Definitions and explainations of mortgage terminology.
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Mortgage Glossary
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Appraisal - A report that estimates the property’s fair market value based on an analysis of the sales of comparable homes in the same area. An appraisal is required by your lender and must be made by a qualified appraiser. |
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Mortgage Glossary
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Balloon Mortgage - A mortgage that typically offers low rates for an initial period of time (usually less than 10) years, and then requires that the balance is due or is refinanced by the borrower. The loan is typically amortized as if it would be paid over a thirty year period to keep monthly payments low.
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Mortgage Glossary
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A Buy Down is when you pay discount points to obtain a lower interest rate rate. For example the par (no points) rate on a 30 year fixed rate mortgage might be 6.25%, but by paying one point (one percent of the loan amount) up front, you might be able to pay a 6% interest rate.
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Mortgage Glossary
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Cap - Caps are limits on an adjustable rate mortgage that limit the amount the payment or, more commonly the interest rate can be increased or decreased during each adjustment period (usually 6 or 12 months). Some ARMs also have a lifetime cap. |
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Mortgage Glossary
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Closing Costs - Costs that the borrower must pay at the time of closing, in addition to the down payment. There are two categories of closing costs, "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are items like origination fees, discount points, attorney’s fees, credit report, title insurance and survey that are paid just once. "Pre-paids" are costs which recur during your loan, like property taxes, homeowners insurance and mortgage insurance. Your lender will estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which must be issued to you within three days of receiving a home loan application as mandated by the Real Estate Settlement Proceedures Act (RESPA). |
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Mortgage Glossary 
