Whether you’re considering buying your first home or a long-time homeowner, the mortgage process can feel intimidating and confusing.
Much of this is due to mortgage-related terms that aren’t well-understood by the general public.
To help you become better prepared for your mortgage process, here are some important  mortgage-related terms and their definitions.
Amortization Schedule
A payment schedule showing the amount of your monthly mortgage payment for paying off the principal (the amount you borrowed and have to pay back), and the amount that pays interest.
Annual Percentage Rate (APR)
A broad measure of costs you’re responsible for in your home loan. The APR includes your interest rate, points, mortgage broker fees and other charges you have to pay. Because it includes more fees and charges, your APR is usually higher than your interest rate.
Adjustable Rate Mortgage
Mortgage payments that can increase or decrease as interest rates change. In most cases, there’s an initial fixed-rate period where the borrower’s rate doesn’t change, followed by a longer period where the rate changes at preset intervals.
A borrower paying an up-front fee to reduce a mortgage rate and monthly payment. While not recommended often, a buydown can help a borrower qualify for a loan.  
Combined Loan-to-value
The total mortgage obligations on a property compared to its market value.
Debt-to-income-ratio (DTI)
A borrower’s monthly liability payments divided by their gross monthly incomes. Your DTI plays an important part in the mortgage you can obtain.
Failure to pay a mortgage on time, or a mortgage payment less than the amount due.
Documents that a lender, buyer and seller sign during a mortgage transaction or real estate purchase. These documents notify all parties of their rights and obligations.
Fixed Rate Mortgage
An industry standard mortgage loan in which the interest rate stays the same through the loan’s entire term.
Gross Income
Your total taxable income. Lenders usually verify your gross income using tax returns and W2’s.
HUD-1 Statement
A comprehensive list of closing costs in a mortgage purchase or refinance. You receive a HUD-1 statement when you close your mortgage and should keep it as a record.
Joint Liability
More than one person obtaining a mortgage.
Loan-to-value (LTV)
The amount of a first mortgage lien as a percentage of the appraised value of a property. For example, if a person wants to borrow $130,000 to purchase a house valued at $150,000, the loan to value ratio is 87% ($130,000 / $150,000). Loan-to-value is a key risk-factor that’s assessed when you apply for a mortgage.
Liquid Assets
Money in a bank account that can be obtained quickly.
Mortgage Insurance
An insurance policy that compensates lenders for losses due to a mortgage loan default. Mortgage insurance can be public or private depending on the insurer.
Ask your loan officer about any of these terms
Mortgages are a big commitment, and you should always be completely aware about what you’re getting into. We hope this post gives you some clarification on some common mortgage-related terms and definitions.
Please contact me today if you have any questions about the mortgage process.

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