Do you know what some of these mortgage terms mean? If you don't know them, you should do so now. These words might help you spot risk in the terms of your mortgage loan and in the mortgage process. They will also help you figure out if the loan you want is the right one for your situation.
ARM stands for "adjustable rate mortgage." This is a loan with an interest rate that can be changed by the lender after a certain amount of time. Most of these contracts deal with changes in rates by looking at a pre-set index of interest rates that the lender has no control over.
Due-on-sale clause: A part of a loan contract that says any remaining loan balance must be paid back when the property is sold. This keeps the seller from giving the buyer the responsibility for a mortgage that is already in place.
Equity grabbing is an unethical form of predatory lending in which the loan provider tries to get the borrower into a loan that will go into default quickly so that the lender can "grab" the borrower's equity.
Good faith estimate: A standard form from a lender that lists all of the expected closing costs that the borrower will have to pay. When a loan application is sent to the lender, they have three business days to send this document. Pay close attention to these details and make sure you fully understand all of the fees you might have to pay.
Negative amortisation is when the total amount owed on a loan goes up because several monthly payments are less than the interest due. Be careful with this kind of loan. This kind of home loan is very dangerous.
Rate protection protects a borrower from the risk that interest rates will go up between the time the borrower applies for a loan and the time the loan closes. This could make your loan safer and more stable for you in the long run.
