Popular Mortgage Terms Explained
You’re considering buying or selling a home in the near future and are wondering how you can get prepared. Maybe you’ve even done some research online or started interviewing real estate agents and lenders. Soon you will realize that the world of lending, home buying and selling comes loaded with lots and lots of buzzwords. There’s just no way to avoid it. So to get yourself fully versed in all things real estate, you’ll want to get quite familiar with this list of top buzzwords:
1) Adjustable rate mortgage (ARM) and fixed rate mortgage – when applying for a loan, you’ll learn more about adjustable rate mortgages (ARM) and fixed rate mortgages. An ARM is a loan that has a set interest rate for a predetermined amount of time, and then adjusts on a regular schedule. A fixed rate loan is one where the interest rate remains fixed for the entirety of the loan.
2) Escrow – if a third party holds property, cash, and the property title until all conditions of the property agreement have been satisfied, this is call escrow. The third party is likely a lawyer and will then hand over the assets to the respective parties, as outlined in the agreement.
3) Fannie Mae/Freddie Mac – Fannie Mae and Freddie Mac are two government sponsored enterprises that buy mortgages from lenders in order to promote stability and home affordability in the market. Fannie Mae is short for The Federal National Mortgage Association and Freddie Mac is short for the Federal Home Loan Mortgage Corporation.
4) Closing – the last thing you’ll do with a real estate loan is close. The closing is when you sign all final documentation related to your loan. You will pay for your closing costs and hand over your down payment in the form of a certified check.
5) Down Payment – your down payment is the amount of money you are bringing to the closing table to pay upfront for your new home. This needs to be in the form of a certified check or wire.
6) Points – mortgage points are upfront charges the lender may add to a mortgage. One point equals one percent of the total loan amount and a homebuyer may choose to pay points to lower their interest rate.
7) Amortization schedule – amortization means to reduce debt. When obtaining a loan, an amortization schedule is created to show how debt is paid over the life of a loan based on how much interest and principal is paid.
8) Prequalification – when a borrower is prescreened by a lender for a loan, this is considered a prequalification. This is only informational and not an obligation from the lender.
9) Pre-approval – different from a prequalification, a pre-approval from a lender locks in an interest rate for a specific loan amount and requires a borrower’s credit report and score.
10) Underwriting – underwriting is the process a lender goes through to determine whether or not to extend credit to a borrower. A lender will look at the borrower’s credit score, credit history, income and other debt obligations as well as property value.
If you’re ready to talk to a trusted lender to better understand your loan options, don't heitate to visit our website at www.mhlmtg.com, or contact one of our licensed loan officers here at 1-877-546-2145.
Contact us today and let us help you find the lowest rates