If you are planning to buy a new home in Pembroke Pines there are few concepts that you will need to know. If you are brand new to the home buying arena, then mortgage terminology can be as foreign as reading Greek.  Use the following glossary of terms to help you raise your own awareness.

Mortgage: It is defined as a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt. What this means in layman terms is that a bank allows you to assume the ownership of a piece of property so long as you repay the cost of that property under a set of rates and terms as defined by the bank.

Good Faith Estimate: RESPA requires the lender to provide a borrower with an estimate of the fees that will be due at closing. They must provide this within three days of taking your application.

Escrow: Your funds are held in an escrow account by a third party until the closing of your transaction.

Fixed-rate mortgage: This is the most ordinary and uncomplicated home loan available to homeowners today. As the name suggests, the interest rate on a fixed-rate mortgage does not change during the entire duration of the loan.

Adjustable-rate mortgage: It refers to a loan program with a variable interest rate that can change throughout the life of the loan. It differs from a fixed-rate mortgage, as the rate may move up or down depending on the direction of the index it is associated with.

Interest Only Loans: If you make interest-only payments on your mortgage each month, you will pay substantially less than your fully-amortized payment, but gain nothing in the way of principal. You would have zero ownership in your home unless it appreciated during that time. And once the interest-only period came to an end, you monthly mortgage payments would jump, possibly to unmanageable levels for some.

Option arm: The program allows a borrower to pay off their loan balance using four payment options, such as 15 year term payment, 30 year term payment, Interest-only payment, and Minimum monthly payment or negative amortization. This loan program has become one of the most popular mortgage choices for borrowers in the United States in the last few years due to its forgiving payment flexibility. This same payment flexibility has also made it one of the most scrutinized loan programs in history because of its misleading ability to qualify borrowers for a home they truly can’t afford.

Underwriting: This lender process is used to determine how much of a risk you and your mortgage would be to their company. An underwriter will evaluate such things as your credit, available collateral, as well as your employment and current debts.

Points: Broken into two categories, discount and origination, this term refers to a fee paid when obtaining a mortgage. Paying points can reduce your final interest rate.

Origination: Less popular with buyers, as they offer no real benefit to the borrower, these points are fees paid to the lender or loan officer in exchange for their job of evaluating and processing your mortgage loan. These points are not tax deductible.

FHA loans: Mortgages insured by the Federal Housing Administration (FHA) that can be issued by any federally qualified lender. The FHA established the mortgage program in 1934 to help lower income borrowers obtain a mortgage who would otherwise have trouble qualifying. Before then, it was common for potential homeowners to put down 50% of the value of the home as a down payment.

Jumbo loans: This mortgage is any single loan amount over the conforming loan limit, which is currently $417,000 for a one unit property in the United States. Jumbo mortgages are not backed by the FNMA (Fannie Mae) or FHLMC (Freddie Mac), so outside investors typically buy these loans in securitized bundles on the secondary market.

Fixed Rate: Your interest rate will remain the same throughout the life of the loan.

Adjustable Rate: Your interest rate is adjusted periodically. There also may be a penalty for paying off the loan before its maturation date.

Reverse mortgage: This Loan is a tax exempt home loan that allows a homeowner to take cash-out of their home using their existing equity, without taking on a monthly payment or having to sell their home. This loan program is available to homeowners aged 62 or older, who occupy property as their principal residence.

Amortization: The decrease in the principle owed on a home, as it decreases over the life of the loan.

Down Payment: A portion of your total home cost that is paid up-front. It can result in a smaller monthly payment and a lower principle balance.

Refinancing: There may come a time during the life of your loan that you will wish to refinance. Perhaps you want to take advantage of lower interest rates or to consolidate debt.  You have to be eligible and have a great credit standing to qualify.

For more information the mortgage process, be sure to talk with a lender or your real estate agent.