Mortgage Terms & Definitions
If this is your first time dealing with mortgages and the home market, you may be unfamiliar with some of the vocabulary. Here are some of the common terms and definitions that you need to know.
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Appraisal: A formal estimation that develops the value of a property.
Annual Percentage Rate (APR): This refers to the annual interest rate on your mortgage and any additional fees on the loan.
Cap: Limit to how high the interest rate can reach in an adjustable rate mortgage.
Index: The published rate used by lenders to calculate the interest on adjustable rate mortgages.
Initial Rate: The original rate on an adjustable rate mortgage during the first interval.
Negative Amortization: If you cannot make a payment large enough to cover the amount of interest due, the unpaid interest is added to the loan’s balance.
PITI (principal, interest, taxes, and insurance): These are the items that are usually included in your monthly mortgage payment to the lender.
Point: A fee or charge where one point is equal to 1% of the loan, owed to the lender when the loan is made.
Term: The number of years you have to pay off your loan, typically between 15 and 30 years.
Title: A legal document that expresses your ownership of a property.
Underwriting: Refers to the lender’s guidelines in determining whether or not you are approved for a loan.
Have further questions about mortgages? Check out our FAQ page.
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