If you're not sure what specific mortgage terms mean, whether you're a new buyer or a more experienced one, check our mortgage terms glossary for a short summary of the most common mortgage terms.
APR or Annual Percentage Rate: The APR is one of the most important mortgage terms in a mortgage terms glossary. The APR tells you how much interest you pay on your mortgage, and ultimately determines your mortgage payments and the cost of your mortgage. The lower the APR, the better.
ARM or Adjustable Rate Mortgage: An adjustable rate mortgage is a mortgage in which the interest rate is adjusted based on an interest rate index over which the lender has no control. Adjustable rate mortgages can be dangerous to homeowners, as the rate can go up unexpectedly and homeowners may find themselves unable to make their mortgage payments.
Balloon Mortgage: A balloon mortgage is another one of the most important terms in the mortgage terms glossary, as balloon mortgages are just as dangerous for buyers as ARMs. In a balloon mortgage, the mortgage payments are calculated as if it were a 30-year mortgage, but the balance is due in full before the 30 years is up, often in 7 years. At this time, the borrower must pay the loan in full or refinance.
Buy-Down: A buy-down is another important entry in the mortgage terms glossary, as it's another occasion when buyers may get into trouble. In a buy-down, a mortgage is issued at a specific rate, but the buyer can "buy-down" the rate for the first year or few years by paying a lump sum, sometimes rolled into the mortgage itself. When the buy-down is over, the mortgage reverts to its set rate, which may be higher than the buyer can afford.
HUD-1 Settlement Statement: The HUD is the form that the borrower receives at closing that details all deposits and payouts of loan proceeds. The HUD tells the borrower the loan amount, how much the borrower pays at closing, how much the seller receives and how fees are distributed.
Jumbo Mortgage: A jumbo mortgage is a mortgage higher than the maximum purchased by Fannie Mae and Freddie Mac, two mortgage lending giants. Jumbo mortgages are considered non-conforming mortgages, and are typically used to refer to lending products over $300,000-$500,000, depending on the lender.
Truth-in-Lending Disclosure: The truth-in-lending disclosure is a document that the lender is required by law to provide in every closing package. It breaks down your mortgage terms, telling you your APR, the amount of your monthly payments and the total cost of your loan.
Underwriting: Underwriting is the process by which a lender determines whether to offer you a loan and prepares your loan documents. You may need to provide a lender with many documents and pieces of information during the underwriting process as they prepare your loan.
A mortgage is nothing more than a loan. Like most loans, it requires some collateral (the thing you'll lose if you don't pay the lender back). In this case, the collateral is a house or apartment you want. A bank lends you money to buy a house, and if you don't pay them back when they say to, they get to seize the house, put you out on the street, and sell your home so they can get their money back.
The Federal Reserve has proposed a new set of lending regulations designed to help protect borrowers. In an effort to tighten up some of the questionable lending practices that are being blamed for much of the current credit crunch, the Fed is calling for stricter guidelines for mortgage lenders.
Although it may seem overwhelming, the mortgage foreclosure process is actually easy to understand. This article breaks down a typical foreclosure process, stage-by-stage from beginning to end.