What is a Mortgage?
A written document evidencing the lien on a property taken by a lender as security for the repayment of a loan. The term "mortgage" or "mortgage loan" is used loosely to refer both to the lien and the loan.
What is a Mortgage application?
A request for a loan that includes the information about the potential borrower, the property and the requested loan that the lender makes a decision on. In a narrower sense, the application refers to a standardized application form called the "1003" which the borrower is obliged to fill out.
What is an Application fee?
The fee that lenders charge to accept an application. The fee is normally nonrefundable and covers misc. expenses.
What is an Appraisal?
A written estimate of a property's current market value prepared by an appraiser.
What is a Good Faith Estimate?
It estimates the fees you will pay at closing.
What is an Approval?
Approval means that the borrower meets the lender's qualification standards and also it's underwriting requirements. In most cases, the approval is contingent upon further verification of information.
What is Debt to Income Ratio?
Your debt, income and mortgage payment make up the Debt to income ratio. This is the primary factor whether you get the loan and normally has to fall below 50%. In some cases, lenders programs will allow up to a 60% DTI
What is a Fixed rate mortgage?
A mortgage on which the interest rate and monthly mortgage payment remain unchanged throughout the term of the mortgage.
What is an Adjustable Rate Mortgage (ARM)?
A mortgage on which the interest rate, after an initial period, can be changed by the lender. While ARMs in many countries abroad allow rate changes at the lender's discretion ("discretionary ARMs"), in the US most ARMs base rate changes on a pre-selected interest rate index over which the lender has no control. These are "indexed ARMs".
What is Rate, Term & APR?
All mortgages have an interest rate, term, and annual percentage rate (APR). For example, a mortgage might be defined as a 30-year fixed-rate loan at 7.625 percent, with an APR of 7.800 percent. In this example, the mortgage term is 30 years. As the borrower, you will pay back the loan in installments over the course of 30 years.
The annual percentage rate (APR) is a measure of the cost of credit, expressed as a yearly rate. Because APR includes costs such as origination fees, it's usually higher than the advertised rate.