Understanding Mortgages

Front

What is a conventional loan?

Back

A loan not insured by the federal government.

Front

What is the purpose of an escrow account in a mortgage?

Back

To collect and pay property taxes and homeowners insurance.

Front

What is included in a monthly mortgage payment?

Back

Principal, interest, and other fees.

Front

What does 'amortization' refer to in a mortgage?

Back

The division of payments into interest and principal over the life of the loan.

Front

What is a fixed-rate mortgage?

Back

A mortgage with an interest rate that stays the same through the term.

Front

What is a down payment in the context of a mortgage?

Back

The initial upfront payment made when purchasing a home, typically a percentage of the purchase price.

Front

What is the difference between a fixed-rate mortgage and an adjustable-rate mortgage?

Back

A fixed-rate mortgage has a constant interest rate, while an adjustable-rate mortgage has an interest rate that may change periodically.

Front

What is private mortgage insurance (PMI)?

Back

Insurance that protects the lender in case the borrower defaults on the loan, typically required when the down payment is less than 20%.

Front

What is the loan-to-value (LTV) ratio?

Back

A financial term used by lenders to express the ratio of a loan to the value of an asset purchased.

Front

What are closing costs?

Back

Fees and expenses paid when a real estate transaction is finalized, including loan origination fees, title insurance, and appraisal fees.