Mortgage Price
Definition of "Mortgage Price"
The interest rate or rates and upfront fees paid to the lender and mortgage broker. Some upfront charges are expressed as a percent of the loan, and some are expressed in dollars. The price includes the total of each type. On a fixed-rate mortgage (FRM), one interest rate is preset for the life of the loan. On an adjustable rate mortgage (ARM), the rate is preset for an initial period, ranging from one month to 10 years, and then can change. For ARM shoppers who are uncertain about how long they will be in their house, the price includes ARM features that affect the ARM rate after the initial rate period ends. These include the margin, maximum rate, rate adjustment period, and rate adjustment caps. The margin is the amount that is added to the index used by the ARM in determining the rate after the initial rate period ends. In a stable interest rate environment, the ARM rate will become the index plus margin, called the 'fully indexed rate.' Both the index and the margin are specified in the ARM contract. The maximum rate is the highest rate permitted by the ARM contract. It tells shoppers how high the ARM rate can go in a rising rate environment. The rate adjustment period and rate adjustment caps indicate how often the rate is changed and the maximum amount of any change. Hence, they indicate whether any rate increases at the end of the initial rate period will be abrupt or gradual.
Popular Mortgage Terms
Fees assessed by lenders when payments are late. Late fees are usually 4% or 5% of the payment. A borrower with a 6% mortgage for 30 years who pays a 5% late charge every month raises his ...
The ratio of total housing expense to borrower income. This ratio is used (along with other factors) in qualifying borrowers. ...
The lender's risk that, between the time a lock commitment is given to the borrower and the time the loan is closed, interest rates will rise and the lender will take a loss on selling ...
Interest from the day of closing to the first day of the following month. To simplify the task of loan administration, the accounting for all home loans begins as if the loan was closed ...
A mortgage loan for 125% of property value. Since such loans are only partly secured, they have many of the characteristics of unsecured loans, including relatively high interest rates. ...
Also called variable or flexible rate mortgage, an adjustable rate mortgage (ARM) is a mortgage where the interest rate is not constant, but changes over time by the mortgage lender. ...
The payment of principal and interest made by the borrower. ...
The process of determining whether a prospective borrower has the ability to repay a loan. Qualification Versus Approval: To be approved for a loan, a prospective borrower must ...
Total costs charged to the borrower that must be paid at closing, by the borrower, the home seller, or the lender. In dealing directly with a lender, settlement costs can be divided into ...
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