Mortgage Glossary Part 2

Balance Sheet

A financial statement that shows assets, liabilities, and net worth as of a specific date.

Balloon Mortgage

A long-term loan, often a mortgage, that has one large payment (the balloon payment) due upon maturity. A balloon loan will often have the advantage of very low interest payments, thus requiring very little capital outlay during the life of the loan



Biweekly Payment Mortgage

A plan to reduce the debt every two weeks (instead of the standard monthly payment schedule). The 26 (or possibly 27) biweekly payments are each equal to one-half of the monthly payment required if the loan were a standard 30-year fixed-rate mortgage. The result for the borrower is a substantial savings in interest.

Bridge Loan

Short-term financing which is expected to be paid back relatively quickly, such as by a subsequent longer-term loan. also called swing loan or bridge financing.

Buydown

When the seller, builder or buyer pays an amount of money up front to the lender to reduce monthly payments during the first few years of a mortgage. Buydowns can occur in both fixed and adjustable rate mortgages.


Certificate of Eligibility

A government-issued document which indicates that a member of the armed forces who serves a certain number of days and is honorably discharged can apply for a Veterans Administration (VA) loan, such as a VA mortgage.


Closing Costs

These are expenses - over and above the price of the property- that are incurred by buyers and sellers when transferring ownership of a property. Closing costs normally include an origination fee, property taxes, charges for title insurance and escrow costs, appraisal fees, etc. Closing costs will vary according to the area country and the lenders used.

Compound Interest

Interest which is calculated not only on the initial principal but also the accumulated interest of prior periods. Compound interest differs from simple interest in that simple interest is calculated solely as a percentage of the principal sum.

Conversion Clause

A provision in an ARM allowing the loan to be converted to a fixed-rate at some point during the term. Usually conversion is allowed at the end of the first adjustment period. The conversion feature may cost extra.


Getting a home loan can be stressful and confusing, especially with so many forms to fill out and paperwork to sign. Luckily, Center State Mortgage is there to help! They will help make getting a home loan, fast, easy, and affordable. Choose Center State Mortgage for your home loan needs!

Types of Loans

Thirty-Year Fixed Rate Mortgage

A 30 year fixed mortgage is possibly the most common type of mortgage loan. It has several characteristics that make it such a popular choice when financing a home purchase.

One of the key features of a 30 year fixed mortgage is its fixed interest rate. When you acquire the loan, the interest rate that you get at that time is the interest rate that you keep for the duration of the loan. Your only option to change the interest rate is if you choose to refinance. If you are able to lock a great interest rate when getting the mortgage, you are set. That is the rate for the next 30 years, assuming that you own the house that long.


Adjustable Rate Mortgages (ARM)

ARM. A mortgage with an interest rate that may change, usually in response to changes in the Treasury Bill rate or the prime rate. The purpose of the interest rate adjustment is primarily to bring the interest rate on the mortgage in line with market rates. The mortgage holder is protected by a maximum interest rate (called a ceiling), which might be reset annually. ARMs usually start with better rates than fixed rate mortgages, in order to compensate the borrower for the additional risk that future interest rate fluctuations will create.

2/1 Buy Down Mortgage

The 2/1 Buy-Down Mortgage allows the borrower to qualify at below market rates so they can borrow more. The initial starting interest rate increases by 1% at the end of the first year and adjusts again by another 1% at the end of the second year. It then remains at a fixed interest rate for the remainder of the loan term. Borrowers often refinance at the end of the second year to obtain the best long-term rates. However, keeping the loan in place even for three full years or more will keep their average interest rate in line with the original market conditions.

Negative Amortization (Neg. Am) Loan

A gradual increase in mortgage debt that occurs when the monthly payment is insufficient to cover the interest due, and the balance owed keeps increasing (at least in the first few years).

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Home Purchase Basics

Congratulations on your decision to buy a new home! As a homeowner, there are many important decisions to be made, especially if it is your first time purchasing a home. Here are some basic hints and tips.

A home purchase may be your largest financial transaction to date, so it's important to make the right decisions and to keep an eye on the details. By using a professional real estate agent the entire process should be smooth, efficient, pleasurable, and most importantly fast!

Your Real Estate Agent should:

1) Preview homes for you and decide which ones are the best for your price range.

2) Show you homes that fit your individual needs and wants

3) Help you make the right decision on which is considered a "good buy" by determining the market and probable causes that may increase or decrease the value of your home over time.

Negotiate the best deal for you. With a Pre-Qualification letter from us in hand, your Real Estate Agent will be able to demonstrate that you are a qualified and capable borrower. This is a very important step in the process, ultimately, it could determine whether or not you will get the home.

Your Mortgage Broker and Loan Officer should:

1) Help you make the right decision about which loan to choose from, depending on your needs and circumstances.

2) Keep you up-to-date on the entire loan process

3) Keep your Real Estate Agent informed of our loan progress

4) Get you the best loan at the lowest interest rates to save you money!

Center State Mortgage is your #1 source for home loans and home purchasing needs! Count on them to help the transaction go smoothly! Visit Center State Mortgage today and get on the road to your purchase of a new home!