Adjustable Rate Mortgage - a mortgage that has a fixed rate of interest for only a set period of time. The interest rate is adjusted based on an index after the initial period.
Annual Percentage Rate - is the rate of interest that will be paid back to the Mortgage lender. The rate can either be a fixed rate or adjustable rate.
Amortization - a schedule of equal periodic payments on how the loan is intended to be repaid over a period of time that includes the amount borrowed, interest rate paid, and the term of the loan. Appraisal - is conducted by a professional appraiser who will look at a property and give an estimated value based on physical inspection and comparable houses that have been sold in recent times.
Closing Costs - are the costs that the buyer must pay during the mortgage process. These may include attorney fees, recording fees, and other costs associated with the mortgage closing.
Debt-to-income Ratio - Monthly payments including the new mortgage are compared to monthly income. The income figure is divided into the expense figure, and the result is displayed as a percentage. The higher the percentage, the more riskier loan it is for the lender.
Down Payment - is the amount of the purchase price that the buyer is paying. Generally, lenders require a specific down payment in order to qualify for the mortgage.
Equity - the difference between the value of the home and the Mortgage loan is called equity. Over time, as the value of the home increases and the amount of the loan decreases, the equity of the home generally increases.
Escrow - An account held by the lender where the borrowers are generally required to set aside a percentage of yearly taxes or insurance payments.
Fixed Rate Mortgage - is a mortgage where the interest rate and the term of the loan is negotiated and set for the life of the loan. The terms of fixed rate Mortgages can range from 10 years to up to 40 years.
Mortgage - is the loan and supporting documentation for the purchase of a home.
Principal - used to describe the amount of money that is borrowed for the mortgage. The principal amount that is owed goes down when borrowers make regular monthly or bi-weekly payments.