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Adjustable-Rate Mortgage (ARM)
A type of mortgage with an interest rate that might change during any period of the loan as written in the contract (loan agreement).
Annual Percentage Rate (APR)
The APR is a measure of the cost of your loan expressed as a yearly percentage rate, such as 10%.
Asset
An asset is anything owned by a person or organization having monetary value.
Balloon Mortgage
A large payment at the end of your loan term. This is often after a series of low monthly payments. A balloon mortgage generally offers very low rates for an initial period of time (usually 5, 7 or 10 years). After the period ends, the entire balance is due. Many borrowers pay the balance by refinancing their mortgage.
Broker
A mortgage broker helps a prospective borrower shop around for the best rate and terms in obtaining mortgage financing. You pay the broker a fee for this work.
Caps
Provisions of an adjustable rate mortgage, which limit how much the interest rate can change at each adjustment period or over the life of the loan. A payment cap limits how much the payment due on the loan can increase or decrease.
Closing Costs
Various fees associated with the transfer of property. The lender must disclose these costs to you.
Interest
The charge for borrowing money.
Lien
A legal claim on the home that secures the promise to repay the debt.
Loan Origination Fees/Underwriting Fees
Fees charged by the lender for processing or evaluating the loan application. They are often expressed as a percentage of the loan amount.
Loan to Value (LTV)
The amount of money you borrow compared to the price of the property you are buying.
Mortgage
A legal document whereby the borrower pledges property to the lender to ensure payment of a loan.
Point
The amount equal to 1% of the loan amount. It is a fee paid to the broker or lender for the loan, often linked to the interest rate.
Principal
The loan amount borrowed or still remaining on the loan.
Principal, Interest, Taxes, and Insurance (PITI)
PITI are the factors included in the standard mortgage payment.
Private Mortgage Insurance (PMI)
Mortgage insurance issued by private insurers that protects the lender against loss in the event the borrower defaults on a mortgage with a low down payment.
Rate Lock
The time period, usually 30 to 60 days that a mortgage lender agrees to hold the mortgage rate and points payable by the borrower to the rate quoted by the lender on a given day.
Real Estate Agent
A real estate professional that helps people buy and sell property.
Settlement Costs/Closing Costs
Fees associated with the transfer of property to a purchaser and recording the mortgage lien on the property deed by the bank financing the transaction. These costs may include application fees, title examination, abstract of title, title insurance, and property survey fees, as well as fees for preparing deeds, mortgages, and settlement documents, attorney’s fees, recording fees, notary, appraisal, and credit report fees.
Title
The title indicates the right of ownership in the property.
Title Insurance
Protects the buyer and lender against losses arising from disputes over the ownership of property.
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