It's our job to take care of your mortgage needs. But just in case you want to learn more about some of the terms and procedures, we've provided a glossary for your convenience.
Loan-to-Value (LTV): the relationship of the loan amount to the appraised value of the property or the sale price, whichever is lower.
Margin: on an adjustable rate mortgage, the margin is added to the index rate to determine the interest rate to be charged during the next adjustment period. Margins are usually constant for the life of the loan and generally reflect the lender's cost of doing business.
Negative Amortization: a loan payment schedule in which the outstanding principal balance goes up, rather than down, because the payments do not cover the full amount of the interest due. The unpaid interest is added to the principal.
Points: 1 point equals 1% of the loan.
Private Mortgage Insurance (PMI): this insurance permits a borrower who has less than 20% as down payment to purchase a home because it protects the mortgage lender against the borrower's potential to default on the mortgage.
Title Insurance: a type of insurance that can protect the lender and the borrower against any title defects when a new home is purchased. Protection for the borrower requires the payment of additional premiums.
Title Search: an examination of public records, laws and court decisions to disclose the facts regarding ownership of the property.
Truth in Lending Statement: required by federal regulations, this statement tells purchasers the cost of financing their loan for the purpose of comparing loan programs.
Underwriting: the analysis of risk that will determine the ability of the borrower to repay a loan, and the matching of that risk to an appropriate amount, rate and term on the mortgage loan.
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Adjustable Rate Mortgage (ARM): a loan with an interest rate that can be changed periodically, based on increases or decreases in a specified economic index.
Amortization: the process of reducing the principal loan amount by making regularly scheduled payments of principal and interest according to the terms of the mortgage agreement.
Amount Financed: a term used in the Truth in Lending Statement that refers to the loan amount less the cost of obtaining the loan.
Annual Percentage Rate (APR): a measure of the cost of credit expressed as a yearly percentage rate. This is a federally required formula, designed to help the owner compare the cost of credit.
Appraisal: an estimate of the fair market value property, conducted by a certified appraiser and approved by the lender.
Assessed Value: a home or piece of real estate property has more than one value; the assessed value generally refers to that value set on the land by tax authorities for purposes of determining real estate taxes
Buy-Down: a borrower may pay additional "points" on a loan to reduce or "buy-down" the initial interest rate to lower the monthly payments.
Buy-Up: a borrower may want to reduce the number of "points" paid at the time of settlement in exchange for "buying up" to a higher interest rate and higher monthly payments.
Closing/Settlement Costs: these are all the costs to the buyer and seller associated with the purchase, sale or refinance of a home, including points, title insurance, recording fees, escrows and attorney's fees.
Commitment: a pledge by the lender to make mortgage funds available to a buyer for purchase or refinancing of a home. The agreement is conditioned on the buyer having provided accurate information and satisfying all conditions and requirements.
Contract of Sale: contract in which seller agrees to sell and buyer agrees to buy under specific terms and conditions spelled out in writing and signed by both parties.
Equity: an owner's equity is the difference between the property's fair market value and the current amount owed on the property.
Escrow: a portion of monthly payments held by the lender on the borrower's behalf to pay taxes, insurance and other charges when they become due.
Fixed-Rate Mortgage (FRM): a loan with an interest rate that remains the same throughout the life of the loan - usually 15 or 30 years.
Hazard/Homeowner's Insurance: an insurance policy required of the buyer that will compensate the insured for a loss on the property due to specified hazards (e.g., fire, theft, etc.).
Index: the interest rate on an ARM (adjustable rate mortgage) is tied to a specific, published index rate. At the end of each adjustment period, the lender is authorized to adjust the mortgage note rate depending on the movement of the index since the last time of adjustment.