You don’t have to be a real estate guru or a financial planner to buy a home, but all of that mortgage jargon can be pretty off putting.
That’s why we’ve created this easy-to-use glossary that puts mortgage terminology into normal, everyday, conversational talk.
Another popular option for the length of a loan for homeowners who want to secure a lower mortgage rate and pay less interest over the life of the loan.
A 15 year fixed mortgage could be either Conventional, FHA, VA or USDA - these are different type of mortgage programs.
30 Year Fixed Mortgage
A 30 Year Fixed Conventional Mortgage is one of the most popular home loan options available because it offers the budget-conscious homeowner lower monthly payments.
A fixed rate allows you to lock in a set principle and interest payment.
A 30 year fixed mortgage could be either Conventional, FHA, VA or USDA - these are different type of mortgage programs.
30 Year Fixed FHA Mortgage
A 30 Year Fixed FHA Mortgage is a popular type of home loan that is insured by the Federal Housing Administration (FHA). It is a type of home loan program that is attractive to first time home buyers because of benefits like lower down payment options, lower closing costs, lower FICO credit score requirements and higher debt-to-income ratios.
Alimony or Child Support
Total monthly alimony and/or child support payments.
The paying off of a debt with a fixed repayment schedule in regular installments over a period of time.
One time processing fee for a loan. This fee may be applied towards various costs, including the appraisal and credit report.
An estimate of the current market value of the property.
Yearly increase in a home's value over a period of time.
Annual Percentage Rate (APR)
The total cost of a loan, which includes not only the interest rate, but all costs associated with the loan, such as closing costs and fees.
Once this is determined, the APR is then amortized over the life of the loan.
In order to allow borrowers to compare various loans and lenders, the APR is required to be disclosed by the Federal Truth-in-Lending statues.
Adjustable-Rate Mortgage (ARM)
Loans with an initial fixed rate period (usually 5, 7 or 10 years). After the fixed rate period, your interest rate may change once per year- either up or down depending on market conditions.
ARM's are almost always lower in rate than fixed loans and can offer huge savings to first time home buyers especially those who don't plan on staying in their home for more than 10 years.
The ability for the buyer to lower their initial interest rate by providing money upfront or by paying extra points up front at the closing of the loan.
Total monthly car or lease payment(s).
The time where buyer and seller exchange money for title and sign closing papers for a new home.
This finalizes the agreements reached in the sales agreement.
Refers to the lender's cost for closing a loan or all the costs associated when a buyer closes on a home.
Private Mortgage Insurance (PMI), which is needed for when the loan amount exceeds 80% of the home purchase price, may be included if the buyer wants to pay PMI upfront instead of paying monthly.
A loan that is underwritten, following specific guidelines, by banks, savings and loans or other types of mortgage companies.
Typically, this refers to loans underwritten to the guidelines of Fannie Mae or Freddie Mac.
Cost to Sell
Commission percentage cost that the Seller pays when selling a home, which is split between the Buyer's Agent and Listing Agent.
Credit Card Payments
Total monthly credit card payments.
The middle FICO credit score out of all 3 credit bureaus (Experian, Equifax, TransUnion), not the average of the 3 credit scores.
A FICO credit score is between 300 and 850. A higher FICO credit score could qualify you for a lower mortgage rate.
Deed of Trust
The legal document that transfers property from one owner to another.
Down Payment & Closing Costs
The amount of money you paid upfront towards your home purchase (down payment) and the lender's cost for closing a loan or all the costs associated with closing on a piece of property (closing costs).
The amount of money you would pay upfront towards your home purchase.
There are loan programs that allow a minimum 3% down payment option. VA and USDA Loans offer a 0% down payment.
Compare different loan benefits such as low equity/down payment with our Loan Options Chart.
Upfront money provided by the borrower to the seller as a show of good faith towards the home purchase price.
A third party that acts as a neutral party and receives documents for the exchange of the deed by the sellers for the buyer’s money.
