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Adjustable Rate Mortgage (ARM).
A type of mortgage
rate loan whose interest rate changes periodically up
or down, usually once or twice a year.
Annual Percentage Rate (APR).
Everything financed in your mortgage loan package (interest,
loan fees, points or other charges) expressed as a percentage
of the loan amount (usually slightly above the actual
interest rate alone.)
Assumable Loan.
A loan in which the lender is willing to "transfer"
from the previous owner of the home to the new owner,
sometimes at the same interest rate, sometimes at a
new rate. An assumable loan can make your home more
attractive to buyers when you want to sell.
Closing Costs.
Costs the buyer must pay at the time of closing in
addition to the down payment: including points, mortgage
insurance premium, homeowners insurance, prepayments
for property taxes, etc. Closing costs average 3%-4%
of the loan amount.
Contingency.
A condition put on an offer to buy a home such as the
perspective buyer making an offer contingent on his
or her sale of a present home.
Conventional Mortgage.
A type of mortgage not insured by either the Federal
Housing Administration (FHA) or the Department of Veterans
Affairs (VA), and thus usually requiring a 10%-20% down
payment.
Earnest money.
Funds submitted with an offer to show "good faith"
to follow through with the purchase. Earnest money is
placed by the broker in an escrow/trust account until
closing, when it becomes part of the down payment of
closing costs. Typically 3%-5%.
Escrow.
A procedure in which documents or transfers of cash
and property are put in the care of a third party, other
than the buyer or seller.
FHA Financing.
Financing for a loan, which will be insured against
loss by the Federal Housing Administration--a part of
the U.S. Department of Housing and Urban Development
(HUD).
Homeowners Insurance.
Insurance that protects the homeowner from "casualty"
(losses or damage to the home or personal property)
and from "liability" (damages to other people
or property). Required by the lender and usually included
in the monthly mortgage payment.
Loan Origination Fee.
A fee charged by the lender for evaluating, preparing,
and submitting a proposed mortgage loan. Typically
1%.
Mortgage Insurance premium (MIP)
A charge paid by the borrower (usually as part of the
closing costs) to obtain financing, especially when
making a down payment of less than 20% of the purchase
price
Point.
An amount equal to 1% of the principal amount being
borrowed. The lender may charge the borrower several
"points" in order to provide the loan.
Property Taxes.
Taxes (based on the assessed value of the home) paid
by the homeowner for community services such as schools,
public works.
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