Adjustable Rate Mortgage (ARM): It’s the type of mortgage that changes with the interest rates, which means your monthly payments can go up or down as determined by your lender, although it’s often subject to a cap.
Annual Percentage Rate (APR): This is the cost of a loan calculated by its yearly interest rate which includes the interest, points, mortgage insurance, and other fees associated with the loan.
Balloon Mortgage: A borrower will get a low interest rate on a mortgage for an initial fixed period of time, anywhere from 5, 7, or 10 years, and after that the balance is due or is refinanced by the borrower.
Bridge Loan: If you’re selling your starter house, this is a short-term loan secured through the house you have up for sale to be used towards the closing costs or construction of the new home you’re buying. It’s also called a Swing Loan.
Closing Costs: Another term for “more money you have to pay.” They are the fees not included in the price of a home the buyer pays to cover the transfer of ownership at closing. Sometimes you can cut a deal so the seller pays for these costs.
Down payment: The cash you fork up to buy a house -- not what you borrow through your mortgage.
Earnest Money Deposit: This is the money you offer a seller when you really, really want to buy the house to let the seller know you’re more serious than the next guy. If your offer is accepted, it becomes part of the down payment. Then it is returned if the offer is rejected, or forfeited if you pull out of the deal.
Escrow: Even more money! This a special account where your mortgage lender puts a portion of each monthly mortgage payment to cover expenses you’ll face like property taxes, homeowners’ insurance, and mortgage insurance.
Fixed Rate Mortgage: It means what it says -- the interest rate and all terms of this mortgage stay the same over the course of the loan. You’re payments never change.
Lock: Interest rates fluctuate, so a lock is a guarantee by a mortgage lender that says if you close the loan within a certain time frame, the rate won’t change.
Mortgage Insurance: This benefits the lender, not you, and is required if you make a down payment of less than 20 percent of the purchase price. That way, the lender is protected if you default on your loan. Oh, and you have to pay for it.
by Alonna Friedman
7/2/08
See more:
Buying a Home,
mortgages,
Real Estate