What are the common mortgage-related terms I should be familiar with?

Understanding mortgage-related terms is essential for anyone navigating the home loan process. Here are some common terms that frequently arise: The term "mortgage" itself refers to the legal agreement between a borrower and a lender that allows the borrower to obtain funds to purchase real estate, with the property serving as collateral. Another crucial term is "principal," which denotes the original sum of money borrowed. Over time, borrowers will also pay interest, which is the cost of borrowing that principal amount, usually expressed as an annual percentage rate, known as the "APR." "Down payment" describes the initial amount a borrower pays upfront toward the home's purchase price, typically expressed as a percentage. A "loan-to-value ratio," or LTV, is the ratio of the mortgage amount to the property value; this is an important figure that lenders analyze when deciding to approve a loan. The term "escrow" refers to a third-party service that manages the payment of property taxes and insurance on behalf of the borrower, ensuring those obligations are met. Borrowers should also be aware of "closing costs," which encompass the various fees and expenses incurred when finalizing the mortgage, such as appraisal fees, title insurance, and attorney fees. Another significant term is "amortization," which describes the process of paying off a mortgage over time through regular payments that include both principal and interest. Understanding these terms can significantly enhance a borrower’s ability to make informed decisions throughout the mortgage process. For additional terminology or information, it might be helpful to check the current PHH Mortgage website, which could provide further resources related to home loans.