Home Loan

Details

Pre Approval

A pre approval is a document that tells you how much you can afford to take out in a home loan. When you apply for a preapproval, your lender will ask you about things like your credit score, income and assets. Your lender will then use this information to tell you how much you qualify for in a home.

Adjustable-Rate Mortgage (ARM)

“An adjustable-rate mortgage (ARM) is a type of loan with an interest rate that varies depending on how market rates move. When you sign up for an ARM, you first get a short period of fixed interest” – the introductory period. “After the introductory period expires, your interest rate will follow market interest rates.

Amortization

Home loan amortization is the process of how payments spread out over time. When you make a payment on your mortgage, a percentage of your payment goes toward interest and a percentage goes toward your loan principal. An amortization schedule can reflect consistent monthly payments and keep you on track to pay off your loan within the term.

Annual Percentage Rate (APR)

Annual percentage rate (APR) is the interest rate you’ll pay on your loan annually plus any additional lender fees. You’ll usually see APR expressed as a percentage. You may see two interest rates listed when you shop for a loan. The larger number is always your APR because it includes fees.

Appraisal

An appraisal is a rough estimate of how much your home is worth. Mortgage lenders require that you get an appraisal before you sign on a home loan. The appraisal assures the lender that they aren’t loaning you more money than what your home is worth.

Assets

In the context of a mortgage, an asset is anything that you own that has a cash value. When you apply for a mortgage, your lender will want to verify your assets. This is to ensure that you have enough money in savings and investments to cover your mortgage if you run into a financial emergency.

Balloon Loan

A balloon loan, or balloon payment mortgage, gets its name from the large size of its payments. It’s a type of financing that requires a lump sum to be paid at some point in the mortgage term – most commonly, at the end. With a balloon loan, you choose to pay an interest-only mortgage or one that includes both principal and interest payments.

Closing Costs

Closing costs are settlement costs and fees you pay to your lender in exchange for finalizing your loan. Some common closing costs include appraisal fees, loan origination fees and pest inspection fees. The specific costs you’ll need to cover depend on your location and property type, which usually equal 3% – 6% of the total value of your loan.

Closing Disclosure

A Closing Disclosure is a document that tells you the final terms of your loan. This document includes your interest rate, loan principal and the closing costs you must pay. Your lender is legally required to give you at least 3 days to review your Closing Disclosure before you sign on your loan.”

Conventional loan

A conventional loan means your mortgage isn’t part of a government program. There are two main types of conventional loans: conforming and non-conforming. A conforming loan follows guidelines set by Fannie Mae and Freddie Mac such as maximum loan amounts while a non-conforming loan can have more variability on eligibility and other factors.

Debt-To-Income (DTI) Ratio

“Your DTI is equal to your total fixed, recurring monthly debts divided by your total monthly gross household income. Mortgage lenders look at your DTI when they consider you for a loan to make sure that you have enough money coming in to make your payments. Most lenders cater to applicants who have a DTI of 50% or lower.

Deed

A deed is the physical document you receive that proves you own your home. You’ll receive your deed when you close on your loan.

Discount Points

Discount points are an optional closing cost you can pay to “buy” a lower interest rate. One discount point is equal to 1% of your loan amount. The more discount points you buy, the lower your interest rate will be.

Down Payment

Your down payment is the first payment you make on your mortgage loan. You’ll usually see your down payment listed as a percentage of your loan value. Most loan types require some kind of down payment, but some types of government-backed loans may even allow you to buy a home with no down payment.

Earnest Money Deposit

An earnest money deposit is a check that you write to a seller when you make an offer on a home. An earnest money deposit tells the seller that you’re serious about buying their home. If the seller accepts your offer, your earnest money deposit goes toward your down payment at closing.

Escrow

Most people who have a mortgage have an escrow account where their lender holds money for property taxes or homeowners insurance. This allows you to split taxes and insurance over 12 months instead of paying it all at once. Your lender may add escrow payments to your monthly mortgage dues along with principal and interest payments.”

FHA loan

You may qualify for an FHA loan with a down payment as low as 3.5%, even if your credit is less than perfect. These loans are typically easier to qualify for than conventional loans because they’re insured by the Federal Housing Administration. FHA loans can be helpful for first-time homebuyers, but you don’t have to be a first-time buyer to qualify.

Fixed-Rate Mortgage

“A fixed-rate mortgage has the same interest rate throughout the term of the loan. Homeowners who choose a fixed-rate term often believe that rates will rise over the course of their loan and want the stability and predictability this type of loan provides.

Home Inspection

An inspection tells you about specific problems in the home. An inspector will walk around the home you want to buy and test things like the heating and cooling system, light switches and appliances. They will then give you a list of everything that needs to be repaired or replaced in the home.

Homeowners Insurance

Homeowners insurance is a type of protection that compensates you if your home gets damaged during a covered incident. In exchange for coverage, you pay your insurance provider a monthly premium. You’re not legally required to get homeowners insurance to own a home. However, your mortgage lender may require you to maintain at least a certain level of coverage for the life of your loan.

Principal

Your principal balance is the amount that you take out in a loan. For example, if you buy a home with a $150,000 loan from your lender, your principal balance is $150,000. Your principal balance shrinks as you make payments on your loan over time.

Private Mortgage Insurance (PMI)

Private mortgage insurance (PMI) is a type of insurance that protects your lender in the event that you default on your loan. Your lender will usually require you to pay PMI if you have less than a 20% down payment. You have the option to remove PMI from your loan when you reach 20% equity in your property.

Property Taxes

You’ll be required to pay property taxes to your local government. The amount you pay in property taxes depends on your home’s value and where you live. Property taxes fund things like police departments, roads, libraries and community development.”

RD Loan

An rd loan may be an option for people with low-to-moderate incomes who live in rural areas. They can be attractive because they offer zero down payments, but you’ll have to pay an upfront fee and mortgage insurance premiums.

Real Estate Agent

“A real estate agent is a local property professional who can help you shop for a home more effectively. Real estate agents can show you homes in your price range, draw up offer letters and work with sellers to get you a great deal on a home. In exchange for working with you, your real estate agent takes a commission from your home sale or purchase.

Refinance

Refinancing happens on an existing mortgage. Essentially, you trade the original debt obligation in for a new one. Refinancing is beneficial for borrowers to create a more convenient payment schedule, a lower interest rate or a different term. When considering refinancing on your mortgage, consider the closing costs associated with getting a new loan.

Seller Concessions

Seller concessions are clauses in your offer that ask the seller to pay certain closing costs.The seller can reject your concessions or send you a counteroffer with concessions removed. Limitations on the percentage of your closing costs sellers can cover varies by property type.

Term

Your mortgage term is the number of years you’ll pay on your loan before you fully own your home. The most common mortgage terms are 15 years and 30 years, but some lenders offer terms as short as 8 years.

Title

A title is proof that you own a home. Your title includes a physical description of your property, the names of anyone who owns the property and any liens on the home. When someone says that they’re “on the title” of a home, it means that they have some kind of legal ownership of the property.

Title Insurance

Title insurance is a common closing cost. You buy title insurance to protect yourself against outside claims to your property. You make a single payment at closing that protects you for as long as you own the home.”

VA Loan

VA loans are made to eligible borrowers by private lenders but insured by the Department of Veteran Affairs. You may be able to make a low down payment (or even no down payment). You’ll probably have to pay an upfront fee at closing, but monthly mortgage insurance premiums aren’t required.

Contact a lender for more information at (479) 621-6800!