Are you thinking about buying a home but don't know an "ARM" from a "lien"?
Here's a short primer on Mortgage lingo to help.
Still confused? Call one of our real estate professionals to assist and educate you along the way.
Adjustable rate: An interest rate that that may change over the life of the loan.
Appraisal: A report expressing the estimated value of a property based on a comparison of similar saleable properties.
Assumable mortgage: A loan that can be transferred with a sold property to a new buyer..
Collateral: Property pledged as security for a debt, such as real estate that secures a mortgage. Collateral can be repossessed if the loan is not repaid.
Conventional loan: A mortgage loan not insured or guaranteed by a federal government entity such as the Federal Housing Administration.
Deed: A document that legally transfers ownership of property from one person to another. The deed is recorded on public record with the property description.
Earnest Money Deposit: Money paid at the time of offer. It is deducted from the final amount due at closing.
Fixed-rate mortgage: A mortgage with payments that remain the same throughout the life of the loan.
Good Faith or Good Faith Estimate: Refers to settlement charges paid by a by the borrower at closing. A Good Faith Estimate of the charges is required by The Real Estate Settlement Procedures Act.
HUD-1: Also known as the “settlement sheet,” it itemizes all closing costs such as real estate commissions, loan fees, points, and escrow amounts.
Lien: A legal claim against a property that must be paid off when the property is sold. A lien is created when you borrow money and use your home as collateral for the loan.
Loan-to-value ratio: Expressed as a percentage, the amount of the loan divided by the value of a property. For example, if you have a $120,000 mortgage against a $200,000 home, the LTV is 60 percent.
PITI: Principal, Interest, Taxes, and Insurance—the four elements of a monthly mortgage payment.
Points: Mortgage industry synonym for “one percent,” typically of the principal loan amount. To pay an origination fee of two points on a $100,000 loan, for example, you’d pay $2,000 to the lender.
Quitclaim deed: An instrument transferring ownership of a property, typically with no guarantee of an unencumbered “clear” title.
REALTOR®: A real estate broker or associate with an active membership in the National Association of Realtors. Not all brokers are Realtors.
Survey: A measurement description of land prepared by a registered land surveyor. Typically it shows the property’s dimensions and its location relative to known landmarks, plus the location and dimensions of any improvements.
Title: The evidence to the right to, or ownership of, property.
Title insurance: A policy that guarantees the accuracy of a title search and protects against errors. Most lenders require the buyer to purchase title insurance to protect the lender against loss in the event of a title defect. This charge is included in the closing costs.
Underwriting: The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower’s credit history and a judgment of the property value.
VA loan: A loan guaranteed by the U.S. Department of Veterans Affairs as a benefit to military veterans.
Warranty deed: A legal document which guarantees that the seller is the true owner of the property and has the right to sell the property.