48 Meriden Rd, Suite 1, Middlefield, CT 06455


Learning the ABC’s of mortgage terminology

Before tackling the mortgage process for the 1st time or the 5th time, understanding the mortgage language will help in the steps of your home purchase journey.

Adjustable Rate Mortgage (ARM): A mortgage that will have an initial fixed rate for a set period of time and then the rate will adjust either up or down depending on market index.

Amortization: The gradual reduction of debt over the term of a loan. Repayment of principal plus interest over a period of time.

Annual Percentage Rate (APR): The full cost of a loan expressed as a yearly percentage rate. The cost includes interest and loan fees.

Appraisal: A written analysis of the property’s current market value completed by a professional Appraiser.

Back End Ratio: One of the qualifying criteria used in the loan process. This is all the borrowers current debt divided by the borrowers gross monthly income.

Borrower: A person who applies for the mortgage on a property.

Closing: The conclusion of transferring of ownership of property from seller to buyer when legal documents are signed and funds are disbursed.

Closing Costs: Expenses that are incurred over and above the property purchase price. Theses expenses can include origination fee, property taxes, title insurance, appraisal, and escrow costs.

CoBorrowers: Any persons in addition to the Borrower who will be on the application for the mortgage.

Credit Report: A document reporting the credit history and current status of a borrower’s creditworthiness. Equifax, Experian and TransUnion are the credit reporting agencies used to obtain this information.

DebtToIncome Ratio(DTI): The ratio of verified gross monthly income divided into a borrower’s monthly payment obligations.

Down Payment: Upfront funds paid that are applied to the purchase price and the remaining balance is the mortgage amount.

Escrow Account: An account required by a lender and funded by a buyer’s mortgage payment to pay the buyer’s homeowners insurance and property taxes.

Fixed Rate Mortgage: A mortgage with an interest rate and a payment that doesn’t change over the term of the loan.

Front End Ratio: Another one of the qualifying criteria used in the loan process. This is the borrowers anticipated monthly mortgage payment divided by their gross monthly income.

Gross Income: The total amount of income before taxes and deductions.

Home Inspection: An examination of a property’s condition.

Interest Rate: A percentage fee charged for the privilege of borrowing money.

Lender: A person or organization that loans money with the expectation that the funds will be repaid.

Loan To Value (LTV): The loan amount divided by the price or appraised value of the property (whichever is less).

Lock or Lock In: Securing a mortgage interest rate quoted for a specific numbers of days after application is completed.

Mortgage: An agreement between you and your lender that allows you to borrow money to purchase or refinance a home and gives the lender the right to take your property if you default on repaying the borrowed money.

Note: A written promise by one party to pay money to another party.

Origination Fee: A fee charged by a lender to cover the administrative costs for processing the home loan application.

PreApproval: A thorough assessment of a borrower’s income, assets and other data to determine a loan amount they would qualify for. A letter of pre-approval is beneficial when submitting an offer on your desired home.

PreQualified: A basic assessment of income, assets and credit score to determine what, if any, loan programs a borrower might qualify for.

Terms: A set period of time, the length of repayment for a loan.

Title Search: An examination of a property’s public record to reveal there are no claims or liens attached to the property.

Underwriting: The process of reviewing all documentation containing income, assets, employment and credit to determine if the borrower meets the investors requirements.

WalkThrough: A final inspection that allows the borrower to examine the purchased property before closing to check that there’s no new damage and requested repairs have been performed.

Give me a call or send me an email and lets get your home financing process started now!!!

Donna Pettola
Cell: 203-747-1409
Office: 844-788-7237 x7388

NMLS# 2060858