GLOSSARY OF MORTGAGE TERMS

Appraisal: An expert judgement or estimate of the quality or value of real estate as of a given date.

Annual Percentage Rate: Annual interest rate calculated to reflect all of the financing costs of a mortgage. Includes note rate of loan, loan points, origination fees, and other financing charges.

Balloon Mortgage: Short term, fixed rate loan that includes small payments for a set period and one large payment covering the remaining amount at a time specified in the loan contract.

Caps: Limits on how much adjustable rate mortgages can increase in interest rate annually and in monthly payment amount.

Closing Costs: Costs and fees assessed during official transfer in ownership of property and in obtaining a mortgage at closing or settlement. Typically totals between 3 and 6 percent of mortgage amount.

Deed of Trust: Like a mortgage, a security instrument whereby real property is given as security for a debt.

Escrow: Special account set up by lender to hold money to pay taxes and insurance. Also name for third party who handles paperwork at settlement.

Federal National Mortgage Association (FNMA): Known as Fannie Mae. A privately owned corporation created by Congress to support the secondary mortgage market. It purchases and sells residential mortgages insured by FHA or guaranteed by the VA, as well as conventional home mortgages.

Loan Commitment: A written promise to make a loan for a specified amount on specified terms.

Loan to Value Ratio: The relationship between the amount of the mortgage and the appraised value of the property, expressed as a percentage of the appraised value.

Mortgage: A lien or claim against real property given by the buyer to the lender as security for money borrowed.

PITI: Principal, interest, taxes, and insurance.

Title Insurance: Protects lenders and home owners against loss of their interest in property due to legal defects in title.


Call Dianne Hawley at 206-948-4566.


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