Mortgage loan terminology and its understanding can help any
person who
aim at mortgage loans
to make an informed and reasonable choice. There
is a certain set of terms which are the essential part of mortgage loan
process and mortgage
insurance as well. Speaking about mortgage loans
at least in general, it's necessary to notice that sound knowledge of
the main aspects of mortgage terminology is your key to success. Basic
mortgage loan terminology refers to mortgage loan types
and mortgage
loan documents. We suggest that you familiarize yourself with all
necessary terminology and get the best deal.
Mortgage loan term
Fixed period during which you have to pay off your loan. So longer the
term the lower the payment.
Interest rate
Certain amount of money which have to pay off for borrowing money. You
interest rate depends on the cost of the house you are going to
purchase, amount of money you can afford to put down, your income and
credit rating.
Closing costs
Final and total sum of all expenses you have to pay when you become a
property owner.
Principal
Certain amount of money borrowed from lender
ARM (Adjustable Rate Mortgage)
This is one of the main types of mortgage insurance, when interest rate
changes within certain period of time (can change depending on
movements of an index rate).
APR (Annual Rate Percentage)
This is a kind of interest rate which involves all expenses for the
mortgage. As a rule APR is higher than advertised rate, that's why you
can easily compare annual rate percentage and fees of various lenders.
Down payment
The amount of money (cash) you pay directly to real-estate seller. This
sum is the difference between the mortgage loan amount and real price
of the object.
Escrow
Mortgage loan document which takes effect only after
conditions stated in it
are fulfilled.
Advance
This is an advanced payment which is paid in advance according to
mortgage agreement.
FRM (Fixed Rate Mortgage)
Fixed rate mortgage is one of the oldest and time-proved types of
traditional mortgage loans which has fixed interest rate and it remains
unchanged during the whole period when your mortgage agreement is in
effect.
At first sight the mortgage processes can seem to be difficult both to
perform and to understand, however if you learn at least a bit about it
and familiarize yourself with basic mortgage terminology, you will come
to know the particulars of mortgage.
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