Whether you are in the home market to buy or sell, you need to familiarize yourself with important mortgage terms and concepts so you don’t get confused in the process. It’s important to work with mortgage loan services like Queensborough Bank and Trust to ensure a professional approach toward your mortgage loan.
Mortgage loan service providers will help you make sense of all the options that are available to you when it comes to mortgage terms and financial products that will best serve your requirements. They can help simplify the process and make sure that you understand every aspect of the mortgage loan, so that you are in the best position to pay your future dues responsibly. Here are five of the most common mortgage terms you should know when dealing with mortgage loans:
1. Amortization – Amortization refers to fixed payments you must make to pay off your mortgage debt over a set period of time. Your mortgage debt covers the principal cost of the purchase plus interest. An amortization schedule is typically presented upon taking out a loan. This schedule details which part of your payment goes towards your principal debt and which part goes towards interest.
2. Adjustable Rate Mortgage – Adjustable rate mortgage or ARM is a type of mortgage in which the interest rate is adjustable throughout the payback period, according to market interest rates. Adjustable rate mortgage loans typically have restrictions on how much interest rates can adjust on a yearly basis, as well as a maximum amount that can be adjusted over the lifetime of the loan.
3. Escrow – An escrow account is an account that a lender sets up in order to hold money for the payment of home insurance and property taxes. These accounts are usually required when a borrower is putting down 20% less than the home purchase.
4. Construction mortgage – A construction mortgage is a short-term loan in which a borrower is given funds to pay for the building of a new home. Like conventional mortgage loans, payments are made based on a schedule determined by the construction timeline, with the final payment typically paid when the home can finally be occupied by the owner or buyer.
5. Conventional mortgage – Conventional mortgage loans are usually insured by private entities. Since they are not backed by government sponsors, they are considered high-risk loans, and as such, conventional mortgage loans have stricter requirements when it comes to down payments and credit standards than government-sponsored loans.
