FirstBank FTHBPacket FinalNoBleeds - Page 20

Adjustable Rate Mortgage (ARM): A mortgage in which the
interest rate is locked in for a specific time period (usually
five years), but can then fluctuate annually depending on the
federal prime rate after the locked rate period expires. The
fluctuating interest rate can increase or decrease the amount
of your monthly mortgage payment.
Home Equity: The value of a property less any and
all existing liens. If a borrower owns a property worth
$500,000 and has liens of $400,000, equity is $100,000.
Appraisal: A comprehensive report that determines the value
of your property based on a number of valuation factors.
Loan Processor: The individual who handles all the
paperwork associated with closing your loan.
Annual Percentage Rate (APR): The rate that shows the true
cost of borrowing. It factors in the interest rate of your loan,
plus all the costs associated with obtaining the loan.
Lock: The act of securing an investment rate on a loan.
After a lock, future rate fluctuations in the market won’t
affect the interest rate on your loan.
Closing: The final step in the loan process when loan
documents are signed at an escrow or title company.
Mortgage Due Date: The date your mortgage payment is
due each month during the loan’s duration.
Closing Costs: The amount of money that must be paid
to close your loan, including lender fees and third-party
charges, along with taxes and transfer fees.
Mortgage Payment: The cost of your loan, paid monthly.
Credit Report: A tool used by the bank or lender to review
your credit profile and your ability to carry and repay debt.
Loan Officer: A representative of a bank or broker who
originates mortgages on their behalf.
Mortgage Rate: The interest rate associated with your
Mortgage Rate Lock: The act of locking-in a desired
interest rate on your mortgage so it cannot change.
Debt-to-Income Ratio: The ratio of monthly liabilities and
housing expenses divided by the monthly gross income of
the borrower.
Mortgage Term: The length of your mortgage. Most are
30 years, though 15 years is also very common.
Down Payment: An upfront payment made by the home
buyer toward the property purchase price, usually ranging
from zero to 20 percent. The remainder of the sales price
makes up the mortgage loan amount.
Points: Percentage points of the loan amount. Often in
order to get a lower interest rate, lenders will
allow borrowers to lower the rate by paying points
Earnest Money: A deposit paid to the seller by the buyer as
a pledge to complete a real estate transaction. If the seller
accepts the offer, the deposit is held in escrow and applied to
closing costs when the deal is closed.
Pre-Approval: Process where lender collects all required
documents to verify your income, assets & credit and
gives you a definite idea of what you can afford. A formal
commitment to lend.
Escrow: A third party intermediary who holds and allocates
funds, including taxes and insurance in a mortgage
Pre-Qualification: Process to determine what you can
afford to ensure you can obtain mortgage financing when
purchasing a property.
Fixed Rate Mortgage: A mortgage in which the interest rate on
the home loan doesn’t change over the entire life of the loan.
Principal: The balance of the liens on a property, not
including interest. What you owe on your mortgage.
Gross Income: The sum of all wages, salaries, profits,
interest payments, rents, and other forms of earnings,
before any deductions or taxes.
Underwriting: The process of verifying that the
borrower’s documentation adheres to a specific loan
program’s guidelines.

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