Adjustable-rate mortgage (ARM): The mortgage-payment rate and loan payments vary. With these mortgages, interest rates start lower than with a fixed-rate mortgage, but then become variable. At specific intervals (typically every year), a lender adjusts the rate up or down as interest rates fluctuate.Annual percentage rate
(APR): The annual cost of a mortgage. APR is the base interest rate plus points, fees, and other loan costs.
Closing cost: Charges a home buyer pays in addition to a down payment. Fees may include points and charges for credit reports, appraisals, prorated property taxes, and homeowner’s insurance.
Finance charge: Interest borrowers pay over the life of a loan.
Fixed-rate mortgage: The mortgage-payment rate and loan payments remain fixed for the life of a loan. Interest rates do not vary.
Good Faith Estimate: An estimate of charges that are a part of the loan disclosure documents that are completed when applying for a mortgage. It discloses an estimate of actual charges for handling the loan.
Lock-in: Borrowers get a guaranteed interest rate (in effect at the time of the loan application) for a specific period of time.
Mortgage: A legal contract that pledges a property as security for a loan.
Mortgage Banker: A loan office that has the ability to close loans as a correspondent lender. The pricing that this individual receives is better than a brokers pricing because of the warehousing line that backing is received from.
Mortgage Broker: Companies that work with a number of banks and lenders to negotiate lower interest rates than available to individuals. They are usually paid a commission by the lender and charge the borrower a broker’s fee.
Mortgage payment: The loan payments for a mortgage are composed of interest (what the lender charges for borrowing money) and principal (amount borrowed).
Private mortgage insurance (PMI): Buyers pay this insurance if their down payments are less than 20% of a home’s purchase price (on a conventional mortgage loan).
Points: Fees borrowers pay to reduce interest rates. A point is 1% of a loan amount.
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