Mortgage Advice
Mortgages

Understanding Mortgages: Mortgage Terms

(7/3/2012) In the midst of one of the most uncertain real estate markets in history, it’s more important than ever to be informed. In a continuing series, we take a look at some of the most pressing questions about mortgages, refinancing, home equity, and other real estate options available to you.

When you’re a first-time home buyer, or you’re refinancing, it may feel as if you need to learn another language to decipher the process. Mortgages comes with a vast array of unique terms to understand, but thankfully knowing a few key terms can serve you well. Some of the most commonly used mortgage terms follow.

ADJUSTABLE-RATE MORTGAGE (ARM):
A mortgage in which the interest rate changes after an introductory period. When interest rates change, monthly payments may increase or decrease depending on the rate.

APPRAISAL:
A real estate appraisal is a comprehensive evaluation process used to determine the current market value of a property. This assessment is typically conducted by a licensed or certified appraiser who examines various factors such as the property's location, condition, size, and comparable sales in the area. The appraisal process involves a thorough inspection of the property, analysis of the local real estate market, and consideration of elements like the property's features, improvements, and potential income generation. Real estate appraisals are essential in various transactions, including buying and selling property, obtaining a mortgage, refinancing, and property tax assessments. The goal is to provide an unbiased and accurate valuation to help all parties involved make informed decisions.


CLOSING:
The final step in buying a home. This occurs in a meeting between the borrower, lender/seller, and other agents that may include lawyers. The property title is transferred to the buyer at this meeting, and the seller receives payment.

DELINQUENCY:
Late payments from a borrower are considered delinquent. AFter 15 days, a late fee may be assessed. After 30 days, additional procedures may begin that will eventually lead to foreclosure in cases of serious delinquency.

DEPOSIT:
Also called earnest money, this is money put down by a potential buyer to show intent to buy. If an offer is accepted, this becomes part of the down payment.

DOWN PAYMENT:
A portion of the total purchase price that is paid in cash. The rest of the purchase price is part of a mortgage loan. When a down payment is less than 20 percent, mortgage insurance is required.

EQUITY:
An owner’s financial interest in a property. This amount is determined by subtracting the amount of the loan left from the market value of the property.  

FIXED-RATE MORTGAGE:
A mortgage with an interest rate that remains constant throughout the life of the loan, translating to fixed monthly payments.

FORECLOSURE:
A process by which a property is sold to pay off a defaulted loan. Default refers to when a borrower has stopped making payments on the house.

MORTGAGE INSURANCE:
Insurance designed for lenders in the case of borrowers stopping payment on loans. Typically required when borrowers pay less than 20 percent on a down payment.

POINTS:
One percent of the principal amount of the mortgage. Points are typically charged by lenders to cover their costs, and are collected at closing.

PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI):
The four elements of a monthly mortgage payment. Each month borrowers will pay down the principal (the main amount of the loan) and interest (depending on the interest rate). They will also pay towards property taxes and insurance (homeowners and mortgage insurance if necessary).

REFINANCING:
Obtaining a new loan to pay off the old loan. Refinancing is often done to get a better interest rate and save money each month.

   

For additional reading:

22 Most Commonly Used Mortgage Terms:
http://www.bankrate.com/finance/financial-literacy/22-most-commonly-used-mortgage-terms-1.aspx

U.S. Department of Housing and Urban Development Glossary: http://portal.hud.gov/hudportal/HUD?src=/program_offices/housing/sfh/buying/glossary

Mortgage Terms Glossary: http://www.realtor.com/home-finance/mortgages/terms-glossary.aspx?source=web

Refinance at Today's Low Rates!

 

 

 

Follow the link to continue reading the related articles.

Understanding Mortgages: Types of Mortgages

Get a grip on record low mortgage rates with a rate lock

Mortgage Fees: Sticker Shock Explained

Are lenders truly making mortgages based on borrowers' ability to repay the debt?

Get preapproved for a mortgage before you go home shopping

Homeowners Insurance: Finding the Best Quotes

Making mortgage fees make sense

Home Insurance Quotes: Types of Home Owners Insurance

 

 

 

 

 

 

 

 

 

 

Fannie Mae & Jumbo Mortgage Rates

Just One Click! = Current Rate Chart

Pennsylvania Mortgage Rates Current Mortgage Rates - Hawaii Current Mortgage Rates - Alaska West Virginia Mortgage Rates Virginia Mortgage Rates District of Columbia Mortgage Rates Maryland Mortgage Rates Delaware Mortgage Rates New Jersey Mortgage Rates Connecticut Mortgage Rates Rhode Island Mortgage Rates Massachusetts Mortgage Rates New Hampshire Mortgage Rates Vermont Mortgage Rates New Hampshire Mortgage Rates Maine Current Mortgage Rates Vermont Mortgage Rates Current Mortgage Rates - New York Current Mortgage Rates - Michigan Current Interest Rates - Wisconsin Current Mortgage Rates - MINNESOTA Ohio Mortgage Rates Current Mortgage Rates - Kentucky Current Mortgage Rates - Indiana Illinois - Current Mortgage Rates Current Mortgage Rates - Iowa Missouri Mortgage Rates Current Mortgage Rates - North Carolina South Carolina Mortgage Rates Current Mortgage Rates - Florida Current Mortgage Rates - Georgia Current Mortgage Rates - Tennessee Current Mortgage Rates - Alabama Current Mortgage Rates - Mississippi Current Mortgage Rates - Louisiana Current Mortgage Rates - Arkansas Current Mortgage Rates - Oklahoma Current Mortgage Rates - TEXAS Current Mortgage Rates - New Mexico Current Mortgage Rates - Arizona Current Mortgage Rates - Kansas Current Mortgage Rates - Nebraska Current Mortgage Rates - Colorado Current Mortgage Rates - Wyoming South Dakota Mortgage Rates Current Mortgage Rates - North Dakota Current Rates - Montana Idaho Current Rates Washington Mortgage Rates Current Mortgage Rates - Oregon Current Mortgage Rates - Utah Current Mortgage Rates - Nevada Current Mortgage Rates - California

Start by selecting your state





Get the Updated and Improved Mortgage Rates App from ERATE.com

iPad for Mortgage Rates

Real Estate Market News

Refinancing: Selecting a Loan

Moving Ahead With Your Refinance