Do You Know Your Mortgage Terms?

August 22, 2019

Definition of APR:

A loan with an interest rate that is periodically adjusted based on a pre-determined index

A rebate by a lender or investor to a local Loan Originator for closing a loan on a certain product

The cost of a mortgage stated as a yearly percentage rate.

Correct! Wrong!

The fees charged for services performed, including the home appraisal, loan origination, flood certificate, the title survey, etc.:

Closing Costs

Settlement Costs

Origination Fees

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This is paid by the buyer to the seller to bind a transaction or assure payment:

Prepayment Penalties

Private Mortgage Insurance (PMI)

Earnest Money

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Definition of Escrow:

The part of a property’s purchase price paid by the borrower

The holding of funds or documents by a third party prior to closing; the funds are usually for payment of taxes and insurance on property

When a lender or builder subsidizes a loan by lowering the interest rate during the initial years of a loan

Correct! Wrong!

Definition of Home Equity:

A rebate by a lender or investor to a local Loan Officer for closing a loan on a certain product

When the value of your home increases and/or you reduce the amount you owe through your loan payments

Expenses such as interest and escrow reserves

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A federal law that allows consumers to review information on known or estimated settlement costs once after application and once prior to or at a settlement:

TILA

HMDA

RESPA

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Definition of Origination Fees:

Fees assessed by the lender, usually to permanently buy a below-market rate

Fees charged by the lender to the borrower to prepare loan documents, conduct credit checks, inspect and sometimes appraise property

A borrower’s monthly mortgage payment

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Definition of Private Mortgage Insurance (PMI):

The fees charged for services performed, including the home appraisal, loan origination, flood certificate, the title survey, etc.

This protects lenders against loss if a borrower defaults and is typically required for borrowers making a down payment less than 20 percent

A written agreement guaranteeing a borrower a specific interest rate as long as the loan closes and funds before a certain date

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The process during which the decision is made whether to approve a loans rates and terms based on the borrowers’ credit, employment, assets, and other factors:

Underwriting

Pre-Qualifying

Closing

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Definition of Appraisal:

A written agreement guaranteeing a borrower a specific interest rate as long as the loan closes and funds before a certain date

A written analysis of a property’s estimated value

When a lender or builder subsidizes a loan by lowering the interest rate during the initial years of a loan

Correct! Wrong!

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