Estimated Lender Costs
A fee charged by lenders for providing financing to process, approve and fund a loan.
Expected Annual Rent Increase
Yearly average rental increase rate.
Expected Selling Price
Estimated expected selling price of the home.
This number was calculated by using an average home appreciation rate.
Fees / Credits
The amount charged upfront to get a lower rate (fees) or the amount credited to you at closing (credits).
A lower rate could save a borrower more money over the life of a home loan.
A borrower may take on a higher rate to help with lower closing costs upfront.
FHA loans were established by the Federal Housing Administration (FHA), part of the US Department of Housing and Urban Development (HUD), to help families with financial limitations become homeowners. The lower down payment makes it possible to buy a new home even with limited funds.
FHA Up Front MIP
FHA has an up front Mortgage Insurance Premium (MIP) of 1.75% of the loan amount. The payment shows what the total Principle and Interest monthly cost would be if you decided to add the total FHA Up Front Premium to your loan amount.
Takes priority when there are other voluntary liens present.
A letter, which details the amount of gift and name of the giver, which indicates a gift of cash to the buyer of a home.
This can be provided by relatives, friends, non-profit organizations, or government agencies depending on the requirements of the lender and product.
Good Faith Estimate (GFE)
A written estimate of closing costs that lenders are required to provide potential borrowers within 3 days of an application submission.
Home Affordable Refinance Program (HARP) was created by the Federal Housing Finance Agency in March 2009 to help homeowners refinance their mortgages where their outstanding balance on an existing mortgage currently exceeds the value of their home, otherwise known as being "underwater".
Also known as homeowner's insurance, this covers the property from damages that may affect the value - see "Homeowner's Insurance".
Annual Home Owners' Association (HOA) Dues are fees a condo owner pays to cover the cost of maintaining the condo buildings' common areas like landscaping, lobbies, elevators, etc.
Home Path Mortgages are devised to help sell Fannie-Mae owned homes where you may not need an appraisal.
Annual homeowner's insurance covers damage to or losses occurring on the homeowner's property and inside the home - also, known as hazard insurance.
Coverage can include liability for accidents that happen on the property or in the homeowner's house by the homeowner, family members or pets.
A person who is active in the military or has been honorably discharged. Qualified Veterans can receive 100% financing and do not have to pay Private Mortgage Insurance (PMI).
Estimated monthly tax on earned income (wages, salaries, commission) and unearned income (dividends, interest, rents) imposed by state and federal government.
Specific income tax brackets and rates can be found here
The fee a lender charges for permitting the borrower to use their money for a specific length of time.
Interest Rate Cap
The max amount of percentage points that ARMs may rise over a loans life.
Jumbo loans were established for larger purchases. They come with specific limits and guidelines for luxury homes purchases.
The amount of monthly income left over after all expenses are paid.
Total dollar amount borrowed to buy a home, which is calculated by subtracting the down payment from the home purchase price.
Loan Origination Fee
Fee charged by a lender to cover administrative costs of processing a loan.
The reason why someone is pursuing a loan: to purchase a home or refinance a current home loan.
Loan-to-Value Ratio (LTV)
The money borrowed in a mortgage transaction compared to the property value a borrower wishes to purchase.
This ratio is calculated by dividing the loan amount by the appraised home value (loan amount / home value).
Annual cost associated with maintaining a home.
The status you use when filing your taxes.
Initially, the monthly mortgage payment that includes the principal and interest compared to paying monthly rent.
Total monthly mortgage payment that includes the principal and interest.
Total amount of rent paid to a landlord per month.
The document providing a lien on a home in exchange for a lender's financing.
The lender secures this financed loan through this mortgage and has the ability to foreclose on this home as well.
An entity that lends its own funds to borrowers while also bringing together lenders and borrowers. Mortgage bankers may also collect monthly payments.
Total monthly mortgage payment that includes the principal and interest.
No PMI mortgage
No PMI Mortgages are a great option if you don’t have enough of a down payment to buy a home.
Number Of Children
The total number of children you are responsible for.
