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Mortgage Lingo 101

Mortgage Lingo 101

January 6th, 2021

As a first-time home buyer, you will hear lots of words that you may not be familiar with. Just like every industry, the real estate market has its own lingo, and it can be confusing for newbies. Here is a list of the most common mortgage jargon to help you navigate the home loan process:

Adjustable Rate Mortgage (ARM) – loans that provide an extra-low interest rate for an initial period of 5,7, or 10 years, after which the rate is allowed to move up or down once a year based on market indexes.

Amortization – spreading the principal and interest into equal payments over the course of the loan. This means your mortgage payment will be mostly interest at the beginning and mostly principal at the end.

Annual Percentage Rate (APR) – the yearly amount you are charged to borrow money. It takes into account not only your interest rate but also the closing costs, points, and insurance.

Appraisal – an estimate of the fair market value of a property.

Closing – the finalization of your mortgage, when you sign all the documents, get the keys, and officially become responsible for the mortgage. 

Closing Costs – expenses due at closing, including appraisal fees, title insurance, underwriting, points, etc. They vary from lender to lender.

Deed – the legal document that assigns ownership of the property.

Down Payment – the money you contribute up front toward the mortgage principal. Depending on the loan, requirements can be anywhere from 0% to 20%.

Earnest Money – a deposit you pay when you sign the purchase agreement.

Equity – how much of the property you own. It is calculated by subtracting the remaining mortgage balance from the current market value of your home.

Escrow – a third-party account that collects money from you to pay for annual expenses like property taxes and homeowners’ insurance.

FHA Loan – a mortgage backed by the Federal Housing Administration. They allow for lower down payments than many other mortgages.

Fixed-rate Mortgage (FRM) – loans with interest rates that stay the same over the entire mortgage term.

Good Faith Estimate – A written estimate of the closing costs you’ll be expected to pay.

Interest Rate – How much your lender charges you to be able to borrow mortgage funds.

Points - upfront fees paid to your lender to lower your interest rate. Also called discount points, one point is usually equal to 1% of your loan total.

Principal – the amount you have left to pay on your mortgage, not counting interest.

Private Mortgage Insurance (PMI) – insurance you pay to protect your lender in case you default on the loan. It can be cancelled on most loans once you reach 20% equity in your home.

Rate Lock – a guarantee from your lender to give you the current mortgage rate at closing. This protects you against market rate increases.

Title Search - A search of city and county records by a third party to ensure there are no liens or other claims on the property.

Underwriting – the lender’s process of evaluating your credit-worthiness as a borrower and how much risk the company is assuming by lending to you.

Of course, this is not an exhaustive list of mortgage lingo, but understanding these basics will keep you from getting that deer-in-the-headlights look when you start talking to a lender.

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Prime 1 Bancorp, Ltd is not affiliated with any government organization or bank nor do we act on behalf of the FHA or VA. This material is not from HUD or FHA and has not been approved by HUD or a government agency. We are not a Federally chartered or State Chartered Bank. We are an we are an Illinois Residential Mortgage Licensee by the Office of Banks and Real Estate Lic #MB.6761138, a California CFL Licensed Mortgage Brokerage by Department of Business Oversights Lic #60DB055973, a Colorado Registered Mortgage Brokerage by Division of Real Estate, a Florida Residential Mortgage Brokerage Licensed by the Office of Financial Regulation Lic #MBR1930 dba Prime 1 Mortgage Inc, a Kentucky Mortgage Loan Broker Licensed by the Office of Financial Institutions Lic #MB729362, a Tennessee Licensed Mortgage Broker by the Department of Financial Institutions Lic #218020, a Texas SML Licensed Mortgage Brokerage by the Texas Department of Savings and Mortgage Lending, and a Wisconsin Licensed Mortgage broker by the Department of Financial Institutions Lic #1434638BR Prime 1 Bancorp, LTD Corporate Office is located at 2720 S. River Rd Suite 50, Des Plaines, IL 60018 our Toll Free Number is 888-205-3737. NMLS: 1434638

Loan product availability is subject to qualification of the borrower and loan approval after full review of the file. Not every applicant qualifies or is eligible for every loan program. Some loan products may not be available in all states. Loan approval, note rate and annual percentage rate are dependent on factors including, but not limited to, credit, collateral, income, assets and overall financial history. Not all applicants will be approved for a loan. All loan programs, terms and annual interest rates are subject to change without notice. NMLS: 1434638

Figure: 7 TAC §80.200(b)

"CONSUMERS WISHING TO FILE A COMPLAINT AGAINST A COMPANY OR A RESIDENTIAL MORTGAGE LOAN ORIGINATOR SHOULD COMPLETE AND SEND A COMPLAINT FORM TO THE TEXAS DEPARTMENT OF SAVINGS AND MORTGAGE LENDING, 2601 NORTH LAMAR, SUITE 201, AUSTIN, TEXAS 78705. COMPLAINT FORMS AND INSTRUCTIONS MAY BE OBTAINED FROM THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV. A TOLL-FREE CONSUMER HOTLINE IS AVAILABLE AT 1-877-276-5550.

THE DEPARTMENT MAINTAINS A RECOVERY FUND TO MAKE PAYMENTS OF CERTAIN ACTUAL OUT OF POCKET DAMAGES SUSTAINED BY BORROWERS CAUSED BY ACTS OF LICENSED RESIDENTIALMORTGAGE LOAN ORIGINATORS. A WRITTEN APPLICATION FOR REIMBURSEMENT FROM THE RECOVERY FUND MUST BE FILED WITH AND INVESTIGATED BY THE DEPARTMENT PRIOR TO THE PAYMENT OF A CLAIM. FOR MORE INFORMATION ABOUT THE RECOVERY FUND, PLEASE CONSULT THE DEPARTMENT’S WEBSITE AT WWW.SML.TEXAS.GOV.