Some Common Mortgage Terms Explained
Adjustable rate mortgage A mortgage where the interest rate
changes during the life of a loan in line with changes in an index (such
as the prime rate.) Also called a variable rate mortgage.
Gradual payment of a debt, which includes the interest, and eventually
all of the principal.
A mortgage that can be passed on to a new owner at the previous
owners interest rate.
The fee the broker charges for his or her services
A mortgage or deed of trust not obtained under a government insured
program, such as FHA or VA.
Can lend mortgage money, and service the loans for a maximum of four
months. Also can act as broker.
A report on the past ability of a loan applicant to pay installment
Money the borrower pays the lender at closing to buy down the
mortgage rate --- get a lower interest rate on the monthly payments. One
discount point equals one percent of the mortgage amount. Also see
Fixed rate mortgage
A mortgage in which the interest rate remains the same throughout the
life of the mortgage.
Sale by a lender of a property on which payments are seriously in
mortgage calling for increasingly higher payments over the term of the
loan. This allows the buyer low beginning payments. The payments then
increase, as theoretically, the buyers earnings increase.
A mortgage insured against loss to the mortgager in case of default.
May be insured by the FHA, VA or by independent mortgage insurance
Interest rate cap
The maximum interest rate increase of an adjustable rate mortgage.
A written promise to make or insure a loan for a specified amount
and on specified terms.
Arranges for loans with lenders. Does not make or service loans, which
involves processing monthly payments.
Lends mortgage money and services loans. Also can act as a broker.
The fee the lender charges to start the loan
Part of the settlement
costs of exchanging real estate. One point equals one percent of the
mortgage amount. Points are paid to the mortgage lender, technically by
the seller of the property. However, because the price of the house
normally is adjusted to allow for this, points effectively increase the
interest rate on the loan to the buyer.
Purchase money mortgage
Mortgage granted directly by a seller to the buyer. The buyer may take
back the property if the buyer does not pay off the mortgage as agreed.
The amount of money needed by the buyer at closing. Charges include
origination fees (points), appraisal fees, credit report costs, tax
service fees and pro-rations, insurance premiums and reserves, title
insurance costs, government recording and transfer fees, surveying
charges, pest control and termite inspection charges.
Article courtesy of The
Fort Myers News Press Business Supplement.