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Mortgage Glossary
Adjustable-rate loans , aka variable-rate loans, generally present a lower initial interest rate than fixed-rate loans. The interest rate varies above the life of the loan depending on market situation, but the loan contract generally sets minimum and maximum rates. When interest rates fall, your monthly payments may be lowered; and when interest rates rise, usually so do your loan costs.
Annual percentage rate (APR) is the cost of credit expressed as a yearly rate. The APR includes the broker fees, points, interest rate, and some other credit charges that the borrower has to pay.
Conventional loans are mortgage loans other than those insured or assured by a government agency such as the Rural Development Services FmHA (formerly know as Farmers Home Administration) the VA (Veterans Administration), or the FHA (Federal Housing Administration).
Escrow is the holding of documents or money by a impartial 3rd participant prior to closing. It can also be an account held by the lender into which the borrower pays for insurance and taxes.
Fixed-rate loans usually have repayment terms of fifteen, twenty or thirty years. Both the monthly payments and the interest rate (for interest and principal) will be always the same.
The interest rate is the cost of the money you are borrowing showing as a % rate. Market conditions can change the interest rates.
The fees charged by the lender for processing the loan are called Loan Origination Fees, and are often shown as % of the loan quantity.
Lock-in refers to a written contract giving the guarantee to someone that is buying a home a exact interest rate on a home loan provided that the loan is closed within a certain period of time, such as sixty or ninety days. The number of points to be paid at closing is also often specified in the agreement.
A mortgage is a contract signed by a person that is borrowing money when a home loan is completed that provides the lender a permission to take ownership of the property if the borrower fails to pay off on the loan.
Overages are the difference among any higher price that the home buyer agrees to pay for the loan and the lowest existing price. Brokers and Loan officers are frequently allowed to keep all or some of this variation as extra compensation.
Points are fees paid for the loan to the lender. 1 point = 1 % of the total loan quantity. Points are typically paid at closing in cash. Sometimes, you can borrow the money needed to pay points, but that will make the total costs and the loan amount higher.
PMI (Private Mortgage Insurance) is a protection to the lender against a loss if a borrower cannot pay the loan. It is normally obligatory for loans that the down payment is less than 20 % of the sales price or, when the amount financed is greater than 80 % of the appraised value in a refinancing.
Thrift institution is an expression for loan associations and savings and savings banks.
Closing costs, settlement, transaction may involve application fees; title insurance, title examination, property survey fees, and abstract of title; fees for preparing mortgages, deeds, and settlement documents; recording fees; attorneys' fees; and appraisal, notary, and credit report fees. Under the Real Estate Settlement Procedures Act, the person that is borrowing gets a good faith estimate of closing costs within three days of application or at the time of application. The good faith estimate shows each probable cost either as an quantity or a variety.
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