Without a proper grasp of mortgage lingo, the home-buying process can leave your head spinning. But fear not, for help has arrived. The 42 definitions that follow will give you a solid understanding of mortgage loans and lenders.
Amortization -- The monthly reduction of a mortgage loan brought about by making regular mortgage payments.
Annual Percentage Rate (APR) -- Shows the monthly cost of the mortgage (including interest, points and mortgage insurance), expressed as a percentage.
Application -- First step in getting approved for the loan. The application provides information about the borrower that the lender will use to justify the loan.
Appraisal -- A formal assessment of a home's fair market value, generally required by the mortgage lender to ensure the home is worth the loan amount.
Adjustable Rate Mortgage (ARM) -- A type of loan that starts out with a lower interest rate for an introductory period (3 years, for example) and later adjusts to whatever the current interest rate is at the time of adjustment.
Balloon Mortgage -- A mortgage that offers low rates for an initial period (generally 5, 7 or 10) years. After this period, the owner must pay the full balance or refinance the loan.
Cap -- A limit to how much a monthly payment or interest rate can increase or decrease. Caps are commonly used on adjustable rate mortgages.
Cash Reserves -- Money often required to be held in addition to the down payment and closing costs. Lenders have their own requirements as to the amount.
Closing -- The process through which property ownership is transferred from the seller to the buyer. Also known as settlement.
Closing Costs -- Expenses above and beyond the sale price of the home. Closing costs vary from state to state, but they often include such items as title searches and lawyer's fees.
Conventional Loan -- A loan made from the private sector and not guaranteed by the U.S. government.
Credit Report -- A record of your credit history, including previous debts, payments and other financial details. Used by lenders to determine your credit score.
Credit Score -- a number derived from your credit report. Used by mortgage lenders to determine your level of qualification for a loan.
Debt-to-Income Ratio -- A ratio calculated by dividing your overall monthly debt by your gross monthly income. Mortgage lenders use this to help determine your "credit worthiness."
Deed -- Official document that shows ownership of a property. It transfers from seller to buyer during the closing process.
Default -- This is what happens when a homeowner is unable to make mortgage payments. Defaulting on a loan could lead to foreclosure (defined below).
Discount Point -- Equal to 1% of the loan amount. Points can be paid by the buyer at closing to reduce the interest rate on the loan.
Down Payment -- Portion of the home's purchase price that is paid in cash and is not part of the mortgage loan.
Earnest Money -- Money the buyer puts down to show sincerity in buying the home. If the offer is accepted, the money becomes part of the down payment. If the offer is rejected, the money is returned. If the buyer pulls out of the deal, the money is forfeited.
Fixed-Rate Mortgage -- A mortgage with payments that stay the same throughout the life of the loan. In other words, the interest rate and other terms of the loan remain fixed.
Foreclosure -- Process through which the home is sold to repay the loan of the defaulting homeowner. See definition of default above.
Good Faith Estimate -- An estimate of all fees and charges that will be due at closing. Must be given to the borrower within three days of a loan application submission.
HUD-1 Statement -- A list of all closing costs. This document must be given to the buyer prior to closing. Also referred to as a settlement statement.
Interest -- A fee charged for borrowing money, expressed as a percentage of the amount borrowed.
Lien -- A legal claim on a property. Must be resolved before the property can be sold.
Lock-in -- Offered by some lenders to guarantee a certain interest rate if the loan is closed within a certain time.
Mortgage Broker -- Individual or company that originates and processes loans for a number of different lenders.
Mortgage Lender -- Bank or lending institution that loans you money for a home.
Mortgage Insurance -- Insurance purchased by the buyer to protect the lender in the event of default. Usually required on loans with less than 20 percent down payment. Also known as Private Mortgage Insurance or PMI.
Origination -- Process of preparing and submitting a loan application. Usually involves a credit check, a property appraisal, and other forms of financial review.
Origination Fee -- Charges associated with origination, defined above.
PITI -- Principal, Interest, Taxes, and Insurance. These are the four elements that will make up your overall monthly mortgage payment.
PMI -- Private Mortgage Insurance. See "Mortgage Insurance" above.
Pre-Approval -- When a lender commits to loaning you a certain amount (as long as you still meet their qualification requirements at time of purchase).
