Annual Percentage Rate (APR)
Amount of interest charged on your loan every year.
Usually comprised of between 2-5% of the total purchase price of the home.
A loan not guaranteed or insured by the federal government. These borrowers usually make larger down payments (at least 20%), don’t require mortgage insurance, and are at a lower risk of defaulting on their home loan payment.
Also known as mortgage points. They’re fees homebuyers pay directly to the lender at the time of closing in exchange for reduced interest rates which can lower monthly mortgage payments.
Federal Housing Administration (FHA)
Have been around since 1934 and are meant to help first-time homebuyers. The FHA insures the loan, making it easier for lenders to offer the homebuyer a better deal, including a lower down payment (as low as 3.5% of the purchase price), low closing costs, and easier credit qualifying.
One of the most common types of loans. It comes with an interest rate that stays the same for the lifetime of the loan, and provides the borrower with more stability and predictability over the lifetime of their loan.
In real estate, the lender refers to the individual, financial institution, or private group lending money to a buyer to purchase property with the expectation the loan will be repaid with interest, in agreed upon increments, by a certain date.
Assist the homebuyer with purchasing or refinancing a home. Loan officers are often employed by larger financial institutions and help borrowers choose the right type of loan, compile their loan application, and communicate with appraisers.
Agreement between a borrower and a lender giving the lender the right to the borrower’s property if the borrower is unable to make loan payments (with interest) within an agreed upon timeline.
Works directly with a lending institution to provide mortgage funds to a borrower. They can only obtain funds from a specific institution and are responsible for each part of the mortgage process, including property evaluation, financial due diligence, and overseeing the application process.
Shops several lenders, acting as a middle man between lending institutions and the borrower. A broker can compare mortgages from several different institutions, giving the borrower a better deal.
If a homebuyer makes a down payment of less than 20% of the purchase price of a home or is the recipient of an FHA or USDA loan, they’ll usually be required to pay mortgage insurance. It lowers the risk of a lender giving you a loan, but it also increases the cost of the loan.
Stands for principal, interest, taxes, and insurance, and refers to the sum of each of these charges, typically quoted on a monthly basis.
Before submitting an offer on a home (or even engaging with a real estate agent) you’ll likely be required to get pre-approved. This means a lender has checked your credit, verified your information, and approved you for up to a specific loan amount for a period of up to 90 days.
Unlike pre-approval, pre-qualification is more of an estimate of how much you can afford to spend on a home.
It allows borrowers to lock in an advantageous interest rate before a real estate transaction closes. A rate lock allows the borrower to lock in that interest rate for a specific period of time protecting them from market fluctuations.
Replaces an existing loan with a new one. Debt is not eliminated when a borrower refinances. Instead, it typically offers better terms, including a lower interest rate, lower monthly mortgage payments, or a faster loan term.
Service members, veterans, and eligible surviving spouses can receive home loan guarantees provided by private lenders. The Department of Veteran’s Affairs guarantees a portion of the loan, which leads to more favorable terms for the borrower.