Buying a home can be a very scary and confusing process if you go into it unarmed.  The mortgage professionals here at PRMI want to coach you through the process and make sure you are comfortable every step of the way.

PRMI offers some of the most competitive rates in the market place, and if you can find a better deal, excellent!  This does not mean we are going to stop helping.  Our number one goal is to make sure you get the best deal available, even if it is not through us.  However, the best deal may be in disguise so let us help you understand how to compare and make the right decision.

One of the contributing factors to today’s current mortgage fallout was bad brokers giving bad deals.  This should never happen, and PRMI will do its best to help you avoid it.  Below are some key mortgage terms to review.  You can call or email us anytime with any questions or concerns you may have.

Adjustable Rate--An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

Amortization--A repayment method in which the amount you borrow is repaid gradually though regular monthly payments of principal and interest. During the first few years, most of each payment is applied toward the interest owed. During the final years of the loan, payment amounts are applied almost exclusively to the remaining principal.

Annual Percentage Rate (APR)--The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Appraisal--A fee charged by an appraiser to render an opinion of market value as of a specific date.

Balloon Payment--A lump sum payment for the unpaid balance of the loan.

Cap--The maximum allowable increase, for either payment or interest rate, for a specified amount of time on an adjustable rate mortgage.

Cash Out--Receiving money back when refinancing your present mortgage.

Closing Costs--Any fees paid by the borrowers or sellers during the closing of the mortgage loan. This normally includes an origination fee, discount points, attorney's fees, title insurance, survey, and any items which must be prepaid, such as taxes and insurance escrow payments.

Discount Points (or Points)--The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., two points on a $100,000 mortgage would equal $2,000).

Equity--The difference between the fair market value (appraised value) of your home and your outstanding mortgage balance.

First Mortgage--A mortgage which is in first lien position, taking priority over all other liens (which are financial encumbrances).

Fixed Rate--An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

FHA Loan--More appropriately termed "FHA Insured Loan." A loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.

Good Faith Estimate--A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Gross Income--For qualifying purposes, the income of the borrower before taxes or expenses are deducted.

Interest Rate--The periodic charge, expressed as a percentage, for use of credit.

Loan to Value Ratio (LTV)--A ratio determined by dividing the sales price or appraised value into the loan amount, expressed as a percentage. For example, with a sales price of $100,000 and a mortgage loan of $80,000, your loan to value ratio would be 80%. Loans with an LTV over 80% may require Private Mortgage Insurance, defined below.

Lock or Lock In--A commitment you obtain from a lender assuring you a particular interest rate or feature for a definite time period. Provides protection should interest rates rise between the time you apply for a loan, acquire loan approval, and, subsequently, close the loan and receive the funds you have borrowed.

Margin--An amount, usually a percentage, which is added to the index to determine the interest rate for adjustable rate mortgages.

Mortgage Banker--Originates mortgage loans, loaning you their funds and closing the loan in their name.

Mortgage Broker--As do mortgage bankers, takes loan application and processes the necessary paperwork. Unlike a mortgage banker, brokers do not fund the loan with their own money, but work on behalf of several investors, such as mortgage bankers, S and L's, banks, or investment bankers.

Mortgage Insurance (MIP or PMI)--Insurance purchased by the borrower to insure the lender or the government against loss should you default. MIP, or Mortgage Insurance Premium, is paid on government-insured loans (FHA or VA loans) regardless of your LTV (loan-to-value).

Mortgagee--The lender in a mortgage loan transaction.

Mortgagor--The borrower in a mortgage loan transaction.

PITI--Principal, interest, taxes and insurance, which comprise your monthly mortgage payment.

Prepayment Penalty--A fee paid to the lending institution for paying a loan prior to the scheduled maturity date.

Title--The written evidence that proves the right of ownership of a specific piece of property.

Title Insurance--Protection for lenders or homeowners against financial loss resulting from legal defects in the title.

Underwriting--The process of verifying data and approving a loan.

Variable Rate--An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

VA Loan--More appropriately termed "VA Insured Loan." A loan for which the Veteran's Administration insures the lender against losses the lender may incur due to your default. Available only to veterans possessing a Certificate of Eligibility.