Mortgage lenders typically charge an application fee when you apply for a mortgage. This helps to cover the costs they incur as they begin to process your application.
Category Archive: Mortgages
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Mar
23
What is an appraiser?
An appraiser is a person who estimates the market value of a property. In residential real estate, most appraisers are independent appraisers who are hired by lenders or others to insure that the value of a property is at least as high as the amount of money that the borrower is borrowing. Additionally, there are …
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Mar
21
What does subordinate mean?
When used in terms of real estate interests or financial instruments, an interest or debt that is subordinate to another means that it is junior to other debts or interests. For example, the lender of a second mortgage is subordinate to the lender of a first mortgage; in the event that the homeowner defaults, the …
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Mar
21
What is the Real Estate Settlement Procedures Act (RESPA)?
The Real Estate Settlement Procedures Act (RESPA) was passed to protect borrowers from abusive mortgage lending practices. The primary function of the law is to ensure that borrowers are given accurate, timely, and complete information about the costs and procedures of the mortgage loan process. Additionally, RESPA eliminated kickbacks and referral fees associated with lending—for …
Mar
21
What is a principal payment?
In terms of mortgages and other loans, a principal payment is a payment that reduces the outstanding balance of the loan. For contrast, see the definition of interest payment.
Mar
21
What is a mortgage payment?
A mortgage payment is a periodic payment used to repay a mortgage loan. Traditionally, mortgage payments have consisted of four parts: principal payments, interest payments, property tax escrows, and homeowners insurance escrows. Of these, only the principal payments go toward reducing the outstanding balance of the mortgage loan. Mortgage payments are typically due once per …
Mar
21
What is mortgage insurance?
Mortgage insurance insures a lender—not the borrower—against a borrower defaulting on a mortgage. If the borrower fails to pay the loan as agreed, the lender can seek payment from the mortgage insurance company. Most mortgage insurance is private mortgage insurance (PMI), but there are some government-sponsored mortgage insurance programs, such as the programs provided by …
Mar
21
What is a mortgage?
A mortgage is a loan in which the borrower (usually a home buyer) pledges the property as security for the payment of the loan. Because the property is the security for the loan, if the borrower fails to repay the mortgage as agreed–or otherwise defaults on the loan–the lender may take possession of the property …
Mar
21
What is a loan-to-value ratio (LTV)?
The loan-to-value ratio (LTV) is ratio of money owed on a property versus the value of a property. For example, if the balance owed on a mortgage is $79,000 and the market value of the property is $120,000, then the LTV ratio is 65.8% ($79,000 ÷ $120,000). LTV ratios change over time. They decline as …
Mar
20
What is an interest payment?
An interest payment is a payment on a mortgage or other loan that does not reduce the outstanding balance of the loan. Instead, an interest payment is a premium paid for the privilege of borrowing money. Another way to think of an interest payment is as the revenue or profit the lender receives for holding …