The mortgage process can be confusing, especially if it is your first loan. BMC Keystone is here to help you navigate the process and make it as easy as possible to understand the terminology. Be sure to contact us if you would like to discuss the learn more about the specific loan options available to you.
Adjustable Rate
An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.
Amortization
A repayment method in which the amount you borrow is repaid gradually through regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.
Annual Percentage Rate (APR)
The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal and credit report.
Application
An initial statement of personal and financial information which is required to approve your loan.
Appraisal
A fee charged by an appraiser to render an opinion of market value as of a specific date. Required by most lenders to obtain a loan.
Closing Costs
Any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney’s fees, title insurance, survey and any items which must be prepaid, such as taxes and insurance escrow payments.
Conforming Loan
Generally, a mortgage up to $417,000. Qualifying ratios and underwriting methods are standardized to a large degree.
Contract of Sale
The agreement between the buyer and seller on the purchase price, terms and conditions necessary for both parties to convey the title to the buyer.
Debt Service
The total amount of credit card, auto, mortgage or other debt upon which you must pay.
Down Payment
The difference between the purchase price and that portion of the purchase price being financed. Most lenders require the down payment to be paid from the buyer’s own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.
Equity
The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.
First Mortgage
A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).
Fixed Rate
An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.
FHA Loan
More appropriately termed “FHA Insured Loan.” A loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.
Good Faith Estimate
A written estimate of closing costs which a lender must provide you within three days of submitting an application.
Gross Income
For qualifying purposes, the income of the borrower before taxes or expenses are deducted.
Home Equity Line of Credit
A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses and debt consolidation.
Home Equity Loan
This has a valuable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax-deductible. Often used for home improvements freeing of other real estate. Recommended by many to replace or substitute for consumer loans with which interest is not tax-deductible such as auto or boat loans, credit card debt, medical debt and education loans.