Mortgage Lingo You Need to Know

Mortgage Lingo You Need to Know

Adjustable-Rate Mortgage

With this loan, your interest rate will gradually increase (or potentially decrease) at pre-determined intervals.

Amortization

You pay down a portion of your mortgage every month, which’ll one day pay off the entire thing. That’s what this fancy, schmancy word is referring to.

Annual Percentage Rate

APR reflects the total cost of your loan, including fees, costs and interest, per year. We keep our mortgage rates here for safekeeping.

This is an UNbiased evaluation of a property’s market value.

Closing Costs

Your closing costs are the fees, expenses and charges for the services needed to finalize the process and make it a done deal.

Co-Signer

When someone co-signs a loan, they agree to be responsible for the primary borrower’s debt. That means if a payment is missed by the primary borrower, the co-signer is expected to pay it. This can affect their credit score.

Debt-to-Income Ratio

Your monthly debt payments / your gross monthly income = your DTI ratio. Lenders use this equation to determine how much home you can afford to borrow and pay back.

Down Payment

This is the lump sum of money you put down up front. Down payments can range from 0% to 20%+, depending on the transaction. See Private Mortgage Insurance for more on this.

Fixed-Rate Mortgage

This one’s easy peasy. It’s a loan with an interest rate that stays the same throughout the loan term.

Gross Monthly Income

How much do you make a month before taxes, expenses and withholdings? That’s your gross monthly income!

Home Equity

Take your home’s worth, minus how much you owe on your mortgage. Boom. That’s your equity. Let’s say your home is appraised at $450,000 and you still owe $200,000. That’s $250,000 in equity!

Home Equity Line of Credit

You can tap into your home’s equity to open this unique line of credit and use it however you want to! You’ve probably seen the dudes in tank tops promoting our HELOCs.

Interest Rate

The cost of borrowing, not including fees.

Loan Officer

This is who makes it all happen. Meet our team of locally based experts!

Loan-to-Value Ratio

Your loan amount / your home’s appraised value = your LTV ratio.

Pre-Approval

This is when a lender reviews your finances and credit history and is willing to loan you X amount of money. Being pre-approved shows sellers and realtors that you mean business. There are even more perks of being pre-approved, too—check ’em out here!

Pre-Qualification

Getting pre-qualified is less formal than getting pre-approved, but it’ll still give you an idea of how much you could borrow.

Principal

The amount you originally borrowed—not including interest.

Private Mortgage Insurance

If you don’t put 20% down, you will most likely be required to pay PMI as a safeguard for the lender. The cost is often added to your monthly mortgage payment and is required until enough home equity has accrued.

Rate Lock

This is an agreement between the buyer and the lender where you lock in your current interest rate for a set timeframe before closing. Learn more about rate locks here.

Refinance

When you replace your existing loan with a new one to score a better interest rate, that’s refinancing.

Underwriter

Someone who analyzes a potential buyer’s credit, employment, assets and more to determine whether to move forward with their loan application.

Give us a call at (515) 334-8119 to learn more about any of our mortgage products and services.

This blog is intended for educational purposes only. For details about specific products or services, see credit union for details. For questions about investments, please consult your financial advisor.