If you are new to home financing, you may be a little confused by some of the common terms that are used in the process. These common terms will help simplify getting your home loan and ensure you understand what stage you are at and what comes next.
The initial step in the mortgage process. This means you have provided basic information such as your debt, income, and assets to a lender. After evaluating this information, a lender can give you an idea of the mortgage amount for which you qualify. Pre-qualification can be done over the phone or on the internet, and there is usually no cost involved.
The second step in the mortgage process, and much more involved. You will supply your lender with all the necessary documentation for them to extensively check you financials and current credit rating. You will complete the loan application (and pay an application fee).
This is a term that means you have been promised a certain interest rate for a certain time period, usually 60 days.
Basics Of Loans
This is the amount that is owed on the loan, the actual amount financed excluding interest.
This is the amount of interest, expressed as a percentage, that you will be paying on your loan.
APR (Annual Percentage Rate):
Often confused with the interest rate, the APR is actually the yearly cost of financing the loan amount.
This is the length of time over which the loan will be repaid.
Paying off a large loan (mortgage) over a specified period of time.
This is an amount of money that a buyer can choose to pay to the lender in order to get a lower interest rate. A point equals one percent of the loan amount. This is usually paid at closing in order to get a lower rate.
Completing The Process
This is the point at which the loan is complete and the terms become active. At closing, everything will be signed and completed.
Fees and other costs that must be paid at the time the loan closes in order to make the terms active.
This is the time at which the lender actual provides the funds requested in the loan.
These are some of the most common terms you will hear as you go through the process of obtaining a mortgage. It is very important to work with a reputable lender! Ask your real estate agent for local lenders they have had a good experience with. Your lender can answer any questions regarding these or any other terms you come across to ensure you feel in control of the process and are entering your mortgage agreement with full understanding.