Glossary of Mortgage Terminology
• Loan application – standard residential loan application form to apply for a loan
• Credit report – credit bureaus report information about your existing and previous debts and rate how you have repaid the obligations
• Appraisal – independent appraisal to determine the market value of the home
• Survey – verifies property boundaries and confirms that the legal description of the property as stated in the sales contract is correct
• HUD-1 settlement statement – itemizes the services provided and lists all charges to the buyer and seller
• Truth-in-lending statement – a statement which discloses the annual percentage rate, finance charges, the amount of the loan and the total payments required
• Mortgage or deed of trust – pledges the property you are buying as security for the loan
• Promissory note – when you sign this note, you are promising to repay the loan
Types of Mortgages:
• Conventional mortgages – the standard product of lending institutions which are usually sold to investors in mortgages. Down payment assistance programs can be linked with these mortgages to reduce the up-front costs. Available with both fixed and adjustable rate mortgages with many loan terms.
• Federal Housing Administration (FHA) – insures lenders against default by borrowers. Available with both fixed and adjustable rate mortgages with maximum loan amounts which are established for various geographic locations.
• Veterans Administration (VA) – the VA guarantees mortgages for veterans of the armed services, those currently in the service, and their spouses. 100% financing may be available.
Mortgage Comparison Terms:
- Fixed rate mortgages – interest rate does not change over the life of the loan
- Adjustable rate mortgages (ARM) – interest rate varies with a lower rate in the beginning which may increase by certain amounts and within certain set time frames, over the term of the loan.
- Convertible mortgages – combines features of the fixed rate and the adjustable rate mortgages. It allow the borrower to start out with an ARM with the capability of switching to a fixed rate at a later date.
- Buy-down – the lender is paid a lump sum to temporarily “buy down” the interest rate. The buy-down rate may be in effect for 3-5 years, during which time the rate gradually increases to the contract rate.
- Interest rate – these are constantly changing and different rates are applied to different programs.
- Interest rate lock-ins – you will want to know if the lender will hold, or lock-in the initial rate quoted until closing. There may be fees associated with the lock-ins.
- Origination fee – a lender’s charge for originating and processing the loan. Typically 1% or more of the loan amount.
- Application fee – covers the costs of credit reports, appraisal fees, and other miscellaneous expenses related to determining whether the borrower qualifies for the requested loan.
- Points - a “point” represents 1% of the loan amount. Borrowers may decide to pay points to keep the interest rate lower and, thereby lower their monthly payments. Points are normally paid at closing.
- Annual Percentage Rate (APR) – total yearly cost of a loan. It includes the interest rate, mortgage insurance, and points.
For more information on your home loan, please contact a LegacyCare loan consultant at 817-860-3232 or you may email us at Joylynn.Bates@myccmortgage.com.