Helpful Mortgage Terms

Annual Percentage Rate

– the annual rate that is charged for borrowing (or made by investing), expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction.


– the amortization of the loan is a schedule on how the loan is intended to be repaid. For example, a typical amortization schedule for a 15 year loan will include the amount borrowed, interest rate paid and term. The result will be a month breakdown of how much interest you pay and how much is paid on the amount borrowed.


– is conducted by a professional appraiser who will look at a property and give an estimated value based on physical inspection and comparable houses that have been sold in recent times.

Closing Costs

– these are the costs that the buyer must pay during the Mortgage process. There are many closing costs involved ranging from attorney fees, recording fees and other costs associated with the mortgage closing.

Debt-to-income Ratio

– lenders look at a number of ratios and financial data to determine if the borrowers are able to repay the loan. One such ratio is the debt-to-income ratio. In this calculation, the lender compares the monthly payments, including the new Mortgage, and compares it to monthly income. The income figure is divided into the expense figure, and the result is displayed as a percentage. The higher the percentage, the more risky the loan it is for the lender.

Down Payment

– is the amount of the purchase price that the buyer is paying. Generally, lenders require a specific down payment in order to qualify for the Mortgage.


-the difference between the value of the home and the Mortgage loan is called equity. Over time, as the value of the home increases and the amount of the loan decreases, the equity of the home generally increases.


– An Escrow account allows you to set aside a little each month for your annual insurance premiums and personal property taxes.  This small monthly amount is added to the principal and interest payment on your mortgage.

Fixed Rate Mortgage

– is a mortgage where the interest rate and the term of the loan is set for the life of the loan.

Homeowner’s Insurance

– prior to the Mortgage closing date, the homeowners must secure property insurance on the new home. The policy must list the lender as loss payee in the event of a fire or other event. This must be in place prior to the loan going into effect.

Loan-to-value Ratio

– Loan-to-Value (LTV) is a calculation that compares the loan amount to the value (usually through an appraisal) of the home. Park Lane requires, in most cases, at least a 95% LTV to qualify for a loan.


– is the loan and supporting documentation for the purchase of a home. Mortgage lenders generally follow strict underwriting guidelines to limit the possibility of borrowers defaulting on their payments.

Origination Fee

– when applying for a Mortgage loan, borrowers are often required to pay an origination fee to the lender. This fee may include an application fee, appraisal fee, fees for all the follow-up work and other costs associated with the loan.


– is the term used to describe the amount of money that is borrowed for the Mortgage. The principal amount that is owed will go down when borrowers make regular monthly or bi-weekly payments.

Truth in Lending

– is a federal mandate that all lenders must follow. There are several important parts to the Truth In Lending regulations including proper disclosure of rates, how to advertise mortgage loans and many other aspects of the lending process. These regulations were put into place to protect consumers from potential fraud.