The wording used when talking about mortgages can make getting a mortgage a confusing and frustrating process. Here are a few of the most common mortgage terms, and what they mean to help you with your mortgage search, as well as a formula to help you determine what your future mortgage payment may be.
Adjustable Rate – An adjustable rate is an interest rate that is going to change periodically as the index changes. The amount you make in payments will go up or down depending on your current interest rate.
Amortization- A method of paying off your mortgage in which a portion of you payment each month goes toward the principal balance the other toward the interest you owe. At first, the majority of your payments go toward the interest on your loan, toward the end of your loan term the majority of each payment goes toward paying the principal.
Annual Percentage Rate (APR)- The yearly cost of having being granted a line of credit for your mortgage expressed as a percentage.
FHALoan- A special type of loan that is backed by the Federal housing Authority. Should the borrower default on the loan the bank is guaranteed to get their money for the home by the federal government.
Grace period- the amount of time that your mortgage payment can be late, without incurring a late charge or a negative report on your credit report.
Index- The number which future interest rates is based on. Usually a percentage.
Interest Rate- The charge, or cost of being granted a line of credit to purchase your home.
Jumbo Loans- Large mortgage Loans that exceed a certain amount. Currently that amount is $203,150.
Lock In- A commitment you receive from a lender for a specified period of time regarding your interest rate. Should you “lock in” a rate of 5%, then that interest rate will not increase or decrease during the specified time period.
Payment- What you are expected to pay on your mortgage each month.
Prepayment Penalty- A fee that is charged should you pay off your loan before it hits its maturity date.
Principal- The total amount of your loan, before interest.
VALoan- A home Loan much like a FHA home loan where the Veterans Administration insures that the loan will be paid should you default on it.
Variable Rate- An interest rate that will change periodically depending on the index.
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July 20th, 2006 
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