many banks and mortgage lenders aggressively competing for your
business, that new home may
be more affordable than you think.
Call me today! One 5-Minute call is all it
takes to see if you
qualify to purchase that next home. I can even have you
pre-approved for the exact loan to buy your next house. A
Pre-Approval is a
powerful and necessary tool when making an offer to buy a
home.
Call or e-mail
me today!
All conversations and
correspondence is strictly confidential.
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