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Mortgage FAQ

Q: Why am I receiving all these mortgage solicitations?
A: Good question! First of all, you should read the fine print to see what company is sending the solicitation. Many use your current lender's name in the letter to gain your trust. This information is easily obtained from public records, where mortgages are recorded. Because mortgage lending has become so competitive, lenders may quote a rate that sounds low until you ask the right questions. Here are some questions you should ask:
  1. What is the APR on the rate you are quoting? The Annual Percentage Rate (APR) is an indicator of the rate plus fees, and that's what you should use when comparing interest rates to avoid lenders who quote a low rate but make up for it with excessive fees.
  2. Is the rate fixed? Some of the low- rate offers are fixed for a short time, applied to interest only or involve prepayment penalties or other fees.
If you receive one of these solicitations and have questions, please call us. It's always best to work with a lender you know and trust. 121 Financial offers a variety of mortgage loans, as well as professional guidance through the mortgage process.

Mortgage Terms

Click the word to view its definition.

Adjustable Rate Mortgage (ARM)
A mortgage in which the interest rate changes periodically, according to corresponding fluctuations in an index.
Amortization Schedule
A table showing the amounts of principal and interest due at regular intervals and the unpaid balance of the loan after each payment is made. It also shows the gradual decrease of the loan balance until it reaches zero.
Draw Period
A set period of time in which the borrower may obtain advances on their open-end home equity line of credit loan.
Escrow
An account established to hold payments for property taxes, homeowner's and flood insurance and private mortgage insurance.?The lender pays the tax and insurance bills from this account.?(More info on escrow accounts can be found under our FAQ's)
Index
A regularly published measure of widely accepted interest rates which change periodically.?For example, we use the Prime rate as the index for our Home Equity Lines of credit.
Loan-to-value ratio (LTV)
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).
Margin
The amount that is added to an index to create the interest rate for a variable rate loan.
Mechanics Lien
A type of lien placed against property when a construction worker has done work on the property and has not been paid.?Mechanics include plumbers, electricians, roofers, and a wide variety of others who build or repair homes.
Prepayment Penalty
A penalty some lenders charge for paying a loan off early.?Check to see if a loan has a penalty and how long it will be in effect.?If you plan to make payments before they are due, or think you might sell your home before the loan is paid off, a penalty could be costly to you.
Right of Rescission
Also known as right to cancel. When a mortgage is taken on a member's principal dwelling (except to purchase the property), all parties on the deed have the right to rescind, or cancel, the transaction.?The rescission period is three business days and does not include Sundays or federal holidays.
Secondary Mortgage Market
The buying and selling of existing mortgages or mortgage-backed securities.?This practice replenishes funds for additional mortgage lending by those institutions participating in the primary mortgage market.?Fannie Mae (FNMA) is a major participant in the secondary mortgage market.
Subordinate Lien
A lien that is "junior" or inferior to a lien of another party.
Title Insurance
Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
Title Search
A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.