What is a mortgage?
A Mortgage (also called a home loan) is a legal contract made between a lender and a borrower that uses property as collateral to secure the loan. The lender can take possession of the property if the borrower fails to pay the prearranged home loan payments.
What is a mortgage refinance?
This occurs when a borrower uses the money from a refinanced loan to pay off an existing home loan. Borrowers typically do this to extend their home loan period, apply for a lower interest rate, or to use some money out of their equity.
What is a home equity loan?
A home equity loan is a type of loan that allows a homeowner to obtain cash loans based on the present value of their property minus the mortgage amount still left to be paid off. Homeowners often apply for home equity loans to pay for expenses such as home remodeling, debt consolidation, college education, and other long-term investments.
What is a home equity line of credit or HELOC?
Home equity lines of credit or HELOCs give homeowners access to an open line of credit, where only the outstanding balance accrues interest. HELOCs provide flexibility by allowing borrowers access to money on an as needed basis.
What is a second mortgage?
A second mortgage is a type of mortgage refinancing that allows you to acquire a second loan on your home in addition to your first home loan.
What is a reverse mortgage?
Reverse mortgages are loans that allow homeowners to transfer some of their home equity into cash. In contrast to traditional home loan mortgages, reverse mortgages do not require borrowers to repay their home loan until the homeowner no longer lives primarily at that residence, although he or she stills owns the residence.
What is a mortgage lender?
A mortgage lender is a financial institution that provides prospective homeowners with the funds over a long-term period to pay off their home loan mortgage. Borrowers are required to pay monthly installments to their lender which includes principle, interest, and additional lender fees.
What is a mortgage principle?
The mortgage principle is the amount of loan money that a homeowner borrows excluding the interest.
What does APR mean?
Annual Percentage Rate ( APR ) is the percentage used to figure out the total cost of your cash advance loan by taking into account all fees charged by your lender in addition to your loan principle and interest.
What is a fixed rate mortgage?
A fixed rate mortgage is a home loan with steady interest rates and monthly payments that do not change throughout the life of the loan.
What is an ARM?
An Adjustable Rate Mortgage (ARM) have monthly payments that change periodically due to fluctuations in market interest rates.
What is an interest-only mortgage?
Interest only mortgages are loans that require the borrower to pay only interest on the principle in monthly installments for a fixed period.
What is an amortized mortgage?
Amortized Mortgages refers to loans that are paid in installments comprised of both principle and interest, and which is paid off (or amortized) over a fixed period of time.
How do you calculate LTV or loan-to-value ratio?
The loan-to-value (LTV) ratio of your home is calculated by dividing the fair market value of your home by the amount of your home loan.
What is the Truth in Lending Act?
The Truth in Lending Act is a federal law that was enacted as part of the Consumer Protection Act. This law requires lenders to reveal all information to the borrower and detail all costs associated with the transaction.
What does pre-approval mean?
A pre-approval is an application for credit and a lender’s written commitment (subject to verification) of how much they’ll let you borrow, letting you know how much home you can afford. This occurs before a loan application is completed. Pre-approval requires more information than a pre-qualification application, such as the property purchase price and down payment amount. Getting pre-approved can help show home sellers you are a serious buyer.
What is an appraisal?
Your property will be appraised to determine its value. The appraiser will visit the house and will also consider sale prices of comparable houses.
What does locking in a rate mean?
Mortgage loan rates may change daily. To ensure that you receive the rate you were quoted, you may elect to lock in your rate by paying an up-front authorization fee.
What are points?
A borrower pays points, based on a percentage of the loan amount, to the lender to reduce the interest rate on the loan. This requires additional costs up front, but you may realize savings in the long run by paying less interest. Speak with Motion’s Mortgage Center advisor to see if purchasing points is an option for you.
What is escrow and title preparation?
A title company will hold the money and documents until all conditions of the mortgage approval are met. Title work will be prepared, including a title exam to ensure the title to the property is clear. Other documents such as the mortgage note and deed will be prepared.
What are closing costs?
The costs associated with processing and closing a loan, such as application fees, points, title, insurance, and credit processing. Motion would provide you with a “Good Faith Estimate,” advising you of the estimated costs you may have to pay at loan closing. When budgeting for your new home purchase, be sure to factor in closing costs.
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*Conditions apply. APR=Annual Percentage Rate