| Glossary of Mortgage Terms |
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Adjustable-Rate Mortgage (ARM)
A mortgage having an interest rate that can change at designated intervals based on a financial index. Rates on our ARMs change every three, five or seven years, based on your preference, allowing more flexibility on your loan. An ARM can also prove useful to members who don't plan on living in one location for a long period of time or that relocate through their careers.
Amortization
The gradual repayment of a mortgage by installments.
Appraisal
A professional assessment of the market value of a property.
Closing Costs
Expenses (over and above the price of property) incurred by buyers and sellers in transferring ownership of a property.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to loan money to a home buyer.
Deed
The legal document conveying title to a property.
Equity - The difference between market value of a property and the owner's outstanding mortgage balance.
Escrow
The holding of documents and money (such as deposit) by a neutral party prior to closing. Also, an account held by the lender into which a homeowner pays money for taxes and insurance.
Fixed-Rate Mortgage
A Fixed-Rate Mortgage interest rate remains the same across the length of the loan. The advantage of this type of mortgage is that your monthly principal and interest payments won't change across the term of the loan. Payments can vary with fluctuations in property taxes and insurance premiums.
Good Faith Estimate
A written estimate of closing costs provided by a lender within three days of applying for a loan.
Interest Rate Cap
A provision of an Adjustable Rate Mortgage (ARM) that limits how much the interest rate can increase per adjustment period.
Lien
A legal claim against a property that must be paid when a property is sold.
Offer To Purchase
A formal document in which a buyer proposes to buy a property for a specified amount and under certain conditions. Acceptance by the seller creates a contract binding on both parties, subject to any contingencies.
Points
A one-time charge by some lenders to increase the yield of a loan. It is equal to 1% of the loan amount and paid at closing.
Prequalification
The process of determining how large a loan a prospective homebuyer can qualify for. This is completed prior to actually applying for a loan.
Principal
The amount originally borrowed. Also the amount of the monthly mortgage payment that reduces the outstanding balance of the mortgage.
Refinancing
The process of obtaining a new mortgage, usually at a lower rate, to repay and replace an existing mortgage.
Survey
A drawing showing the legal boundaries of a property.
Title
A legal document establishing the right of ownership.
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