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    Common Mortgage Terms

    Annual Percentage Rate (APR) 

    Amount of interest charged on your loan every year. 

     

    Closing Costs  

    Usually comprised of between 2-5% of the total purchase price of the home.  

     

    Conventional Mortgage 

    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. 

     

    Discount Points 

    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 lower down payment (as low as 3.5% of the purchase price), low closing costs, and easier credit qualifying. 

     

    Fixed-Rate Mortgage 

    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. 

     

    Mortgage Lender 

    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. 

     

    Loan Originator 

    Also known as Loan Officers, assist the homebuyer with purchasing or refinancing a home. Loan Originators are often employed by larger financial institutions and help borrowers choose the right type of loan, compile their loan application, and communicate with appraisers. 

     

    Mortgage 

    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. 

     

    Mortgage Banker 

    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. 

     

    Mortgage Broker 

    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. 

     

    Mortgage Insurance 

    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. 

     

    PITI 

    Stands for principal, interest, taxes, and insurance, and refers to the sum of each of these charges, typically quoted on a monthly basis. 

     

    Pre-Approval 

    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. 

     

    Pre-Qualification 

    Unlike pre-approval, pre-qualification is more of an estimate of how much you can afford to spend on a home. 

     

    Rate Lock 

    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. 

     

    Refinance 

    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. 

     

    VA Mortgage 

    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. 

     

     

     

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