With mortgage rates still hovering around record lows, many people are looking to purchase a new home or refinance their existing home loan. Our last post highlighted some of the most common title terms to know. We think it’s only fitting to help new and seasoned home buyers and sellers better understand terminology central to the mortgage process.
Common Mortgage Terms to Know
-Pre-qualification: The process of gaining a tentative estimation of the amount of home loan you can afford based on general financial information you provide.
-Pre-approval: The process of being approved by a mortgage lender to borrow up to a specific amount.
-Home Appraisal: Completed by a third-party professional to determine the fair market value of a home. A home appraisal also impacts the amount of money a lender will let you borrow.
-Loan Origination: The all-encompassing phases of the home loan process carried out by the lender, from the mortgage application to the relinquishment of funds.
-Loan Discount Points: Enable a home buyer to pre-pay mortgage interest to secure a lower interest rate for a loan. Every point paid down is equal to one percent of the total mortgage amount.
-Private Mortgage Insurance (PMI): A form of insurance typically associated with conventional home loans. PMI is generally obtained in cases where a borrower’s down payment is less than than 20 percent of the home’s value, and remains effectual until the LTV (loan-to-value ratio) is less than 80 percent.
-Amortization Schedule: Outlines the series of mortgage payments that are scheduled to take place over the life of a loan.
-Closing: Conclusion of the real estate transaction. Closing, also referred to as “settlement,” occurs when all documents relating to the mortgage are signed and completed, and the transfer of title (property ownership) from the seller to the buyer takes place.
-Closing costs: Fees rendered by both buyers and sellers during settlement at the close of the mortgage process.
-Fixed-rate mortgage: Financial instrument for which the interest rate remains constant (fixed) over the life of the loan (generally 15 or 30 years).
-Adjustable-rate mortgage (ARM): Mortgage for which the associated interest rate varies according to current market conditions, resulting in an increase or decrease in loan payments on a periodic basis.
-Closing Disclosure (CD) Form: Document outlaying details of the mortgage, from detailed payment information to closing costs.
For more on mortgage terms and how they may relate to the settlement process, please contact the experienced team at Linear Title & Escrow today!