Mortgage lingo have you confused?

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Adjustable Rate Mortgages: This is a type of mortgage that allows the interest rate to fluctuate.

Amortized Loan: A loan that provides for repayment within an agreed period (term) by means of regular payments (usually monthly) which includes a portion for principal and a portion for interest.

Assumable Mortgage: Purchaser takes ownership to real estate encumbered by an existing mortgage and assumes responsibility as the generator for the unpaid balance of the mortgage.

Capital Gains Tax: The tax profit derived from the sale of a capital asset. The capital gain is the difference between the sale price and the basis of the property, after making appropriate adjustments for closing costs, capital improvements, allowable depreciation, etc.

Closing Costs: Expenses incurred in the closing of a real estate or mortgage transaction. Purchasers' expenses normally include: cost of title examination, premiums for title policies, survey, attorney fee, lender service fees, and recording charges. In addition, the purchaser may have to place in escrow a sum of money to cover accrued real estate taxes and insurance.

Conventional Mortgage: A loan not insured or guaranteed by a government agency. They are typically made for 15 to 30 years and are called "fixed rate" mortgages.

CRV: Certificate of Reasonable Value. A document (appraisal) issued by the VA establishing its opinion of maximum value.

Equity: The difference between the market value of property and the homeowners indebtedness (mortgage).

Escrow Payment: The portion of a mortgagors monthly payment held in a trust by the lender to pay for taxes, hazard insurance, mortgage insurance, lease payments, and other items as they become due; known as impounds in some states.

FHA: This loan is made through banks, savings and loans, and mortgage companies, but backed by the Federal Housing Authority. Qualification, interest rate and down payments can be different from conventional mortgages.

Firm Commitment: A lenders agreement to make a loan to a specific borrower on a specific property.  FHA or PMI agreement to insure a loan of a specific property with a designated purchaser.

Graduated Payment Mortgages: This plan allows people to make less of a monthly payment in the early part of a mortgage and a larger monthly payment in later years.

Land Contract: An installment-type contract between buyers and seller, providing for periodic installment pay-off of the purchase price while the seller retains title to the property as security for payment of the purchase price.

Loan Commitment: A written promise by a lender to make a loan under certain terms and conditions. These include interest rate, length of the loan, lender fees, annual percentage rate, mortgage and hazard insurance, and other special requirements.

Loan to Value Ratio: The ratio of the mortgage loan principal (amount borrowed) to the property's appraised value (selling price). On a $100,000 home, with a mortgage loan principal of $80,000, the loan to value ratio is 80%.

Mortgage/Deed of Trust: Pledge of real property to secure a debt by a written instrument given by the mortgagor. Should be recorded in the County Records Office.

Mortgage Insurance Premium (MIP): The consideration paid by a mortgagor for mortgage insurance either to FHA or a private mortgage insurance (PMI) company. On a FHA loan, the payment is one-half of one percent annually on the declining balance of the mortgage. It is a part of the regular monthly payment and is used by FHA to meet operating expenses and provide loss reserves.

Mortgagee: The lender of money or the receiver of the mortgage document.

Mortgagor: The borrower of money or the giver of the mortgage document.

Note: A written promise to pay a certain amount of money.

Origination Fee: A fee or charge for work involved in the evaluation, preparation, and submission of a proposed mortgage loan.

Owner Financing (also called seller take-back): In some cases the seller is in a position to take back or hold the first or second mortgage on the property. This provides the buyer a mortgage where none is available.

Point: One percent of loan amount.

Prepayment Penalty: A fee paid to the mortgagee for paying the mortgage before it comes due. Also known as prepayment fee or reinvestment fee.

Prepayment Privilege: The right given a purchaser to pay all or part of a debt prior to its maturity. The mortgagee cannot be compelled to accept any payment other than those originally agreed to.

Privately Insured Mortgage: A conventional mortgage loan on which a private mortgage insurance company protects the lender against loss.

Private Mortgage Insurance (PMI): Insurance written by a private company protecting the mortgage lender against loss occasioned by a mortgage default.

Second Mortgage/Second Trust: Junior Mortgage or Junior Lien; an additional loan imposed on property with a first mortgage. Generally at a higher interest rate and shorter terms than a "first" mortgage.

Short Term Balloon: These loans are typically for a set period of time, 1, 3, 5 years for example. Although based on a payment schedule of 30 years, they must be paid off at the end of 1, 3, 5 years. The term "balloon" is used because the entire amount of "balloon amount" is paid off at the end of the loan period.

Title: Often used interchangeably with the word ownership. It indicates the accumulation of all rights in property; the owners and others.

Title Insurance: An insurance policy which protects the insured (purchaser or lender) against loss arising from defects in title.
VA: Qualified veterans are eligible for VA loans. Each lender sets their own mortgage interest rates.

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