ADJUSTABLE RATE MORTGAGE (ARM)
A mortgage loan that permits the lender to periodically adjust its interest rate, which in turn can raise or lower your monthly payments.
AMORTIZATION
Gradual reduction of the balance you owe. The reduction is usually made according to a pre-determined schedule for installment payments.
ANNUAL PERCENTAGE RATE (APR)
The total yearly cost of your loan, including the interest rate, points and certain loan fees.
APPRAISAL
A formal, written estimation of the current market value of your new home. This helps your lender determine a reasonable loan amount. In the case of a newly built home, the appraisal is almost always comparable to the selling price.
CLOSING
The conclusion of your home purchase. This includes the delivery of a deed, financial adjustments, the signing of notes and the disbursement of funds.
CLOSING COSTS
All of the costs (both yours and ours) that are associated with the purchase of your home. Examples include the cost of title insurance policies, the cost of credit reports, recording fees and escrow fees.
CONTRACT FOR PURCHASE AND SALE
This is the purchase agreement you will sign when you decide to purchase your new home. It is preliminary to the opening of escrow.
CREDIT REPORT
A written report summarizing your credit history. It will be obtained by your lender from a credit rating agency.
DEBT-TO-INCOME RATIO
Your total debt expenses as a percentage of your monthly income. Your lender will use this ratio to qualify you for a mortgage loan.
DOWN PAYMENT
The amount of cash required to purchase your new home.
ESCROW OFFICER/TITLE AGENT/ATTORNEY
Assures that all documentation related to the sale of your new home has been completed properly, including the title search and title insurance. The escrow agent/title agent/attorney will also explain all closing documents to you, obtain your signature where necessary and record the documents.
ESCROW OR IMPOUND ACCOUNT
The portion of your monthly mortgage loan payment that is held by the lender/servicer to pay for taxes, hazard insurance, mortgage insurance or other items as they become due.
FIRST TRUST DEED LOAN
A mortgage loan that creates a lien against your new home that is prior to any other lien on the property (other than a lien for property taxes).
FIXED-RATE MORTGAGE LOAN
A mortgage loan in which the interest rate and monthly payment amount remain the same for the entire term of the loan.
HOMEOWNERS INSURANCE POLICY
An insurance policy that combines personal liability insurance and hazard insurance coverage for your home and its contents.
HOUSING EXPENSE RATIO
Your monthly housing expense, excluding utilities, as a percentage of your monthly income. Your lender will use this ratio to qualify you for a mortgage loan.
INTEREST
The cost of borrowing the purchase price of your home (minus your down payment).
LOAN-TO-VALUE
The relationship between the amount of your home loan and the value of the property. For example, if you have a loan of $95,000 on a home that costs $100,000, the loan-to-value ratio is 95%.
LOCK-IN-RATE
A commitment from your lender to make a loan at a pre-set interest rate at a future date, usually between 15 and 90 days. This protects you against rate increases.
MORTGAGE INSURANCE
Mortgage insurance makes it possible to buy a home with less than 20% down. It allows your lender to recover part of their financial losses if you fail to fully repay your mortgage loan.
PITI
The elements - principal, interest, taxes, and insurance - that are the components of most mortgage payments.
POINTS
A dollar amount paid to a lender, typically to obtain a lower interest rate. One point is equal to one percent of the loan amount.
PRINCIPAL
The balance due on your mortgage loan, excluding interest.
SETTLEMENT COSTS
Money paid by you and us to effect the closing of your mortgage loan. This normally includes origination fees, discount points, title insurance, and prepaid items such as taxes and insurance.
TITLE
The right to ownership in property. In the case of your home, the documentary evidence of ownership, or title, is a deed.
TITLE INSURANCE
Insurance that provides for the payment of specific amounts (up to the policy limits) for loss caused by defects in the title to your home.
UNDERWRITING
The analysis of the risk involved in making a mortgage loan to determine whether the risk is acceptable to the lender. Underwriting involves the evaluation of your new home as outlined in the appraisal report, and of your ability and willingness to repay the loan.
