Learn About Some Commonly-Used Mortgage Terms
Are you in the process of applying for a mortgage? Are you ready to purchase a home, but don’t know the first thing about getting a loan?
Rather than continue to guess and hope that things work out, it would be in your best interest to learn as much as possible about the mortgage industry. This starts with understanding the most important mortgage related terms.
Adjustable Rate: An interest rate that may change over the life of the mortgage, also knows as an ARM.
Assumable Mortgage: A loan that can be transferred from the seller to the buyer.
Balloon Payment: A final lump sum payment, generally larger than past payments, due at the end of a balloon mortgage.
Conventional Loan: A mortgage not guaranteed by a government organization, such as the Federal Housing Administration (FHA).
Good Faith: Settlement charges paid by the borrower at closing. Also refers to Good Faith Estimate, which is an estimate of charges as to how much money will be due at closing and is required by The Real Estate Settlement Procedures Act.
Jumbo Loan: Known as a non-conforming loan, this is for a loan that exceeds a particular dollar amount such as $417,000 (as of 2009).
Loan to Value Ratio: This is a percentage derived by taking the amount of the loan and dividing it by the property value.
Owner Occupied: A property occupied by the borrower as a primary residence. Not a second property, rental property, or vacation home.
Quitclaim Deed: Signifies the transfer of a property with no guarantee of a clear title.
Reverse Mortgage: A financial tool for homeowners age 62 or older who want to convert equity in their home into cash.
Title Insurance: An insurance policy that guarantees the accuracy of a title search, protecting both the lender and the buyer. Most lenders require the buyer to purchase title insurance at closing.
Underwriting: The analysis of a loan application, by an underwriting professional, to determine the amount of risk associated with providing a loan to the borrower.
VA Loan: A mortgage guaranteed by the U.S. Department of Veterans Affairs.
Warranty Deed: A document guaranteeing that the seller has the right to sell a property.
Yield Curve: A graph comparing long term and short term mortgage rates.
Zero Down Mortgage: A mortgage that requires no down payment, resulting in 100 percent financing.
Now that you have more knowledge of the most commonly used mortgage terms, you should have an easier time communicating with lenders as you search for the best loan for your new home.