At USA Mortgage, we take it upon ourselves to educate our current and prospective clients when it comes to purchasing a home. The home buying experience can be daunting and possibly one of the most important decisions someone will make.

 

While many mortgage terms are obvious in nature – such as “monthly payment” or “home loan” – there are a host of others less well known. Our list below compiles just a few of many terms that we feel are essential to understand. How well do you know your mortgage terminology?

 

Non-Amortizing Loan – A type of loan in which payments on the principal are not made, while interest payments or minimum payments are made regularly. As a result, the value of principal does not decrease at all over the life of the loan. The principal is then paid as a lump sum at the maturity of the loan.

 

APR – Stands for: Annual Percentage Rate, which must be reported by lenders under Truth in Lending regulations. APR is a measure of credit cost to the borrower that takes into account the interest rate, points, and flat dollar charges by the lender. The charges covered by the APR also include mortgage insurance premiums.

 

Lock – This is an option exercised by the borrower at the time of the loan application (or later) to “lock in” the rates and points prevailing in the market at that time. Both the lender and borrower are committed to these terms regardless of what happens between that point and the closing date.

 

Mortgage Formulas – Equations used to derive common measures in the mortgage market, such as monthly payment, balance, and the APR.

 

Principal – The portion of the monthly payment used to reduce the loan balance.

 

Refinancing – The process of paying off an old loan while simultaneously taking on a new one. This may be in efforts to reduce borrowing costs and obtain a new loan at an interest rate below the rate of the existing loan. Refinancing may also be done to raise cash (as an alternative to a home equity loan) or to reduce monthly payments.

 

Stay tuned for more mortgage terms coming your way in addition to industry updates, company news and home buying advice. Would you rather learn about these terms in person? Contact us today to schedule an appointment with one of our mortgage experts.