- MORTGAGE DEFINITIONS -
amortization
Repayment of your loan amount through regular payments of both principal and interest, calculated to pay off the loan after a fixed period of time.
annual percentage rate (APR)
Charges imposed on the borrower to obtain a mortgage, expressed on an annualized basis as an interest rate. It includes the interest rate, loan fees and points.
closing
The time at which loan documents and funds are signed and delivered to finalize the funding of a loan. Sometimes called a settlement.
closing costs
Expenses incurred to finance a home loan and/or transfer ownership of real estate.
cosigner
Person who agrees to make loan payments, if you cannot fulfill your financial commitment.
down payment
Cash paid by the home buyer towards the partial payment of a home's sales price.
Fannie Mae
Federal National Mortgage Association. A government-sponsored private corporation that buys home loans from lenders and sells them to investors.
FHA
Federal Housing Administration. An agency within the Department of Housing and Urban Development that provides mortgage insurance for home loans and sets standards for construction and underwriting.
negative amortization
Increase in the unpaid loan balance created when monthly payments do not cover both principal and interest and unpaid interest is added to the principal balance.
points
Upfront fee lenders charge to reduce an interest rate. Each point typically equals 1 percentage point of the total amount of the loan.
prepayment penalty
Fee borrowers pay if they pay off a loan during the early years of its term.
principal
The original amount of money borrowed not including interest owed.