|
While not a complete list, we have compiled the common financing terms that apply to your mortgage or loan. Learn the terms, abbreviations and acronyms so you can be an informed borrower.
APR -- annual percentage rate. The cost of the loan expressed as a yearly rate on the balance of the loan.
ARM -- adjustable rate mortgage. A loan with an interest rate that is periodically adjusted to relfect changes in a specified index.
FRM -- fixed rate mortgage
HELOC -- home equity line of credit
INTEREST RATE CAPS -- A limit on the amount that can be charged to the monthly payment of an adjustable rate mortgage during an adjustment period.
LOAN-TO-VALUE RATIO -- A technical measure used by lenders to assess the relationship of the loan amount to the value of the property.
MARGIN -- The rate added to the index to determine the actual interest rate in an adjustable rate mortgage. For example, if the index rate is 5 percent and the margin is 2.5 percentage points, then the rate the borrower will pay is 7.5 percent.
MORTGAGE BANKER -- A company that provides home loans using its own money. The loans are usually sold to investors such as insurance companies and Fannie Mae.
MORTGAGE BROKER -- A company that matches lenders with prospective borrowers who meet the lender's criteria. The mortgage broker does not make the loan but receives payment from the lender for services.
PITI -- principal, interest, taxes and insurance. The sum of the principal, interest, taxes and insurance is designed to represent the borrower's actual mortgage-related expenses.
PMI -- private mortgage insurance. A special type of loan insurance that many lenders require borrowers to purchase if the borrower's down payment is less than 20 percent of the home's purchase price.
POINTS -- Fees charged by lenders at the time a loan is originated. A point is equal to 1 percent of the total loan amount.
PREPAYMENT PENALTY -- Lenders can impose a penalty on a borrower who pays a loan off before its expected end date.
VAR -- variable
| 
