6.3 Mortgage Application Process Bell Ringer

Front

What is a mortgage?

Back

A mortgage is a loan specifically used to purchase real estate, where the property serves as collateral for the loan.

Front

What are the components of a monthly mortgage payment?

Back

The components typically include principal, interest, property taxes, and homeowners insurance.

Front

How do you calculate the total monthly payment for a mortgage?

Back

Total monthly payment = (Principal + Interest + Property Taxes + Homeowners Insurance) / 12.

Front

What is APR in the context of mortgages?

Back

APR (Annual Percentage Rate) is the annual rate charged for borrowing, including fees and other costs.

Front

What is the front-end ratio in mortgage applications?

Back

The front-end ratio is the percentage of a borrower's gross monthly income that goes towards housing costs, including mortgage payments, property taxes, and insurance.

Front

How do you calculate the front-end ratio?

Back

Front-end ratio = (Total monthly housing costs / Gross monthly income) x 100.

Front

What is the significance of a down payment?

Back

A down payment is the initial upfront payment made when purchasing a home, which reduces the loan amount and can affect mortgage terms.

Front

What is the difference between fixed-rate and adjustable-rate mortgages?

Back

Fixed-rate mortgages have a constant interest rate throughout the loan term, while adjustable-rate mortgages have interest rates that may change periodically.

Front

How is total interest paid over the life of a mortgage calculated?

Back

Total interest = (Monthly payment x Total number of payments) - Loan amount.

Front

What factors can affect mortgage interest rates?

Back

Factors include credit score, loan amount, down payment, economic conditions, and the type of mortgage.