Mortgage Process Definitions You May Find Helpful

Assumptor/Assumer - A person who assumes a mortgage loan.

Closing costs – The amount charged to close or settle on a mortgage and purchase or refinance a home.

Equity – The difference between what the property is worth and what you owe on it. Equity is good; it’s one of your assets.

Escrow account – Unless you have at least 20% equity in the property you are buying or refinancing, the lender will require an escrow account. They will collect some money every month in your payment to pay the property taxes and homeowners insurance, and also flood insurance, if you are required to have it.

Foreclosure – If you don’t pay your mortgage, the lender gets the property back so they can re-sell it. Foreclosures take different lengths of time depending on state law, anywhere from 90 days to a year or even more. If you haven’t moved out by the time the foreclosure is finished, you will be forcibly evicted.

Interest rate – The percentage that you pay and is used to calculate your payment.

Mortgage – From the French, meaning “dead pledge”. This is a loan you get for real estate which is secured by that real estate. If you don’t pay it, the lender gets the real estate back to re-sell to try to get most or all of their money back.

Prepaids – The money used to set up your escrow account if you will have one on your mortgage and to pay any interest due at closing. Even if you don’t have an escrow account, it refers to the amount you may owe on property taxes that are currently due at closing or if you are paying your homeowners insurance at closing.

Refinance – You own a property and want to either a) get a lower interest rate to lower your payment, b) switch from an adjustable rate loan to a fixed rate loan, c) get cash out of the equity you have in the property to pay for something else or d) a combination of the above.

Home | Privacy Policy | Contact | About Me