20 Most Important Terms To Know About Home Loans

Purchasing of a new house is perhaps the most significant accomplishment anyone can ever reach. But instead of being emotionally high on this most important decision of life, one should have a more realistic and practical approach towards this whole process. Majority of us would opt for loans to be able to finance a house, if that is the story of your life, you should be well versed with the terminology associated with this loan procedure.

Adjustable Rate Mortgage (ARM)

Simultaneously known as Variable Rate Mortgage. It is a legal agreement wherein money is borrowed in which the rate of interest is altered regularly based on a pre-selected inventory.

Annual Percentage Rate (APR)

An interest percentage which demonstrates the price of a mortgage in an annual percentage. This percentage is inclusive of all points and fees and is usually focused on the loan being in the long length of time frame.


This is a consensus between the purchaser and seller in wherein the buyer accepts responsibility for the seller’s current mortgage.


This is a procedure of lowering the purchaser’s monthly remittance for a short span of time. The lender pays subsidy to the mortgage by decreasing the rate of interest for the initial few years of a loan.


A restriction on the aggregate of the interest rate or monthly remittance for a modifiable mortgage which can be altered according to specific requirements.


Simultaneously known as settlement, the last meeting of a real estate deal, in which the land and capital is interchanged between the both parties who are involved in this deal.

Debt-to-Income Ratio

This proportion is usually expressed as a percentage wherein total from splitting up a borrower’s monthly remittance obligation on durable dues by the borrower’s combined over all monthly earnings.

Discount Points

Prepaid interest evaluated at termination of the deal by the lender. One point is usually considered equal to 1 percent of the loan aggregate.

Down Payment

The capital paid by the purchase at termination of the deal which contributes to the difference between buying cost and the mortgage aggregate

Earnest Money

Capital given by the purchase to the retailer as an advance payment to ensure the purchaser’s future payments.


Equity in simple words is proper market value subtracted by latest indebtedness.


Capital given to the third parties which will be utilized to cover all external payments like duty or indemnity costs and earnest money accumulation.

Fixed Rate Mortgage

This is a mortgage is which the rate of interest will be persistent throughout the whole time period associated with this loan

Loan-to-Value Ratio

The relationship between the sum of the mortgage loan and the evaluated cost of the land.

Market Value

This is a cost which a given piece of land or property can easily bring in the marketplace.

Mortgage Insurance

This is a form of protection and insurance given to the lenders against loss if a borrower fails to pay. This is a prerequisite when the loan-to-value percentage is higher than 80 percent.

Origination Fee

This is the payment given to a lender for the purpose of dealing with a loan application. This is generally calculated as a percentage of the loan.


It usually alludes to Capital, Interest, Duty and Protection cover


This is an important process involving decision making for providing a loan to a possible home purchaser.

Variable Rate Mortgage

This is also alluded to as Modifiable Rate Mortgage. It is a legal agreement wherein money is borrowed in which the rate of interest is altered regularly based on a pre-selected inventory

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