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CONFUSED BY ALL OF THOSE MORTGAGE LOAN WORDS?
(HERE ARE A FEW WORDS THAT EVERY POTENTIAL HOME BUYER SHOULD KNOW.)
Are you thinking about buying a home? In the middle of applying for your first home mortgage? Not understanding all of the weird mortgage loan words that are being spoken to you? Then you are not alone as many of us that have purchased a home or applying for our first home mortgage feel the same way that you do.
Buying your first or even your second mortgage loan can be a very stressful and confusing time for any borrower. As most of us, if not all of us would like to know and be educated and be able to understand the terms that our realtor is throwing at us. As most of the time if you don’t specially ask them to explain every word and detail they will review things with you at their pace. It would be a good idea for you to educate yourself by going down to your local library or bookstore and purchase a book about home mortgage loans. You are going to want and do everything that you need to do to save you money now and over for the next thirty years.
Knowing the definition of all of the key mortgage loan words will be beneficial to all potential home buyers. Below are a few definitions to assist you in your mortgage loan process.
CLOSING COSTS – The total dollar amount that will cost the borrower when transferring ownership towards the new property for your home mortgage.
APPLICATION FEE - This is the amount that the lender will charge you to process your mortgage loan application to purchase your house while using their services.
APPRAISAL FEE – This is the amount that states the value of your potential property for your mortgage loan process. Usually an outside source will evaluate the home estimated costs is $200-$500.
ALTERNATIVE MORTGAGE – This will be anything other than a standard fixed rate mortgage loan, which can include reverse, jumbo, and adjustable mortgages for your home mortgage loan.
LOAN ORGINATION FEE – This is a charge that a lender charges for underwriting your mortgage loan.
INTEREST ONLY LOAN – This has been a very popular mortgage loan. Where you make your repayment that just covers the interest on your home which doesn’t cover any of the principal on your mortgage loan. Now remember, your payment will not decrease as you make your payments and this usually is good for 1 – 5 years.
LOAN PROCESSING FEE – This is a charge that your lender charges for compiling all of your paperwork in order to process your mortgage loan which estimates to be about $300.
INCOME VERIFICIATION – This is the process that all required income documents be provided in order to process your mortgage loan and your eligibility.
FIRST MORTGAGE - This stands for the primary loan on your mortgage which has a priority over others.
MORTGAGE BANKER – This consists of a person or company that originates home mortgages and sells them to potential investors.
PITI – This stands for your mortgage payment, principal, interest, taxes, and insurance.
PRINCIPAL – This is the actual amount that you are borrowing for your mortgage loan that you owe.
SECOND MORTGAGE – Means that you have used your home as collateral to secure another loan for money.
ADJUSTABLE RATE MORTGAGE, ARM – This is when your interest rate on your mortgage loan changes with the standard financial index does. ARMs usually offers a lower interest rate, but at the same time it could be raised at anytime to your mortgage payment. Just remember there are caps on how much they can actually raise or lower it during the length of your loan. So, do your research and make sure this it for you.
BALLOON PAYMENT – This is where the mortgage loan payments are not paid in full for the principal. At the end of your mortgage loan term you must either pay it in full or refinance your mortgage.
COMMITMENT FEE – This is an exchange of money promised from the borrower to the lenders to repay on said terms. When requesting an extension for the mortgage loan approval process for about 30-60 day period.
FIXED RATE MORTGAGE – For the duration of your mortgage your interest rate will remain the same. You can also shop around for the lowest possible interest rate for your mortgage.
CO-SIGNER – This is an additional person that signs on the mortgage loan document that will take full responsibility if the first borrow fails to comply. Most use a co- signer if their credit is poor and their financial situation is not enough to qualify for a mortgage loan.
DEBT TO INCOME RATIO – This is the amount of your pre-tax dollars versus your monthly expenses. Lenders look at this to see if you have the ability to pay your monthly mortgage.
FIXED RATE OPTION – This is the home equity credit line that the borrower can specify the payments and interest on their portions of the mortgage balance.
POINT – Is a way of measuring your fees that are related to your mortgage loan, which the point should equal to about 1% of your mortgage loan.
MORTGAGE INTEREST EXPENSE – This is the interest that you have paid on your mortgage loan that is fully deductible when you file your taxes at year end.
At the title company is where you will sit down and sign for your new home, there are going to be many pages that will talk all about your home mortgage loan, all of the fees that make up your mortgage loan and anything else that is relevant to the purchase of your new home. As this is a very stressful time you will benefit from educating yourself in knowing ahead of time all of the mortgage loan words. Just remember that all of your hard work will pay off when you are given the keys to your new home. |