Pre-Qualification -- When a mortgage lender informally reviews your finances to determine the maximum amount they're willing to lend you.
Principal -- The "core" amount borrowed from a lender, excluding interest and additional fees.
RESPA -- The Real Estate Settlement Procedures Act is a law that protects consumers during the home buying and loan application process. Among other things, it requires lenders to make full discloses about settlement costs and conditions.
Settlement -- See previous definition under "closing."
Title Insurance -- Protects the mortgage lender against claims that come from a dispute about property ownership. Similar coverage for home buyers is also available.
Title Search -- A review of public records to ensure the seller is the legal owner of the property and that there are no unsettled liens or claims.
Truth-in-Lending -- A federal law that requires mortgage lenders to provide written disclosures of all conditions and costs associated with a loan.
VA Loan -- A loan guaranteed by the Department of Veterans Affairs. These loans are made to qualified military veterans and often come with the benefit of no money down.
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About the Author
BR Cornett writes on behalf of Jimmy Jacobs Custom Homes, a home builder in Georgetown, Texas since 1988. Learn more about Georgetown, Texas real estate [http://www.jacobshomes.com/featured/index.htm] by visiting http://www.jacobshomes.com
Article Source: [http://EzineArticles.com/?The-A-to-Z-of-Mortgage-Loans:-42-Definitions-for-Home-Buyers&id=331967] The A-to-Z of Mortgage Loans: 42 Definitions for Home Buyers
Sunday, November 21, 2010
What Type Of Mortgage Loan Is Right For You?
What Type Of Mortgage Loan Is Right For You?
By [http://ezinearticles.com/?expert=Charley_Smith]Charley Smith
Homebuyers and homeowners need to decide which home Mortgage loan is right for them. Then, the next step in getting a mortgage loan is to submit an application ( Uniform Residential Loan Application ). Although we try to make the loan simple and easy for you, getting a mortgage loan is not an insignificant process.
Below is a short synopsis of some loan types that are currently available.
CONVENTIONAL OR CONFORMING MORTGAGE Loans are the most common types of mortgages. These include a fixed rate mortgage loan which is the most commonly sought of the various loan programs. If your mortgage loan is conforming, you will likely have an easier time finding a lender than if the loan is non-conforming. For conforming mortgage loans, it does not matter whether the mortgage loan is an adjustable rate mortgage or a fixed-rate loan. We find that more borrowers are choosing fixed mortgage rate than other loan products.
Conventional mortgage loans come with several lives. The most common life or term of a
mortgage loan is 30 years. The one major benefit of a 30 year home mortgage loan is that one pays lower monthly payments over its life. 30 year mortgage loans are available for Conventional, Jumbo, FHA and VA Loans. A 15 year mortgage loan is usually the least expensive way to go, but only for those who can afford the larger monthly payments. 15 year mortgage loans are available for Conventional, Jumbo, FHA and VA Loans. Remember that you will pay more interest on a 30 year loan, but your monthly payments are lower. For 15 year mortgage loans your monthly payments are higher, but you pay more principal and less interest. New 40 year mortgage loans are available and are some of the the newest programs used to finance a residential purchase. 40 year mortgage loans are available in both Conventional and Jumbo. If you are a 40 year mortgage borrower, you can expect to pay more interest over the life of the loan.
A Fixed Rate Mortgage Loan is a type of loan where the interest rate remains fixed
over life of the loan. Whereas a Variable Rate Mortgage will fluctuate over the life
of the loan. More specifically the Adjustable-Rate Mortgage loan is a loan that has a
fluctuating interest rate. First time homebuyers may take a risk on a variable rate for qualification purposes, but this should be refinanced to a fixed rate as soon as possible.
A Balloon Mortgage loan is a short-term loan that contains some risk for the borrower. Balloon mortgages can help you get into a mortgage loan, but again should be financed into a more reliable or stable payment product as soon as financially feasible. The Balloon Mortgage should be well thought out with a plan in place when getting this product. For example, you may plan on being in the home for only three years.
Despite the bad rap Sub-Prime Mortgage loans are getting as of late, the market for this kind of mortgage loan is still active, viable and necessary. Subprime loans will be here for the duration, but because they are not government backed, stricter approval requirements will most likely occur.
