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Financing Your New Sanibel or Captiva Home-What You Need to Know


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 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.

Amortization – Gradual payment of a debt, which includes the interest, and eventually all of the principal.

Assumable mortgage – A mortgage that can be passed on to a new owner at the previous owner’s interest rate.

Brokerage fee – The fee the broker charges for his or her services

Conventional loan – A mortgage or deed of trust not obtained under a government insured program, such as FHA or VA.

Correspondent lender – Can lend mortgage money, and service the loans for a maximum of four months. Also can act as broker.

Credit report – A report on the past ability of a loan applicant to pay installment payments.

Discount fee (discount points) – 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 “points.”

Fixed rate mortgage – A mortgage in which the interest rate remains the same throughout the life of the mortgage.

Foreclosure – Sale by a lender of a property on which payments are seriously in default.

Graduated payment mortgage – A 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 buyer’s earnings increase.

Insured mortgage – A mortgage insured against loss to the mortgager in case of default. May be insured by the FHA, VA or by independent mortgage insurance companies.

Interest rate cap – The maximum interest rate increase of an adjustable rate mortgage.

Loan commitment – A written promise to make or insure a loan for a specified amount and on specified terms.

Mortgage broker – Arranges for loans with lenders. Does not make or service loans, which involves processing monthly payments.

Mortgage lender – Lends mortgage money and services loans. Also can act as a broker.

Origination fee – The fee the lender charges to start the loan

Points – 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.

Settlement costs – 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.

Copyright ฉ  Sally Davies, Realtorฎ, S.C.I.S, e-PRO. Royal Shell Real Estate, Inc. Sanibel, FL 33957 USA. Direct +1 (239) 691-3319, Office +1 (239) 472-0078

Pages last updated 03/31/2012