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Common Mortgage Terms to Know Before Meeting Your Broker

Common Mortgage Terms to Know Before Meeting Your Broker

By Homeland Lending, Posted in Mortgage Advice
On December 04, 2018

Obtaining a mortgage can be confusing, and there may be many common mortgage terms that you aren’t familiar with. Preparation prior to meeting with your mortgage broker will help you understand the terms of your mortgage more clearly, and help you to ask better questions. Protect and educate yourself by learning these common mortgage terms to know before meeting your broker.

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Adjustable Rate Mortgage vs. Fixed Rate Mortgage - An adjustable rate mortgage will change the interest rate after a set period of time. A fixed rate mortgage will keep the same interest rate throughout the term of the loan.

Annual Percentage Rate (APR) - The rate of interest paid to the lender of your mortgage.

Amortization - The schedule of payments to be made to repay the loan, including interest, broken down by monthly payment.

Appraisal - The estimated value of a property assessed by a professional who will consider physical property and comparable properties.

Bi-Weekly Mortgage - Pay off your mortgage more quickly by paying half of a monthly payment every two weeks for an additional monthly payment per year.

Closing Costs - Costs the buyer pays during mortgage lending process – this includes attorney fees, recording fees, and other fees.

Debt-to-Income Ratio - This is a way of looking at your income to determine loan eligibility. Lenders will look at your total debt obligation in comparison to your income to determine how much mortgage you can afford.

Down Payment - This is the initial payment made on a property, usually a specific percentage of total purchase price as specified by lender.

Equity - The difference between the loan and the value of the property. In a sense, it’s the portion of the property you own.

Escrow - Typically your lender will take care of the real estate taxes, but they will be paid from money put in escrow at closing and from monthly payments. This money is held and managed by the lender.

Good Faith Estimate - An approximation of what will be required at closing; this figure is usually not an exact amount.

Homeowners Insurance - If you have a mortgage, you will be required to keep homeowners insurance listing the lender as the payee.

Origination Fee - This fee is paid at the time of application for a mortgage, and covers application fee, appraisal fee, and other work required to close the loan.

Points - These are the percentage points of the loan. Your lender may allow you to lower your interest rate by paying a point up front. This will save you money if you stay in the house for the life of the loan, but if you move quickly, it will end up being a waste of money.

Principal - The amount of money borrowed for the mortgage.

Settlement Costs - Final, agreed-upon closing costs

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