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Mortgage Terms

  • Adjustable Rate Mortgage (ARM) - A mortgage loan with a periodically adjustable interest rate, reflecting the changes in a specific financial index.  ARMs are typically offered with one, three, or five-year periods before the rate can change.

 

  • Alternative Mortgage - A loan other than a standard fixed-rate mortgage.  An alternative mortgage may vary in interest rate, maximum loan amount, or loan-to-value ratio.

 

  • Amortization - A regular payment of both principal and interest to pay off a loan.  Early in the loan most of the payment is applied toward interest, with increasing amounts paid toward principal as the loan moves toward maturity.

 

  • Annual debt service - the total annual interest and principal loan payments required on a loan.

 

  • Annual Mortgagor Statement - The statement sent to a borrower, on a yearly basis, detailing principal remaining on the loan and amounts paid toward interest and taxes.

 

  • Annual Percentage Rate - The rate a borrower actually pays, including interest, points, and loan origination fees, when expressed as a percentage rate per year.

 

  • Annual Percentage Yield - The real rate of interest on a loan.

 

  • Assumable Mortgage - A mortgage that can be taken over by the buyer when a home is sold.

 

  • Balloon Mortgage - A loan that has level monthly payments based on a repayment schedule for a longer term, but that provides a lump sum payment to be paid at the end of an earlier term.

 

  • Blanket Mortgage - A mortgage that covers more than one piece of real estate.

 

  • Credit Score - A number based on all the information in a credit report. 

 

  • Disclosure Statement - A written statement of a borrower's rights under the Truth-in-Lending Act.

 

  • Discount Points - A type of fee that lenders charge.  Discount points are additional funds borrowers pay to the lender at closing to get a lower interest rate on their mortgage.

 

  • Fixed-Rate Mortgage - A loan with an interest rate that remains at the same rate for the entire loan.

 

  • Government Mortgage - A mortgage that is insured by the Federal Housing Administration or guaranteed by the Department of Veterans Affairs or the Rural Housing Service.

 

  • Graduated Payment Mortgage - A mortgage where the monthly payments are low for the first few years, gradually rise for a few years, and the remain fixed.

 

  • Home Equity Loan - A loan allowing owners to borrow against the equity in their home.

 

  • Hud-1 Settlement Statement - A document that provides an itemized listing of the funds that are payable at closing.

 

  • Interest Rate - A percentage expressing the relationship between the interest for one year and the principal.

 

  • Lease-Purchase Mortgage Loan - An alternative financing option that allows low and moderate income home buyers to lease a home from a nonprofit organization, with an option to buy.

 

  • Letter of Commitment - An official notice to a borrower of the lender's intent to grant a loan.

 

  • Loan-to-Value Percentage - The relationship between the principal balance of the mortage and the appraised value of the property.

 

  • Lock-in - A lender's gurantee of an interest rate for a set period of time.

 

  • Mortgage - A legal document by which real property is pledged as security for the repayment of a loan.

 

  • Mortgage Acceleration Clause - A provision in a mortgage that gives the lender the right to demand repayment of the entire loan under certain circumstances, such as default, property sale, change of title, or refinance.

 

  • Mortgage Insurance - An insurance on some loans that protects lenders from possible default by the borrower.

 

  • Pre-Approval Letter - A letter from a lender confirming the amount that can be borrowed by a person whose ability to borrow has already been assessed by the lender.

 

  • Refinance - Replacing an older mortgage with a new mortgage at better terms.