Must-Know Mortgage Terms

An adjustable rate mortgage is a rate that is paid for a set year. It is often lower than other rates, but after the year is up, it goes up by a predetermined amount for the remainder of the mortgage.

This type of loan, annual percentage rate, is a rate that is paid yearly. It is a higher rate because it is all paid at once, and includes a few other factors that companies will go over with clients.

The closing costs are the costs that originate from the mortgage companies and agencies. They can be loan origination fees, escrow payments, title insurance, attorney fees or other rates.

An Escrow is essentially a third party. During the mortgage process they are the person who holds the documents and other money. They also hold the money that is paid each month for the mortgage payments.

A fixed mortgage rate is the most common type of payment. It is a fixed number that stays constant throughout the life of the loan.

This is the term that refers to the relationship between the value of the home and the loan. The percentage of the loan to the value of the home will determine if a private mortgage will need to be covered by the companies as well.

This policy protects the mortgage companies from loss when a home is financed with more than 80 percent of the home’s value. Once a homeowner has purchased 20 percent equity in their house, they can cancel their PMI.

Title insurance protects both the buyer and the lender from any title issues or legal defects. This policy allows for the property owner to transfer titles.

Ciera Putnam is a finance and mortgage writer. Information provided by Castle & Cooke Mortgage (NMLS# 1251). She writes for Fusion 360, an advertising agency in Utah. Find her on Google +