The principal is the amount of a mortgage loan that you have to pay back. Your monthly payment includes a portion of that principal. When a payment on the principal is made, the borrower owes less and will pay less interest based upon a lower loan size. “Mortgage Key Terms.” Consumer Financial Protection Bureau, https://www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/. Accessed 21 … Read more
Property taxes are taxes charged by local jurisdictions, typically at the county level, based upon the value of the property being taxed. Often, property taxes are collected within the homeowner’s monthly mortgage payment, and then paid to the relevant jurisdiction one or more times each year. This is called an escrow account. If the loan … Read more
The right of rescission refers to the right of a consumer to cancel certain types of loans. If you are buying a home with a mortgage, you do not have a right to cancel the loan once the closing documents are signed. However, if you are refinancing a mortgage, you have until midnight of the … Read more
Annual income is a factor in a mortgage loan application and generally refers to your total earned, pre-tax income over a year. Annual income may include income from full-time or part-time work, self-employment, tips, commissions, overtime, bonuses, or other sources. A lender will use information about your annual income and your existing monthly debts to … Read more
It means the amount of money you are borrowing from the lender, minus most of the upfront fees the lender is charging you. “Mortgage Key Terms.” Consumer Financial Protection Bureau, https://www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/. Accessed 21 May 2021. Legal Disclaimer: The content on this page provides general consumer information. It is not legal advice or regulatory guidance. New Dwelling Mortgage updates … Read more
Amortization means paying off a loan with regular payments over time so that the amount you owe decreases with each payment. Most home loans amortize, but some mortgage loans do not fully amortize, meaning that you would still owe money after making all of your payments. Some home loans allow payments that cover only the … Read more
An adjustable-rate mortgage (ARM) is a type of loan for which the interest rate can change, usually in relation to an index interest rate. Your monthly payment will go up or down depending on the loan’s introductory period, rate caps, and index interest rate. With an ARM, the interest rate and monthly payment may start … Read more
The ability-to-repay rule is the reasonable and good faith determination most mortgage lenders are required to make that you are able to pay back the loan. “Mortgage Key Terms.” Consumer Financial Protection Bureau, https://www.consumerfinance.gov/consumer-tools/mortgages/answers/key-terms/. Accessed 21 May 2021. Legal Disclaimer: The content on this page provides general consumer information. It is not legal advice or regulatory guidance. New Dwelling … Read more
A 5/1 adjustable-rate mortgage (ARM) or 5-year ARM is a mortgage loan where “5” is the number of years your initial interest rate will stay fixed. The “1” represents how often your interest rate will adjust after the initial five-year period ends. The most common fixed periods are 3, 5, 7, and 10 years and … Read more