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Mortgage FAQs

What is a mortgage?
A Mortgage (also called a home loan) is a legal contract made between a lender and a borrower that uses property as collateral to secure the loan. The lender can take possession of the property if the borrower fails to pay the prearranged home loan payments.

A homeowner acquires a new loan to pay off an existing loan. Reasons homeowners refinance is to lower their interest rates and/or access cash from their home equity.

What is a home loan?
It is a loan by a lender to the homeowner secured by a "lien" on the real estate.
What is a home equity loan?
It is a closed-end home loan secured by the borrower's residential asset. The reasons to usually get a home equity loan are to pay off debt or to make home improvements.
What is a home equity line of credit or HELOC?
A HELOC is simply an open-end loan set up as a line of revolving credit for some maximum draw, instead of a fixed loan amount in which your home is collateral. This is an open-end loan that permits the borrower to repay and re-borrow the funds available. HELOCs can be used to pay for several important items such as college education tuition, private school education, high interest debt, home improvements, home renovation, and major medical bills.
What is a second mortgage?
Mortgage loan taken out after the first mortgage and secured against the same asset as the first mortgage loan. Mortgage loan is based on the amount of equity or ownership interest you have in your home.
What is a mortgage lender?
A mortgage Lender is a financial institution that provides prospective homeowners with the funds over a long-term period to pay off their home loan mortgage. Borrowers are required to pay monthly installments to their lender which includes principle, interest, and additional lender fees. Examples, mortgage bankers and mortgage brokers.
What is the difference between a mortgage broker and a mortgage banker?
A mortgage broker is the middleman who helps match borrowers with lenders based on corresponding needs and standards. Mortgage brokers arrange more than 80% of all transactions between borrowers and lenders, yet mortgage bankers actually finance and distribute the largest portion of home loans compared to all other lenders.
What is a mortgage principle?
The mortgage principle is the amount of loan money that a homeowner borrows excluding interest.
What does APR mean?
Annual Percentage Rate ( APR ) is the percentage used to figure out the total cost of your cash advance loan by taking into account all fees charged by your lender in addition to your loan principle and interest.
What is a fixed rate mortgage?
A fixed rate mortgage is a home loan with steady mortgage interest rates and monthly payments that do not change throughout the life of the loan.
What is the adjustable rate mortgage?
An adjustable rate mortgage is a mortgage loan whose interest rate is episodically adjusted based on an index. The monthly payments made by you may change during the term of your mortgage loan with the changing interest rate. The fluctuating rates pass on part of the interest rate risk from the mortgage lender to you.
What is an interest-only mortgage?
Interest-only mortgages are loans that require the borrower to pay only interest on the principle in monthly installments for a fixed period. You can use one of our mortgage calculators to calculate exact payments.
What is an amortized mortgage?
Amortized Mortgages refers to loans that are paid in installments comprised of both principle and interest, and which is paid off (or amortized) over a fixed period of time.
How do you calculate LTV or loan-to-value ratio?
The loan-to-value (LTV) ratio of your home is calculated by dividing the fair market value of your home by the amount of your home loan.
What are lender fees?
These fees usually range anywhere from 2 to 5 percent and may include, but are not limited to, things such as appraisal costs, document preparation, and application costs.
What is the Truth in Lending Act?
The Truth in Lending Act is a federal law that was enacted as part of the Consumer Protection Act. This law requires lenders to reveal all information to the borrower and detail all costs associated with the transaction.
What is a Residential Purchase Agreement?
Also known as Contract to Purchase Real Estate, it is a binding agreement (among two or more parties) to purchase real estate. It binds the buyer to buy at a set price and the seller to sell to the buyer, all of which is to be transacted within a specified time.