Mortgage related words: Know the lingo
As your guide through one of life’s most important purchases, we’re committed to keeping communication open and understandable. You’ll see and hear a lot of new mortgage related words over the course of this journey. Here’s a rundown of some mortgage lingo you should know, including the definition of terms like adjustable–rate mortgage (ARM) and fixed–rate mortgage.:
Adjustable-rate mortgage (ARM)
A loan with an interest rate that will adjust at some time during the term of the loan
Annual percentage rate (APR)
The cost to borrow money expressed as a yearly percentage—includes the interest rate plus other charges or fees
Appraisal
A report that provides an estimate of a property’s value
Closing costs
Expenses above and beyond the price of the property (e.g., loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed recording fees, etc.)
Closing Disclosure
A document that shows the actual terms and costs of your loan and your projected monthly payments
Debt-to-income ratio (DTI)
Your monthly debt divided by your gross monthly income
Discount points
Interest paid by the borrower to lower the interest rate on the loan
Earnest money
Money a buyer pays the seller to show good faith that they’re serious about purchasing the property
Escrow
An escrow or impound account lets you spread out the costs of taxes and insurance over the life of your loan as part of your monthly payment
Fixed-rate mortgage
A mortgage that has the same interest rate for the entire term of the loan
Home inspection
A visual examination of a property to determine its condition and to report any repairs needed for a mortgage
Loan estimate (LE)
A document that provides mortgage fee estimates for borrowers during the application process
Loan-to-value (LTV)
Indicates the ratio of the loan amount to the appraised value of the property
Mortgage insurance (MI, MIP, PMI)
Insurance typically required as part of the mortgage if your down payment was less than 20 percent of the home’s value
Pre-approval
A bank or lender has reviewed your credit and determined that they’re willing to lend you money
Recording
A formal record of ownership called “the deed,” which transfers title and ownership of the property to the purchaser
The above information surrounding mortgage terms and lingo is for educational purposes only. All information, loan programs and interest rates are subject to change without notice. All loans subject to underwriter approval. Terms and conditions apply.