If you are about to go on a mortgage transaction, you may not wanna move forward without learning more about the loan jargons that you could encounter. Save time asking questions and come in non-empty handed. Here are some of the most common mortgage terms that you should learn about before you proceed with any mortgage transaction:
1. Annual Percentage Rate or APR - it is the effective interest rate that has all loan related fees included. This rate helps in determining the total cost of a loan and is also used in comparing different loans with different note rates.
2. Combined Loan-to-Value or CLTV - this is the total amount of mortgage dues of a specific property in comparison to the fair market value.
3. Debt-to-Income Ratio or DTI - it is calculated by computing the borrower's monthly liabilities and dividing it by his gross monthly income.
4. Default - it is the term used to refer to one's failure to fulfill his mortgage responsibility.
5. Delinquency - this is the term used to refer to the late payment for one's monthly liability. Once the delinquency goes past 30 days, creditors may report it to credit bureaus.
6. Discount point - this is the amount paid to help decrease the interest rate.
7. Fixed rate mortgage - this is the type of mortgage where the interest rate remains the same all throughout the loan, which contradicts with the loan type that has an interest rate that can be adjusted.
8. Good Faith Estimate - this is something that a lender or broker in the US must provide to its customer as required by RESPA. This shall include an itemized list of costs that your loan comes with.
9. Joint Liability - the term uses to refer to a multiple person mortgage.
10. Jumbo Mortgage - the type of mortgage that has a loan amount higher than conventional loan limits.
11. Loan-to-Value or LTV - this expresses the ratio of a loan to the value of the property.
12. Liquid Assets - a person's money that can be obtained flawlessly, may it be in bank or investment account.
13. Loan origination fee - the cash a borrower pays a lender for the mortgage loan.
14. Mortgage insurance - it's the insurance policy that protects lenders and investors for losses caused by mortgage loan defaults.
