Mortgage Terms

Posted by  on Apr 16, 2009
If you are thinking about getting a new mortgage and you are looking into interest rates, you might be thinking about getting a mortgage broker. Also, it is a good idea to become familiar with some mortgage terms in order to best decide what you want to do.

Caps consumer safeguards limit the amount the interest rate on an adjustable rate mortgage which may change per year and/or the life of the loan.

Another term is affordability analysis, which is actually an analysis of a buyers ability to afford the purchase of a home. Reviews income, liabilities, and available funds, and considers the type of mortgage you plan to use, the area where you want to purchase a home, and the closing costs that are likely.

A mortgage broker is an individual in the business of assisting in arranging funding or negotiating contracts for a client but who does not loan the money himself. Brokers usually charge a fee or receive a commission for their services. Buy-down is when the lender and/or the home builder subsidized the mortgage by lowering the interest rate during the first few years of the loan.

While the payments are initially low, they will increase when the subsidy expires. Amortization means loan payment by equal periodic payment calculated to pay off the debt at the end of a fixed period, including accrued interest on the outstanding balance. Amortization term is the length of time required to amortize the mortgage loan expressed as a number of months.
For example, 360 months is the amortization term for a 30-year fixed-rate mortgage. Caps are consumer safeguards which limit the amount monthly payments on an adjustable rate mortgage may change.

A certificate of eligibility is the document given to qualified veterans which entitles them to VA guaranteed loans for homes, business and mobile homes. Certificates of eligibility may be obtained by sending form DD-214 to the local VA office with VA form 1880. APR is a measurement of the full cost of a loan including interest and loan fees expressed as a yearly percentage rate.

Because all lenders apply the same rules in calculating the annual percentage rate, it provides consumers with a good basis for comparing the cost of loans. An appraisal is an estimate of the value of property, made by a qualified professional called an "appraiser". An appraised Value is an opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property.

An adjustment interval on an adjustable rate mortgage, is the time between changes in the interest rate and/or monthly payment, typically one, three or five years depending on the index. The adjustment period is the period elapsing between adjustment dates for an adjustable-rate mortgage.

An assignment is the transfer of a mortgage from one person to another. An assumable mortgage can be transferred from the seller to the new buyer. Generally requires a credit review of the new borrower and lenders may charge a fee for the assumption. If a mortgage contains a due-on-sale clause, it may not be assumed by a new buyer. A balloon payment is the final lump sum paid at the maturity date of a balloon mortgage. A biweekly payment mortgage is a plan to reduce the debt every two weeks. The 26 biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is a substantial savings in interest.


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