Mortgage terminology explained
Obtaining a mortgage can also mean gaining a new vocabulary
. The mortgage industry has its' own terminology and knowledge of them can help clarify and simplify the process. A few terms you'll find useful to know:
Closing Costs Expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include an origination fee, an attorney's fee, taxes, title insurance, survey and any other costs assessed at settlement.
Earnest Money A deposit given by a buyer to a seller as part of the purchase price to bind a transaction or assure payment. Earnest money funds are applied as a credit to the buyer's bottom line at closing.
Equity A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage.
Good Faith Estimate An estimate of charges which a borrower is likely to incur in connection with a settlement.
Loan to Value Ratio (LTV) The ratio of the amount of your loan to the appraised value of the home. The LTV will affect programs available to the borrower and generally, the lower the LTV the more favorable the terms of the programs offered by lenders.
Mortgage Insurance (MI) Insurance written by an independent mortgage insurance company protecting the mortgage lender against loss incurred by a mortgage default (foreclosure). Usually required for loans with an LTV of 80.01% or higher.
PITI Principal, interest, taxes and insurance--the components of a monthly mortgage payment.
Prepaids Those expenses of property which are paid in advance of their due date and will usually be prorated upon sale, such as taxes, hazard insurance, and private mortgage insurance.
Industry terms have you confused? Contact Rebecca at http://rebeccamadej.com with your mortgage questions as it is my pleasure to demystify and clarify mortgage terminology.
Mortgage terminology explained
By: dwalizer
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