Term

Before you consider applying for a mortgage, it is very important for you to know the basic mortgage terms. Below is a mortgage term glossary with its corresponding mortgage term definitions so that you can fully understand the whole of the mortgage business.

Adjustable rate is the term that means the interest rate that periodically changes in relation to its index. The payments accordingly decrease or increase. Another mortgage term is amortization. This is the repayments method wherein the borrowed amount is gradually repaid through payments of the principal and the interest that is done on a regular monthly basis. On the first number of years, most of the payments are generally applied towards the owed interest. On the final years, the amounts paid are mostly for the remaining principal. Annual memberships are those amounts that are sometimes annually charged for having available credit lines. These charges are usually charged, regardless of the fact that you are using your line or not. These are popularly called the participation fees. Annual Percentage Rates or the APR’s are the costs of credits on yearly basis that are expressed as percentages. These rates are required to be divulged by your lender as mandated by the Truth in Lending Act Regulation Z. These includes those up-front costs that are paid to obtain some loans, therefore, the amounts are higher than the stipulated interest rates on a mortgage note. However, the APR’s do not include those title insurance, appraisals, as well as credit reports.

Appraisals are those fees that are charged by appraisers to render opinions of market values on a particular date. These are generally required by a number of lenders for one to obtain a loan. Balloon Payments are those lump sum payments for the balance of a loan that has not yet been paid. Cap is the term that means the maximum allowed increase, either for interest rates or payments for specified amount of time on adjustable rate mortgages. Ceilings are those maximum allowed interest rates that are over the life of a particular loan of those adjustable rate mortgages. Closing Costs are those fees that are paid by the borrower or the seller during a mortgage loan’s closing. These costs normally include those origination fees, the discount points, the attorney’s fees, the title insurance, the survey, and some other items that have to be prepaid like taxes and the insurance escrow payments. Conforming Loans are those mortgage loans that are below $203,150.00. The qualifying ratios, as well as the underwriting methods, are normally standardized to higher degrees. Credit Limits are those maximum amounts that one can borrow under the home equity plans. Debt Services are the total amounts of a credit card, an auto, a mortgage, or any other form of debt that a borrower has to pay.

Deeds of Trust are commonly used in most western states. These are the agreements that are used to pledge the borrower’s home or any other real estate to secure the loan. Due on Sale is the term in the mortgage agreement that states that when a borrower transfers, sells, or encumbers a specific property, the lender has every legal right to demand for the full outstanding balance. Hazard Insurance is the contract made between the insurer and the purchaser to compensate any insured property due to hail damage, fire, and any other forms of hazards. Interest Rates are those periodic charges that are expressed in percentage, generally used for credits.

Mortgage Brokers are those that take your loan applications and then process the important and necessary paperwork. Unlike those mortgage bankers, the mortgage brokers do not fund a loan using their own money. Instead, they work on behalf of investors like bankers and investment bankers.

Knowing the basic terms of mortgage is very essential so that you will not have a hard time understanding the more complicated issued of mortgage. Once you have fully understood the basics, understanding the more complicated aspects of mortgage will not be as difficult as you think it is.