Terms a Top Mortgage Lender Uses

Learn the Lingo Used By Mortgage Banks and their Mortgage Brokers

Mar 17, 2010 Armand Famiglietti

Mortgage lenders have a language that is all their own. When receiving pre-approval or approval for a loan they tend to throw out numbers and terms in such a quick fashion that it might seem impossible to keep up unless someone is well versed in those terms. It is imperative that a borrower understand these terms and conditions so that they get the full scope of the loan. This will allow them to compare different mortgage lender loans and decide which product is right for their family.

Here is a look at some common terms that mortgage lenders use when proposing a package to a client. These terms define the amount of money a person will pay and for how long over the course of their home mortgage loan.

Monthly Payment

This sounds fairly straightforward, however there are a few caveats that come along with the idea of a monthly payment. A monthly payment is the amount of money that the borrower will be required to pay the lender each month in order to fulfill their end of the loan. However in a variable rate mortgage that amount can adjust higher or lower. In a fixed rate loan that monthly payment will stay the same. Also if the borrower is in an adjustable rate mortgage (ARM) that number will change higher at some point when the initial term of the loan is over (usually 1, 3, 5, 7 or 10 years depending on the mortgage product.)

Other things that may be included into that payment are the property taxes (which is held in escrow and then paid accordingly) or PMI which is a type of insurance in place if the borrower does not have at least 20% equity into the property.

Monthly Gross Income

The monthly gross income refers to the amount of money the borrower makes before taxes or other liabilities are removed from their salary. A mortgage lender will use this as the basis of their income and then deduct debts such as credit card, student loans, personal loans and more.

FHA Loan

An FHA Loan refers to a loan that is insured through the Federal Housing Authority. Many mortgage lenders offer these loans to their clients.

Equity

Equity refers to the amount of value that a home has minus the total debt against that property. For instance if a home is priced at $400,000 and the seller holds a mortgage for $300,000, then the property has 25% equity. (Essentially 1/4th of the value.) Many lenders look to make first mortgage loans with 80% equity or higher.

More Information on Mortgage Lender Terms

For additional information on terms that mortgage lenders use, check out this article. For info on how much interest can be obtained by selecting a 15 year loan, instead of a 30 year loan, check out this article.

Equity Mortgage

Tuesday, July 20, 2010

Equity Mortgage - Terms a Top Mortgage Lender Uses