Bankers realize that the lending process can be lengthy and the terminology is often very confusing. American Federal tries to make the process as pain-free as possible. Below is a list of frequently used terms and acronyms.
ARM (adjustable rate mortgage) - a mortgage loan with an interest rate that varies over the life of the loan, based on the market interest rate.
Amortization - the process of repaying a loan that allows most of the payment at the beginning of the loan term to be applied to the interest on the loan, and most of the payment at the end of the loan term to be applied toward the principal.
Closing Costs - costs associated with the loan that are paid when the loan process is complete and the loan documents are signed. These may include title insurance, appraisal fees, survey fees, attorney fees, loan discount points, and document preparation fees. Closing costs typically range from three to four percent of the sale price of the property.
Contract for Deed - a document that outlines the terms of a transaction between a buyer and seller.
Fixed Interest Rate - the borrower pays the same interest rate for the life of the loan.
Home Equity Loans/Lines of Credit - loans that use the borrower's equity in their home as collateral for the loan.
Points - additional money paid at closing to the lender in return for a lower interest rate.
Principal - the amount borrowed or remaining unpaid on a loan.
SBA (Small Business Administration) - a government agency that guarantees loans for small, independently owned businesses.
Title Insurance - insurance that protects the lender or buyer against loss arising from disputes over ownership of a property.
Underwriting - the process of reviewing information about the borrower and making decisions about a loan.
