Understanding Mortgages

Front

What is a conventional loan?

Back

A loan not insured by the federal government.

Front

What is a mortgage?

Back

A loan to buy or refinance a home.

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 PMI?

Back

Private Mortgage Insurance.

Front

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

Back

To reduce the loan amount and show the lender the buyer's commitment.

Front

What is an adjustable-rate mortgage (ARM)?

Back

A mortgage with an interest rate that can change periodically based on market conditions.

Front

What is the difference between principal and interest in a mortgage?

Back

Principal is the amount borrowed, while interest is the cost of borrowing that amount.

Front

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

Back

A ratio that compares the amount of the loan to the appraised value of the property.

Front

What is a pre-approval in the mortgage process?

Back

A lender's conditional commitment to loan a specific amount based on the borrower's financial situation.