Adjustable-Rate Mortgage (ARM)
An adjustable-rate mortgage is a mortgage type where the interest rate is not fixed for the course of the loan. After the initial rate period, the interest rate can fluctuate based on the current interest-rate index. Check out our ARM page for more information.
This is the practice of decreasing a loan amount over the life of the loan term by making equal, (typically monthly) payments. This includes the accrued interest amount on the outstanding balance.
Annual Percentage Rate (APR)
The interest rate that reflects the cost of a mortgage as a yearly rate. This rate may be more than the stated note rate or advertised rate on the mortgage because it is cumulative of points and other credit costs. The APR permits home buyers to compare different possible mortgages types based on the annual cost of an individual mortgage product.
This is a short-term temporary loan for financing the costs associated with the construction of a new home. The lender loans funds to the builder periodically as the construction advances. For more construction loan information click here.
Prepaid interest evaluated at closing by your lender. Each point equates to 1% of the loan, i.e., three points on a $100,000 mortgage would be equal to $3,000. These discount points are charged to reduce the interest rate, or can be evaluated as added risk based on loan-level price adjustments (LLPA’s).
Down Payment Assistance Program (DPA)
DPA Programs are available to provide down payment assistance to qualified buyers seeking to purchase a home. These funds do not require repayment. Local programs will vary, so please contact us to see what may be available.
Earnest Money or Escrow Deposit
This is the money supplied by the buyer as part of the cost of the home. This money is supplied as part of a good faith statement to bind the contract and attest to the commitment on the part of the buyer to the transaction.
An FHA Loan is a type of loan offered by the Federal Housing Administration and is an option for most qualified homebuyers. An FHA loan has limitations as to the amount of the loan but is typically sufficient to obtain a reasonably priced home in most areas of the country. The biggest advantage of this type of loan is that it features a low down payment and plenty of flexibility in terms.
FHA Mortgage Insurance
FHA Mortgage Insurance is a requirement related to obtaining an FHA Loan. This insurance protects the lender if the borrower defaults on the loan. The FHA requires two types. One is Up Front Mortgage Insurance Premium (UFMIP), which can be financed as part of the loan. Additionally, a Monthly Mortgage Insurance Premium is included as part of your monthly payment. In the current market, the upfront premium is 1.75% of the loan amount and monthly premiums are typically 1.25% divided monthly for a 30 year fixed rate loan with the minimum down payment. Variances can be seen based on the terms and loan to value.
First-Time Homebuyer Program
These are mortgage loans that offer distinct qualifying terms reserved for buyers that have not owned real estate before or have not owned real estate in at least 3 years. Available programs will vary by state, but oftentimes you may get assistance with closing costs and down payments. Click here for more information
This is a measure of a borrower’s monthly payments held by the lender or servicer to pay for taxes, hazard insurance, mortgage insurance, and additional items as required.
A published interest rate against which lenders gauge the difference between the current interest rate on an adjustable-rate mortgage and that earned by other investments. This sum is what is then used to modify the interest rate on an adjustable-rate mortgage (ARM) up or down.
The sum a lender adds to the index on an adjustable-rate mortgage to formulate the adjusted interest rate.
A mortgage broker’s role is to facilitate the procurement of funds.
Mortgage Insurance (MI)
This is defined as money paid to insure the mortgage when the borrower has less than a 20% down payment. Also, see Private Mortgage Insurance and FHA Mortgage Insurance.
Private Mortgage Insurance (PMI)
In some cases where the borrower does not have a 20% down payment, the lender may allow a reduced down payment, even as low as 3.5% on VA or USDA guaranteed loans. With a smaller down payment, lenders typically require that the borrower has private mortgage insurance on the borrowed amount. You can obtain private mortgage insurance in various forms such as upfront, paid at closing or monthly. Lenders may require a mix of both upfront and monthly. The amount required will depend on many factors such as the program type, property type, and credit score.
Title Insurance is important to both the lender and the homebuyer because it insures against financial loss or damage that might be incurred because of liens, encumbrances or defects to the title of property or error of the related search. This insurance also protects the lender and homebuyer from claims such as ownership interest, incorrectly recorded documents, forgery, liens, encroachments, easements, and more risks listed in the policy.
Based upon considerations such as credit, employment, and assets, underwriting approves or declines to fund to persons seeking a home loan. Underwriting is also the process of matching approved risks with appropriate rates, terms and loan amounts to homebuyers.
USDA Rural Home Loan
A USDA Rural Home Loan is guaranteed by the USDA and is available with no down payment to qualified buyers. This loan is one of the few remaining loan programs of this type. Not all properties must comply with the term ‘rural’, but the physical location of the property and the maximum household income of the borrower come into play. Contact us to see if this option would be a good choice for you or click here for more information.
A VA Loan is a mortgage that is available to U.S. military veterans. The Veterans Administration guarantees these loans and they are offered through a private lender like banks or mortgage companies when the buyer is seeking to purchase a property for their own personal occupancy. These loans are available at competitive rates and can be obtained with little or no money down.