Mortgage
General
General
This term refers to a specific type of loan used to purchase real estate where the property itself serves a collateral.
What is a mortgage?
In the acronym PITI, the letter P stands for this portion of the payment that reduces the original loan payment.
What is principal?
This is your total earnings on a pay stub before any taxes or deductions are subtracted.
What is gross income (gross pay)?
This 3-digit number acts as your "financial GPA" and directly influences the interest rate you are offered on loans.
What is a credit score?
Things required for basic survival (food, shelter, basic clothing) are classified as these - which must take priority over things you want in a budget.
What are needs?
This upfront cash payment made by the homebuyer is calculated as a percentage of the home's purchase price.
What is a down payment?
In PITI, the letter I represents the fee charged by the lender for borrowing money.
What is Interest?
Commonly referred to as "take-home" pay, this amount remains after all mandatory and voluntary deductions are taken out.
What is net income (net pay)?
When applying for a loan, a borrower with a higher credit score will typically receive this advantage regarding interest.
What is a lower interest rate?
If a homebuyer doesn't pay their mortgage, the lender can take legal action to reclaim the home through this process.
What is foreclosure?
This feature of a mortgage is a schedule showing how each monthly payment is split between principal and interest over the life of the loan.
What is an amortization schedule (or table)?
What are Taxes and Insurance?
Rent, car payments, and property insurance fall under this budget classification because the dollar amount stays constant every month.
What are fixed expenses?
Unlike buying a car with a loan to build equity, this arrangement lets you rent a vehicle for a set term, sometimes with mileage limits.
What is a car lease?
This financial tool helps individuals track income, savings, and spending over a specific period of time to avoid overspending.
What is a budget?
This special bank account holds funds collected monthly by your lender to pay your annual property taxes and homeowners insurance.
What is an escrow account?
Borrowers making a down payment of less than 20% on a mortgage are usually required to purchase this extra protection for the lender.
What is Private Mortgage Insurance (PMI)?
Utilities, groceries, and gas fall under this budget classification because the amounts change from month to month.
What are variable expenses?
One of the deciding factors of a credit score is looking at how well you pay your bills.
What is payment history?
This term refers to money set aside specifically to cover unexpected expenses, like sudden car repairs or job loss, typically covering 3 to 6 months of living costs.
What is an emergency fund?
This financial metric compares your total monthly debt payments to your gross montly income to evaluate borrower risk.
What is Debt to Income Ration (DTI)?
Ongoing expenses such as routine maintenance and repair are often referred to as these kind of costs of owning a home.
What are hidden costs?
This is a VOLUNTARY deduction that helps you live comfortably when you stop working.
What is a retirement deduction?
Formula for Simple interest on a loan. _____ = ____ x ____ x _____
What is I = Principal x Rate x Time?
This popular budgeting technique allocates 50% of your net income toward needs, 30% toward wants, and 20% toward savings and debt repayment.
What is the 50/30/20 rule?