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
A measure of interest cost on a reverse mortgage. ...
A loan eligible for purchase by the two major federal agencies that buy mortgages, Fannie Mae and Freddie Mac. Conforming mortgages cannot exceed a legal maximum amount, which was $322,700 ...
The maximum allowable increase in the interest rate on an ARM each time the rate is adjusted. It is usually one or two percentage points. ...
The maximum allowable decrease in the interest rate on an ARM each time rate is adjusted. It is usually one or two percentage points. ...
A documentation rule where the borrower discloses assets and their source but the lender does not verify the amount. ...
Cost-of-Funds Index, one of many interest rate indexes used to determine interest rate adjustments on an adjustable rate mortgage. ...
A lender that holds the loans it originates in its portfolio rather than selling them. ...
Loan applications that are withdrawn by borrowers, because they have found a better deal or for other reasons. ...
A borrower who does not meet the underwriting requirements of mainstream lenders. Sub-prime borrowers pay more than prime borrowers and are sometimes taken advantage of. ...
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