"A" Loan - Conventional or prime loan with the best terms on the market but may have mortgage insurance
Adjustable Rate Mortgage (ARM) - A mortgage loan with an interest rate subject to change over the term of the loan.
Amortization - The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.
Cash-out Refi - Taking equity out of a home. A refinancing of a mortgage in which the new principal (the borrowed amount) exceeds the outstanding principal of the original loan by at least 2%.
Conventional Mortgage Loan - Any mortgage loan not guaranteed or insured by the government.
Fixed- Rate Mortgage (FRM) - A mortgage loan with an interest rate that does not change over the term of the loan.
Floating rate - Rate may go up or down throughout the mortgage process. You can watch the rates and lock in at any time until the day before your loan closes.
Flood Insurance - If your home is in a federally designated high flood risk zone within a flood plain. Federal law mandates that you must buy flood insurance.
Insurance - Lenders won't let you close the deal on your home purchase if you do not have home insurance, which covers your home and your personal property against losses from fire, theft, bad weather, and other causes.
Interest - Usually expressed as a percentage called the interest rate, interest is what the lender charges you to use the money you borrowed.
Loan to Value Ratio (LTV) - The amount borrowed relative to the value of the property. An LTV of 80% means that the mortgage loan is for 80% of the value of the property, with the borrower making a 20% down payment.
Lock - Allows you to lock in a rate for a certain period of time, usually 15 or 30 days.
No Document Loan - Requires no supportive papers of income but has extra fees and higher interest rates.
PMI (private mortgage insurance) - If you put less than 20% down on your home purchase most "A" lenders will charge you PMI. The coverage doesn't protect you, it protects the lender for you defaulting on the mortgage. Without the coverage, many buyers could not afford to buy a home. PMI is automatically cancelled once the mortgage balance shrinks to 78% of the home's original purchase price.
Principal - The principal is simply the sum of money you borrowed to buy your home. Before the principal is financed you can give the lender a sum or cash called a down payment to reduce the amount of money that will be financed.
Sub prime Loan - for borrowers who cannot obtain an "A" loan. Higher interest rates but no mortgage insurance.
Taxes - The taxes are property taxes your community levies based on a percentage of the value of your home. The tax is generally used to help finance the cost of running your community.
Underwriting - The determination of the risk a lender would assume if a particular mortgage loan application is approved.
