Amortization - The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.
Closing Costs - these are the costs that the buyer must pay during the Mortgage process. There are many closing costs involved ranging from attorney fees, recording fees and other costs associated with the mortgage closing.
Down Payment - is the amount of the purchase price that the buyer is paying. Generally, lenders require a specific down payment in order to qualify for the Mortgage.
Equity - the difference between the value of the home and the Mortgage loan is called equity. Over time, as the value of the home increases and the amount of the loan decreases, the equity of the home generally increases.
Escrow - at the closing of the Mortgage, the borrowers are generally required to set aside a percentage of the yearly taxes to be held by the lender. On a monthly basis, the lender will also collect additional money to be used to pay the taxes on the home. This escrow account is maintained by the lender who is responsible for sending the tax bills on a regular basis.
Good Faith Estimate - the Good Faith is an estimate by the lender of the closing costs that are from the Mortgage. It is not an exact amount, however, it is a way for lenders to inform buyers of what is needed from them at the time of closing of the loan.
Mortgage - A loan that is secured by real estate.
Mortgage Broker - A person or company that brings borrowers and lenders together.
Principal - is the term used to describe the amount of money that is borrowed for the Mortgage. The principal amount that is owed will go down when borrowers make regular monthly or bi-weekly payments.
Private Mortgage Insurance - When the LTV is higher than 80% lenders will generally not be able to do the transaction. In these cases, the borrowers can get Private Mortgage Insurance (PMI) which is a guarantee to the lender that until the borrower reaches a 80% LTV, they are covered from default. To get this protection, borrowers pay a monthly PMI premium.
Title Insurance - the lender is using the home as collateral for the Mortgage transaction. Because of this, they need to be certain that the title of the property is clear of any liens which could jeopardize the Mortgage. So, lenders will require borrowers to get title insurance on the property, which will ensure that the homes are free and clear.