Describes whether someone intends to live in the house as a primary residency or if the home will be used for different purposes like a vacation home or investment property where tenants pay rent.
A fee that is charged by a lender to cover the administrative costs of processing a loan.
Payment - End of Period
Monthly payment amount at the end of the specified timeframe comparing the home buying and renting scenario.
This payment compares a mortgage payment to rent, which includes the annual rent increase rate.
Total amount of personal expenditures and bills per month.
This acronym (Principal-Interest-Taxes-Insurance) represents the 4 components a homeowner pays in a mortgage payment that includes taxes and insurance: Principal = Loan Amount, Interest = Amount charge to borrow money to buy a home, (Property) Taxes and (Homeowner's) Insurance = Amount paid to cover any damages to the home or property.
Private Mortgage Insurance (PMI)
Private Mortgage Insurance (PMI) is paid in monthly installments by a borrower or upfront as part of the closing costs.
This insurance allows a lender to lend more than 80% percent of the property value while protecting the lender of risk or default on the home loan. PMI is only needed when the down payment is less than 20%.
This insurance can be requested for removal once the mortgage is paid down to 80%. PMI is automatically removed with no request when the mortgage is paid down to 78%. Qualified Veterans do not have to pay PMI.
A point equals 1% of your total loan amount. The more points you pay, the lower the interest rate you get.
Total monthly primary expenses including larger expenses.
These expenses are part of a borrower's back-end ratio, which is part of the total debt-to-income ratio.
Principal + Interest
Principal is the dollar amount used to pay down the home loan balance.
Interest is the fee a borrower pays the lender for borrowing the money to buy a home.
This is an estimated number - Property Taxes are calculated by multiplying a town's General Tax Rate by the property's assessed value, which is determined by the municipal's tax assessor.
A town's General Tax Rate is used when calculating property taxes - a list of general property tax rates by town in NJ can be found here.
Property Tax Insurance
Amount of monthly property tax plus homeowner's insurance compared to renter's insurance in the home buying and renting scenario.
A description of the property a home buyer is interested in or a home owner currently owns.
How much a property is worth.
The price of a home a buyer is interested in.
Also known as the interest rate or mortgage rate, is the rate of interest charged on a mortgage/home loan.
It can either be fixed for the life of the loan or can change according to prevailing interest rates within limits, which is known as an adjustable rate.
Filing documents at various government agencies, local, state, and federal to create a public record.
The balance of the original home loan amount.
Insurance that covers a renter's belongings and liability on a rental property.
Reverse mortgages are great for homeowners 62 and older who want to help supplement their income or take cash out for whatever need.
Years Before Selling
Years spent owning a home before selling a home.
Known as the HUD-1, this details the transaction paid out and received by the buyer and seller at closing.
Total monthly student loan payments.
An allowable tax deduction from the interest paid on a mortgage, Private Mortgage Insurance (PMI) and Property Taxes.
This is the life of the loan, typically 15 or 30 year timeframe.
Term of Home Loan
The number of years you would like to structure your home loan.
It's important to remember that the shorter the term, the higher the mortgage payment.
The title is the actual document that gives evidence of property ownership.
Title insurance protects lenders against any title dispute that may arise over a particular property. Home title insurance is a required fee paid at closing.
VA loans are backed by the US Department of Veterans Affairs and offer veteran buyers home loan options with no down payments. This program is a great way to save on a mortgage loan as a veteran.
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If you have any complaints, please reach out to: NJ DOBI, Trenton, NJ. Rates as of 4/23/17. Loans are arranged through third parties. Recent advertised rates are subject to change without notice. Advertised rates are available only on owner-occupied, single-family, residential properties, 80% LTV purchase/rate term.
Fees and charges may apply. An advertised rate is not guaranteed and does not constitute an approval. Not all applicants will be approved. Minimum credit score requirements apply.
Full documentation, acceptable properties, insurance, and additional underwriting is required. Loans are secured by liens against real property. Terms, conditions, and restrictions apply.
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