Twenty Mortgage Interest Terms any Home Loan Consumer
Before you sign your John Hancock on each and every
single mortgage document in the package, don’t
you at least want what all those terms used throughout
the agreement mean, how the overall financial process
works and, finally, how interest rate fluctuations may
come into play?
Adjustable Rate Mortgage (ARM,) also known as Variable
Rate Mortgage, is a mortgage loan where the interest
rate adjusts periodically contingent upon the pre-selected
Annual Percentage Rate (APR) is an interest rate that
represents the entire cost of a mortgage based on a
yearly rate. In additional, the Annual Percentage Rate
(APR) takes into account any fees and points added onto
the loan throughout the plan’s overall span.
Assumption is an agreement between the seller and buyer.
The contract makes the buyer assume responsibility for
the home seller’s current mortgage obligation.
An assumption generally saves the homebuyer the monies
associated with closing costs and the current interest
Buy-down is the method by which a lender or homebuilder
will subsidize the home loan mortgage by reducing the
interest rate for the first initial years of financing.
The buy-down lowers the buyer’s monthly payment
for a specified and condensed period of time.
Caps refer to the upper limit on the amount a monthly
payment or an interest rate can change in an adjustable
rate mortgage (ARM).
Closing is the term that refers to the settlement of
a property. The conclusion of a real estate sale is
a closing that involves a meeting where the fund and
property and funds are exchanged between the home seller
Debt-to-Income Ratio is a ratio calculated as a percentage
after the borrower’s monthly payment obligations
have been tallied based upon the homebuyer’s gross
Discount Points are the prepaid interest amounts assessed
during the closing by the lending institution. A point
is equivalent to one percent of the loan principal.