Home Loans and Refinance Loan Jargon
Apparently, homeownership has its privileges but what
do those mortgage terms really mean? During your quest
for buying that new home, familiarizing yourself with
the jargon of the mortgage industry will eliminate great
Down Payment is the sum of cash paid by the buyer during
the closing that accounts for the difference between
the mortgage amount and the home purchase cost.
Earnest Money is the money provided by a home buyer
to a seller as a deposit. The earnest money represents
a buyer’s commitment to make the future transaction.
(At the closing, earnest money is subtracted from the
Equity is the value a home owner has in real estate
above and beyond the obligation against the property.
Essentially, equity is fair market value subtracted
from the current indebtedness of the property.
Escrow is the term used to define the funds that, provided
to a third party, are retained to cover expenses in
the way of tax, earnest money deposits and insurance
payments during the term of the mortgage or refinance
Fixed Rate Mortgage is a mortgage rate where the interest
rate remains stable and constant during the life of
the refinance loan or mortgage loan.
Loan-to-Value Ratio is the ratio between the appraisal
value of the home property and the amount of the mortgage
Market Value is the price a property can potentially
bring in when put up for sale on the real estate market.
Mortgage Insurance is an insurance that warrants lenders
against the loss of a borrower defaulting on either
a refinance or mortgage loan. (Mortgage insurance or
private mortgage insurance is a requirement if the loan-to-value
ratio is more than 80 percent).
Origination Fee is the rate charged by a lender for
administering and processing the loan application. (Normally,
the origination fee is calculated as a percentage of
the home loan).
PITI is the acronym for principal, interest, taxes,
Underwriting is the decision-making process by which
lenders have a valid basis for either granting or denying
the financing or refinancing of a loan.
Variable Rate Mortgage is more commonly referred to
as the Adjustable Rate Mortgage (ARM). The variable
rate mortgage reflects the rate a home loan or refinance
loan will adjust periodically based on the pre-selected