Mortgage is one of the primary concerns for any homebuyer or seller.
This mainly pertains to a loan secured by a property or house and would be paid in installments over a timeframe set between you and the lender.
The mortgage ensures that the money you borrowed would be repaid.
For most people, this is the largest financial obligation in terms of owning a home.
Mortgages come in different types.
Hence it is very vital that you would be knowledgeable in mortgage types and terminologies.
This is the very first key that would guide you through getting a mortgage.
Here are some of the most common terminologies you would encounter in inquiring and acquiring a mortgage loan: Mortgagee and Mortgagor - the first one is the lender, which could be a bank or lending firm or any financial institution that allows borrowing of money.
The second one is the label for the borrower.
Mortgage Note - this one is your obligation to give a written promise that you would pay off the loan amount stated in relation with the terms and conditions of the mortgagee.
This may also consist of the lender's actions in case you would default on your loan.
Underwriting - this is the process that verifies all the information from the loan documents you would be required to provide.
The lender would then oversee if your loan is subject to approval or decline.
Conditions/Conditional Approval - in case the underwriter sees your loan could be issued approval but then you lack further documents, you would be given with this instead.
The conditions may include submission of documentations of your income and/or assets and more legible copies of your driver's license or social security card.
This occurs when the loan is perceived eligible with the assumption that everything else is acceptable.
An advantage of this is that the loan application would not be delayed as long as you provide the documents in a timely fashion.
Doc Type - there are variations of requirements for each loan type depending on the lender's requisites.
Verification of Employment or VOE, Cash or Liquid Reserves, Seasoned Assets and PITI or the Principal, Interest, Taxes, Insurance are some of the common ones.
There are two main types for the documentation process - the Full Doc or Stated Doc.
The former refers to two years worth of income verification and seasoned assets.
The latter refers to stating your income and assets without the necessity of verification.
However, for one type of the stated doc loan, assets need to be verified.
APR or Annual Percentage Rate - this is the rate of interest on a yearly basis.
This includes the fees on the mortgage loan and interest payment.
Amortization - this feature of the loan describes if and when the loan would be paid off.
For example, 10 year amortization automatically means that the loan would reach a zero balance after 10 years or 120 months.
Negative Amortization - this one describes that the loan with a principal balance would increase over time.
This type of loan requires less payment than the actual amount of interest due.
And then the difference between "interest paid" and "interest due" would be an additional factor to the principal balance for each month the loan is to be paid, resulting to what this term means.
It is vital that before you enter this loan type, you must know that this would never reach zero-balance.
And there is a limited amount of negative amortization before you would be enforced to refinance, make the interest only payments or principal and interest payments.
Interest-only - this type of amortization pertains to the principal balance of the loan not increasing or decreasing in any way.
For every month you would pay up, it would be equivalent to the interest owed and no principal payment was brought out.
Once again, there is a limited period for this type.
The same measure would be done in the case of negative amortization once the limit is reached.
ARM or Adjustable Rate Mortgage - this refers to any mortgage that has an adjustable rate characteristic.
This also includes any mortgage that has a rate to be adjusted at any time during the period of the loan was acquired.
There are other terminologies you would eventually encounter as you go along the mortgage acquisition process.
The important thing is that you would keep an open mind in learning new things so you could look forward to a successful transaction.