Burnett Mortgage

An ARM is a type of mortgage that starts with an initial fixed interest rate for a set period (commonly 1, 3, or 5 years), after which the interest rate adjusts periodically based on a specified index. This means that the monthly mortgage payments can fluctuate over time, potentially increasing or decreasing based on market conditions.

Amortization refers to the process of repaying a loan over time through regular payments. Each payment covers both principal (the amount borrowed) and interest. In the early years of a mortgage, a larger portion of the payment goes toward interest, while more goes toward principal as the loan progresses.

A property appraisal is an assessment conducted by a licensed appraiser to determine the fair market value of a property. Appraisals are important for lenders to ensure that the property’s value supports the requested loan amount.

A bi-weekly mortgage payment plan involves making payments every two weeks instead of monthly. This results in 26 half-payments per year (equivalent to 13 full payments), which can help borrowers pay off their loan faster and reduce overall interest costs.

Closing costs are fees paid by the buyer at the mortgage closing, which can include appraisal fees, attorney fees, title insurance, and other costs associated with finalizing the loan and transferring ownership of the property.

A construction mortgage is used when building a home. The lender disburses funds to the builder based on a predetermined construction schedule, and once the construction is complete, the mortgage converts into a permanent mortgage.

The debt-to-income ratio is a financial metric used by lenders to assess a borrower’s ability to manage monthly payments. It’s calculated by dividing the borrower’s total monthly debt payments (including the new mortgage payment) by their gross monthly income.

The down payment is the upfront payment made by the buyer toward the purchase price of the property. Lenders often require a minimum down payment as a percentage of the purchase price.

Equity is the difference between the market value of a property and the outstanding balance of the mortgage loan. As the property value increases and the mortgage balance decreases, the equity in the property grows.

Escrow refers to funds held by a third party (typically the lender) for payment of property taxes, homeowners insurance, and other expenses on behalf of the borrower. Escrow payments are collected as part of the monthly mortgage payment.

A fixed rate mortgage has an interest rate that remains constant for the entire term of the loan, providing predictable monthly payments over the life of the mortgage.

A Good Faith Estimate (GFE) is an estimate provided by the lender to the borrower that outlines the expected closing costs associated with the mortgage. It helps borrowers understand the costs involved in obtaining the loan.

Homeowner’s insurance protects against property damage or loss due to covered perils (such as fire, theft, or natural disasters). Lenders typically require borrowers to have homeowner’s insurance in place before closing on a mortgage.

The loan-to-value ratio is a comparison of the mortgage amount to the appraised value of the property. Lenders use the LTV ratio to assess risk and may require mortgage insurance for loans with higher LTV ratios.

A mortgage is a loan used to finance the purchase of a home. The property serves as collateral for the loan, and borrowers make regular payments (including principal and interest) over a specified term.

An origination fee is a fee charged by the lender for processing a new mortgage loan. It may include application fees, appraisal fees, and other administrative costs associated with the loan.

Points are upfront fees paid to the lender to reduce the interest rate on the mortgage. Each point typically costs 1% of the loan amount and can result in lower monthly payments over the life of the loan.

Principal refers to the amount of money borrowed for the mortgage. Each mortgage payment includes a portion of principal, which reduces the outstanding balance over time.

PMI is insurance that protects lenders in case the borrower defaults on a mortgage with a high loan-to-value ratio (typically above 80%). Borrowers pay PMI premiums as part of their monthly mortgage payments until they have sufficient equity in the property.

Settlement costs are the expenses associated with closing a mortgage loan, including attorney fees, title insurance, recording fees, and other charges paid by the buyer or seller.