As with any of life’s important steps, knowledge is key. This is why we’ve outlined the 12 most commonly used mortgage terms.
Adjustable-Rate Mortgage – Also known as an ARM, an adjustable-rate mortgage is a loan with an interest rate that adjusts based on the performance of a pre-agreed market rate.
Conventional Mortgage Loan – A conventional mortgage is any mortgage not guaranteed or insured by the government.
Credit Score – A credit score is a three-digit number. It’s based on an individual’s credit report and is used to indicate the risk level of lending to the individual.
Fannie Mae – A federally chartered and stockholder-owned mortgage finance company. Fannie Mae is not allowed to originate loans. It can simply purchase and/or secure loans made by lenders.
Freddie Mac – The nation’s other federally chartered and stockholder-owned mortgage finance company. Freddie Mac is also not allowed to originate loans. Rather, it can purchase and/or secure loans made by lenders.
Fixed-Rate Mortgage – A fixed-rate mortgage is a loan with an interest rate that remains constant throughout the lifespan of the loan.
Home Equity – Home equity represents the difference between the current value of the house in question and the amount of money still owed on the mortgage.
Jumbo Loan – Fannie Mae and Freddie Mac set maximums for the loans they purchase and/or secure. A jumbo loan is a loan that exceeds these pre-set limits.
Loan Officer – Also known as a ‘Mortgage Loan Originator,’ loan officers work for a financial institution. They specialize in evaluating loan applications for individuals and businesses.
Loan-to-Value Ratio – This ratio represents the amount borrowed relative to the property’s value. With a conventional mortgage, the loan-to-value ratio is typically 80 percent because the borrower is putting 20 percent down.
Mortgage – A mortgage is a loan acquired for the express purpose of buying real estate.
Refinance – Refinancing is the process of securing a new mortgage with new terms and/or interest rate. This new mortgage is used to pay off the borrower’s original loan on the same property.
Want to learn more about mortgage terms and options? Contact me today, I’d be happy to talk with you.
