COMMON MORTGAGE TERMS

Whether you have started your homebuying process or are still considering taking the first step, you may hear a lot of different terms passed around from friends, family, real estate agents and lenders.

 

Whether you are looking for your first house or your fifth house, homebuying terms and phrases can still be confusing!  Our quick and easy guide can help you out during the process.  Below is a list of terms you want to know:

 

Appraisal:  a required property assessment completed by an independent appraiser to measure the property’s value and condition.

Amortization:  the repayment schedule on a loan, or the gradual paydown on a loan.

Closing costs:  fees associated with finalizing your loan.  Each of these fees may not apply to your unique situation, and closing costs vary and may include the appraisal fee, lender fees, credit fees, attorney fees, and more.

Debt-to-Income Ratio (DTI):  a calculation used to identify the amount of debt you have in comparison to your monthly income.  This includes all debt, not just a home loan.  The lower your DTI, the easier it can be to obtain a home loan.  You can calculate your DTI using the equation:  total recurring monthly debt / gross monthly income = DTI.

Deed:  a document that legally transfers ownership of real estate.

Down payment:  a portion of your mortgage paid upfront.  While some types of loans do not require any money down, you can often expect to pay a down payment on your mortgage.  This can be any percentage of the mortgage and helps reduce your monthly payment amount.  Down payments can show that you have money prepared to dedicate to your home loan.

Earnest money:  a deposit that ensures your sincerity about the home transaction.  The amount often varies, but it can be anything decided upon by the buyer and seller.  It may be a percentage of the home price, or it may be a specific dollar amount.  This deposit is held in an escrow account until closing, at which point it will be applied to the cash needed for closing.

Escrow:  a third-party account that holds money for taxes and insurance paid through your monthly mortgage payments.

Equity:  the amount of the home’s value owned by the homeowner, less any liens against the property.

Inspection:  an optional examination of a property that is often performed to spot any issues that did not come up during the appraisal.

Interest rate:  the price of borrowing money from a lender.  The base rate is set by the Federal Reserve and then customized per borrower based on credit score, down payment, property type, and points the buyer pays to lower the rate.

Loan Estimate or Closing Disclosure:  a document outlining the terms and costs related to your mortgage.  You will receive an initial disclosure at the time of your application, as well as an updated disclosure when any significant changes are made to your rate or terms.  Prior to closing, you will receive a final Closing Disclosure representing all the final costs, rate and terms for your loan.

Private Mortgage Insurance (PMI):  insurance designed to protect the lender if the homeowner defaults on the loan.  PMI is often paid on conventional loans where less than 20% is put down.

Pre-approval:  a step that leads into the mortgage process where documentation is officially reviewed, though a full approval comes later in the process.

Pre-qualification:  helps buyers get a sense of how much home they can afford before starting the loan process.  It is a snapshot of finances to show a preliminary budget.

Underwriting:  all your documentation is reviewed and approved or denied by the lending company based on current program guidelines.

Team Lasson is here to assist with all of your home buying needs!  If you’re considering taking the leap into home ownership in the near future, we’re here to help.  Contact us today to explore which loan program aligns best with your financial goals. 

The first step in preparing for your big purchase is to get pre-approved for a mortgage at Lake of the Ozarks.  Visit www.yourlakeloan.com or call us at (573) 216-7258 to get started today!

Michael Lasson

Senior Mortgage Banker

NMLS #:  493712

Flat Branch Home Loans – Team Lasson

2882 Bagnell Dam Blvd

Lake Ozark, MO 65049

Cell:  (573) 216-7258

Email:  teamlasson@fbhl.com

Website:  www.yourlakeloan.com

**The postings on this site are my own and do not necessarily represent Flat Branch Home Loans positions, strategies, or opinions.

Flat Branch Home Loans NMLS 224149. A Division of Flat Branch Mortgage Inc.

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