Refinance Mortgage loans are popular and can help to increase your monthly disposable income. But more importantly, you should refinance only when you are looking to lower the interest rate of your mortgage. The loan process for refinancing your mortgage loan is easier and faster then when you received the first loan to purchase your home. Because closing costs and points are collected each and every time a mortgage loan is closed, it is generally not a good idea to refinance often. Wait, but stay regularly informed on the interest rates and when they are attractive enough, do it and act fast to lock the rate.
A Fixed Rate Second Mortgage loan is perfect for those financial moments such as home improvements, college tuition, or other large expenses. A Second Mortgage loan is a mortgage granted only when there is a first mortgage registered against the property. This Second Mortgage loan is one that is secured by the equity in your home. Typically, you can expect the interest rate on the second mortgage loan to be higher than the interest rate of the first loan.
An Interest Only Mortgage loan is not the right choice for everyone, but it can be very effective choice for some individuals. This is yet another loan that must be thought out carefully. Consider the amount of time that you will be in the home. You take a calculated risk that property values will increase by the time you sell and this is your monies or capital gain for your next home purchase. If plans change and you end up staying in the home longer, consider a strategy that includes a new mortgage. Again pay attention to the rates.
A Reverse mortgage loan is designed for people that are 62 years of age or older and already have a mortgage. The reverse mortgage loan is based mostly on the equity in the home. This loan type provides you a monthly income, but you are reducing your equity ownership. This is a very attractive loan product and should be seriously considered by all who qualify. It can make the twilight years more manageable.
The easiest way to qualify for a Poor Credit Mortgage loan or Bad Credit Mortgage loan is to fill out a two minute loan application. By far the easiest way to qualify for any home mortgage loan is by establishing a good credit history. Another loan vehicle available is a Bad Credit Re-Mortgage loan product and basically it's for refinancing your current loan.
Another factor when considering applying for a mortgage loan is the rate lock-in. We discuss this at length in our mortgage loan primer. Remember that getting the right mortgage loan is getting the keys to your new home. It can sometimes be difficult to determine which mortgage loan is applicable to you. How do you know which mortgage loan is right for you? In short, when considering what mortgage loan is right for you, your personal financial situation needs to be considered in full detail. Complete that first step, fill out an application, and you are on your way!
For additional information about mortgage loan types, mortgage loan products or a bad credit mortgage loan and where to apply for a [http://www.ezlendmortgage.com/bad-credit-mortgage-loan.html]Bad Credit Mortgage Loan visit http://www.EZLendMortgage.com a popular website providing information, tips, mortgage advice and resources including information on independent help finding the best conventional mortgage, adverse mortgage lenders, subprime mortgages, and a [http://www.ezlendmortgage.com]Refinance Mortgage Loan
Article Source: [http://EzineArticles.com/?What-Type-Of-Mortgage-Loan-Is-Right-For-You?&id=558647] What Type Of Mortgage Loan Is Right For You?
By [http://ezinearticles.com/?expert=Charley_Smith]Charley Smith
Homebuyers and homeowners need to decide which home Mortgage loan is right for them. Then, the next step in getting a mortgage loan is to submit an application ( Uniform Residential Loan Application ). Although we try to make the loan simple and easy for you, getting a mortgage loan is not an insignificant process.
Below is a short synopsis of some loan types that are currently available.
CONVENTIONAL OR CONFORMING MORTGAGE Loans are the most common types of mortgages. These include a fixed rate mortgage loan which is the most commonly sought of the various loan programs. If your mortgage loan is conforming, you will likely have an easier time finding a lender than if the loan is non-conforming. For conforming mortgage loans, it does not matter whether the mortgage loan is an adjustable rate mortgage or a fixed-rate loan. We find that more borrowers are choosing fixed mortgage rate than other loan products.
Conventional mortgage loans come with several lives. The most common life or term of a
mortgage loan is 30 years. The one major benefit of a 30 year home mortgage loan is that one pays lower monthly payments over its life. 30 year mortgage loans are available for Conventional, Jumbo, FHA and VA Loans. A 15 year mortgage loan is usually the least expensive way to go, but only for those who can afford the larger monthly payments. 15 year mortgage loans are available for Conventional, Jumbo, FHA and VA Loans. Remember that you will pay more interest on a 30 year loan, but your monthly payments are lower. For 15 year mortgage loans your monthly payments are higher, but you pay more principal and less interest. New 40 year mortgage loans are available and are some of the the newest programs used to finance a residential purchase. 40 year mortgage loans are available in both Conventional and Jumbo. If you are a 40 year mortgage borrower, you can expect to pay more interest over the life of the loan.
