A Wealth of Information and Service - Contact a Loan Officer (800) 718-8906
A Wealth of Information and Service - Contact a Loan Officer (800) 718-8906
Navigating mortgage jargon can feel like learning a new language. This guide speaks clearly – whether you’re a first-time homebuyer or a seasoned investor – offering concise definitions and practical insight to empower your decisions.
Adjustable-Rate Mortgage (ARM): A loan whose interest rate adjusts over time based on an index – often starting with lower payments but carrying future rate-change risk. Example: a 5/1 ARM stays fixed for five years, then adjusts annually
Annual Percentage Rate (APR): Your interest rate plus lender fees, expressed annually – making it easier to compare loan costs.
Amortization: The schedule of periodic payments that gradually pay down both principal and interest over the loan term.
Balloon Payment Mortgage: A loan where you make smaller payments at first, followed by one large “balloon” payment at the end.
Borrower’s Ability to Repay (ATR): A legal standard requiring lenders to assess a borrower’s capacity to repay a loan based on income, assets, debt, and credit history.
Escrow: A holding account used for property tax and insurance payments or to safeguard earnest money during closing.
FHA Graduated Payment Mortgage: A loan with lower initial payments that increase gradually over time – designed for borrowers expecting income growth.
Forbearance: A temporary agreement allowing delayed payments to avoid foreclosure; important: missed interest still accrues.
Fixed-Rate Mortgage: A loan with a stable interest rate and monthly payment throughout the term nfor predictability and budgeting ease.
Interest-Only Mortgage: Initial payments cover only interest; later, both interest and principal become due, which can raise payments significantly over time.
Loan Modification: A change to your mortgage’s terms—like lowered interest or extended term—intended to make payments more manageable.
Loss Mitigation: Any approach to avoid foreclosure—from modifications and short sales to short refinances.
Negative Amortization: Occurs when your payment doesn’t cover interest, causing the unpaid amount to be added to the principal, increasing the balance over time.
Mortgage Insurance (PMI/LMI): Insurance required when down payment is under 20%, protecting the lender—not the borrower—from loss.
Prepayment Penalty: A fee for paying off a mortgage early—check your terms to see if this applies.
Rate Lock: Secures your interest rate during the mortgage process—so rising rates won’t surprise you before closing.
Reverse Mortgage: For homeowners 62+, this type of loan pays the borrower from home equity—adding to, not reducing, the balance.
Shared Appreciation Mortgage (SAM): You receive better terms in exchange for sharing any future home appreciation with the lender.
Title & Title Insurance: A title is legal proof of property ownership; title insurance protects against hidden claims or liens.
Underwater Mortgage: When your mortgage balance exceeds your home’s current market value—can make refinancing or selling tricky.
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