Costa Mesa Real Estate (And Beyond)


We often are asked to define “terms” we use in the industry. Here are several we hope make your transaction clearer.


ADJUSTABLE RATE MORTGAGE (ARM)- A loan in which the interest rate is adjusted periodically based on a preselected index rate.

BALLOON MORTGAGE-A mortgage note with an amortization schedule that does not extinguish the debt by the end of the mortgage term. A large (balloon) payment of the remaining balance is required at the end of the term.

CONVENTIONAL LOAN-A mortgage loan which is not insured or guaranteed by any agency of the state or federal government.

DISCOUNT POINTS-A charge calculated as a percentage of the loan amount, to compensate the lender for the difference between the stated interest rate of the loan and current market interest rates.

EQUITY-The difference between a home’s value and the mortgage amount owed on the home.

FANNIE MAE & FREDDIE MAC-The Federal National Mortgage Association (Fannie Mae) and the Federal Home Loan Mortgage Corporation (Freddie Mac) are government sponsored, privately owned entities which purchase mortgages from lenders and turn the mortgages into securities which are bought by investors. Fannie Mae and Freddie Mac are the key secondary mortgage market agencies.

LOAN TO VALUE (LTV) RATIO-The ratio, expressed as a percentage, is the difference between the loan amount and the lesser of sales price or appraised value.

PITI (PRINCIPAL, INTEREST,TAXES, & INSURANCE)-The total dollar amount necessary to cover the monthly cost of principal, interest, taxes, and insurance.

TITLE INSURANCE POLICY-An insurance policy which protects the insured from losses caused by defects in the title to the property.


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