Understanding common terms used in mortgage is vital to everyone who is going to sign an agreement for a home loan. Many find the mortgage process cumbersome, mostly because the forms seem hard to understand.
Before you search for a qualified mortgage company, Salt Lake City providers want you to study this glossary of some commonly used words in mortgage:
ARM: Adjustable Rate Mortgage
A home loan wherein the interest rate isn’t fixed, that is, it is based on standard financial index and it may vary during the period of the loan however, most ARM have a cap on the increase.
APR: Annual Percentage Rate
A method for calculating the cost of a loan or mortgage in the form of a yearly rate. It includes additional terms like interest, mortgage, insurance, credit costs and it is higher than the interest rate quoted by the lender.
In mortgage terms, it is typically the value of a property as estimated by a qualified appraiser.
This is a type of mortgage which offers lowered interest rates for a few years in the beginning after which the principal sum must be paid off in a lump typically called a balloon payment.
In a mortgage, the closing costs typically refers to expenses incurred when transferring property ownership, which may have an origination fee, title insurance, attorney fees, taxes and escrow. Lenders usually provide good faith estimates of the closing costs to prospective home buyers.
This is a lump payment higher than periodic payments toward the loan and it pays off the remaining balance amount of a home loan.
This refers to what is provided as security against a debt or loan. In a home loan or mortgage, the collateral is essentially the property.
The payment done by the buyer in cash which is not financed by the mortgage. Cash payments in a mortgage tend to vary anywhere between 5 to 20%.
Knowing these terms will make things easier for you when you apply, because you won’t be confused by all the nitty gritty details.