It could not be denied that mortgage plays a main role in the whole process of home purchase, unless you have enough resources to purchase in cash. You have to approach a lender that could help you in your home purchase.
It is therefore necessary to have an understanding of the different terms of mortgage to get a good idea on what your home mortgage loan really means. The following are several mortgage terms that you should remember specifically if you plan to purchase a property.
Mortgage—is the method where you take out a loan against your own property, which could be either residential or commercial. The property serves as security for repayment of the debt.
Owned Home—is a home occupied by the owner and the family. Head of the family, the wife, son, daughter and other relative who also lives there either could solely or partly own it.
Rented Home—is a home, which the person or persons living there do not own. It is considered a rental home whether the rent is paid or not.
The Adjustable Rate Mortgage (ARM)—a home loan program where the monthly dues and the interest rate are regularly adjusted depending on the index changes specification.
Credit Score—the numerical value reflecting a borrower’s credit worthiness. This is used by lenders in finding out the risks involved in approving a loan.
Closing—the final stage in the whole process of the loan where the seller transfers the title of the property to the homebuyer, signs the documents, and gets the loan amount from his or her mortgage lender.
Closing Costs—are costs paid by the buyer or the borrower at closing that includes charges for loan processing and origination fees.
Private Mortgage Insurance—an insurance policy which serves as protection for the mortgage lender in the event that a borrower defaults on his or her mortgage.
Lock-in Interest—a written agreement guaranteeing a fixed rate on the loan for a specific time before closing. Rates can usually be locked in thirty, forty-five or even ninety days until the closing.
Amortization—is a loan payment, which is divided into equal amounts, which are calculated to repay the debt at the end of the specified period, and includes an accrued interest on the outstanding balance.
Balloon Mortgage—is a kind of amortization for a period, which is longer than the term of the loan. This usually means a thirty-year amortization and a five to seven years term. The outstanding loan balance will become due at the end of the loan term and this is called as the balloon payment.
Default—is the inability of a borrow to meet his or her legal obligations in a contract most specifically the failure to pay the monthly mortgage payments.
Earnest Money—is a sum that is handed by the buyer to a seller as part of the purchase price as assurance of payment.
Foreclosure—a legal proceeding wherein the lender or the seller demands a sale of a mortgaged property in the event the borrower fails to meet his or her mortgage terms.
HUD-1 Statement—is a document that provides a listing of the funds payable upon closing. These include the commission’s loan, loan fees and initial amount of escrow. The total amount at the end of the statement describes the net proceeds of the seller and the net payment of the buyer during closing.
Lien—is any claim against a property to satisfy the obligation or debt.
Market Value—the least price that a seller will accept for his or her property and the highest price a buyer pays towards a home. The market value may differ from the home price that it could actually sell over a period of time.
Refinancing—is securing a new loan of the home that is already owned in replacement of the existing loan of the property.
Survey—does a qualified and registered land surveyor, which details the land location with the dimensions and location of any building in the area, perform a land measurement.
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