A Fixed Rate Mortgage Loan is a type of loan where the interest rate remains fixed
over life of the loan. Whereas a Variable Rate Mortgage will fluctuate over the life
of the loan. More specifically the Adjustable-Rate Mortgage loan is a loan that has a
fluctuating interest rate. First time homebuyers may take a risk on a variable rate for qualification purposes, but this should be refinanced to a fixed rate as soon as possible.
A Balloon Mortgage loan is a short-term loan that contains some risk for the borrower. Balloon mortgages can help you get into a mortgage loan, but again should be financed into a more reliable or stable payment product as soon as financially feasible. The Balloon Mortgage should be well thought out with a plan in place when getting this product. For example, you may plan on being in the home for only three years.
Despite the bad rap Sub-Prime Mortgage loans are getting as of late, the market for this kind of mortgage loan is still active, viable and necessary. Subprime loans will be here for the duration, but because they are not government backed, stricter approval requirements will most likely occur.
Refinance Mortgage loans are popular and can help to increase your monthly disposable income. But more importantly, you should refinance only when you are looking to lower the interest rate of your mortgage. The loan process for refinancing your mortgage loan is easier and faster then when you received the first loan to purchase your home. Because closing costs and points are collected each and every time a mortgage loan is closed, it is generally not a good idea to refinance often. Wait, but stay regularly informed on the interest rates and when they are attractive enough, do it and act fast to lock the rate.
A Fixed Rate Second Mortgage loan is perfect for those financial moments such as home improvements, college tuition, or other large expenses. A Second Mortgage loan is a mortgage granted only when there is a first mortgage registered against the property. This Second Mortgage loan is one that is secured by the equity in your home. Typically, you can expect the interest rate on the second mortgage loan to be higher than the interest rate of the first loan.
An Interest Only Mortgage loan is not the right choice for everyone, but it can be very effective choice for some individuals. This is yet another loan that must be thought out carefully. Consider the amount of time that you will be in the home. You take a calculated risk that property values will increase by the time you sell and this is your monies or capital gain for your next home purchase. If plans change and you end up staying in the home longer, consider a strategy that includes a new mortgage. Again pay attention to the rates.
A Reverse mortgage loan is designed for people that are 62 years of age or older and already have a mortgage. The reverse mortgage loan is based mostly on the equity in the home. This loan type provides you a monthly income, but you are reducing your equity ownership. This is a very attractive loan product and should be seriously considered by all who qualify. It can make the twilight years more manageable.
The easiest way to qualify for a Poor Credit Mortgage loan or Bad Credit Mortgage loan is to fill out a two minute loan application. By far the easiest way to qualify for any home mortgage loan is by establishing a good credit history. Another loan vehicle available is a Bad Credit Re-Mortgage loan product and basically it's for refinancing your current loan.
Another factor when considering applying for a mortgage loan is the rate lock-in. We discuss this at length in our mortgage loan primer. Remember that getting the right mortgage loan is getting the keys to your new home. It can sometimes be difficult to determine which mortgage loan is applicable to you. How do you know which mortgage loan is right for you? In short, when considering what mortgage loan is right for you, your personal financial situation needs to be considered in full detail. Complete that first step, fill out an application, and you are on your way!
For additional information about mortgage loan types, mortgage loan products or a bad credit mortgage loan and where to apply for a [http://www.ezlendmortgage.com/bad-credit-mortgage-loan.html]Bad Credit Mortgage Loan visit http://www.EZLendMortgage.com a popular website providing information, tips, mortgage advice and resources including information on independent help finding the best conventional mortgage, adverse mortgage lenders, subprime mortgages, and a [http://www.ezlendmortgage.com]Refinance Mortgage Loan
Article Source: [http://EzineArticles.com/?What-Type-Of-Mortgage-Loan-Is-Right-For-You?&id=558647] What Type Of Mortgage Loan Is Right For You?
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