Foreclosure and Loan Modification Blog

Mortgage Basics: Understanding the Lingo

[fa icon="clock-o"] Tuesday, August 20, 2013 [fa icon="user"] Jake Sterling [fa icon="folder-open'] understanding credit, loan modification help

By Barbara Pronin, RISMedia Columnist

Learn Your Mortgage Lingo

With home prices languishing and mortgage interest rates still at historic lows, this may be the year you will want to buy your first home. But getting a mortgage can be a daunting process, especially if the terms associated with getting a loan are new to your vocabulary.

From mortgage broker Ken Go, here are some basic terms to know as you move toward becoming a homeowner:

Underwriting: this is the process lenders use to decide if they will give you a loan. Underwriters evaluate your credit history, employment, current debt and available collateral in order to determine how much of a risk you might be to their company.

Points: these are fees you will pay for the privilege of getting a mortgage loan. A point is generally 1% of the total loan amount. Discount points, which can reduce your final loan amount, are tax deductible. The points paid to the lender for evaluating and processing your loan are called origination points, and are not tax deductible.

Fixed rate: your interest rate (and payment) will remain fixed for the life of your loan.

Adjustable rate: your interest rate will be adjusted periodically, and there may be a penalty for paying off the loan early.

Down payment: the amount of the total home cost that you will pay upfront. The larger your down payment, the smaller your loan amount and the smaller your monthly payment.

Good faith estimate: the lender is required by law to provide a borrower with an estimate of the fees that will be due at closing. The estimate must be provided within three days of accepting your application.

Escrow: your funds are held 'in escrow' by a third party until your transaction closes.

Amortization: describes the decrease in the principal owed on your home as it decreases over the life of the loan.

Download a Sample Financial Worksheet The Secret to a Loan Modification

photo credit: Alan Cleaver via photopin cc

Reprinted with permission from RISMedia. ©2013. All rights reserved.

Jake Sterling

Written by Jake Sterling

Jake Sterling is Amerihope Alliance Legal Services' Homeowner Liaison. He helps to bring awareness and teach homeowners about foreclosure defense and options to save their homes.

About this Blog

Amerihope Alliance Legal Services is a leading loan modification and foreclosure defense law firm with attorneys licensed in 5 states. We have helped over 7,000 homeowners fight back and keep their homes.

Click to Read Our Super Loan Mod Success Stories

Our goal is to provide valuable information to help homeowners who are trying to obtain a loan modification or to stop foreclosure. You may schedule a free consultation at any time.

Subscribe to Email Updates

Lists by Topic

see all
Quick Foreclosure Quiz

Foreclosure Process Handbook