The ABC’s of Mortgages
Sometimes it can feel like those in the mortgage industry are speaking a different language! This can be intimidating. So, I’m sharing some key words… and not so key ones. I thought we would take each letter and create the “ABC’s of Mortgages”. Don’t you worry, it’s not like there is a quiz at the end! Buckle up with me, here we go!
Amortization
Making the payments necessary to cover the principal (actual loan amount) and interest, which will add up to pay off the total commitment at the end of the agreed upon time.
Borrower
The person who, get this, is borrowing the money! The person who is approved to receive the loan and is also responsible to repay the loan and any fees related, this person is the borrower.
Closing
The formal name for the meeting where the funds and property are exchanged. The buyer, seller, and closing attorney are required to attend this meeting and typically, your mortgage banker will attend.
Debt to Income Ratio
The borrower’s monthly payment obligations (bills) divided by their monthly income (paychecks), gives you a percentage. This percentage is the Debt to Income Ratio.
Equity
The difference between the amount your home is worth, based on the fair market value (not what your heart says it’s worth), and the amount of the loan, not including interest or other fees.
Fair Market Value
The value of a home based on what a knowledgeable, unpressured and willing person would pay for the home. This doesn’t take into consideration current market situations—so just because it is a sellers’ market, the fair market value of your home won’t go up.
Glossary
A list of terms that are specific to a subject or industry. Like this one on our website… http://www.smcapproved.com/glossary/
Hazard Insurance
A type of insurance that covers property damage from storms, wind, fire, and other similar risks.
Interest Rate
The amount charged, written as a percentage of the principal (actual loan amount), by a lender to a borrower for allowing the borrower to use their money to pay for their loan.
Jumbo Loan
This loan is primarily used for luxury properties and is considered a jumbo loan because its amount is higher than the limits set by the Federal Housing Finance Association, for home financing.
Knowledge is Power
Keep going! After all, as Ralph Waldo Emerson says, “there is no knowledge that is not power.”
Loan to Value (LTV)
A percentage calculated by dividing the amount borrowed by the price of the home. Usually when you see this it is to provide a maximum percentage amount the lender is willing to offer the buyer. For example, if a home is $100,000.00 and the LTV of the loan you are interested in is 95% then the maximum amount the lender would be able to offer you is $95,000.00.
Mortgage Insurance
An insurance policy that protects lenders, just in case the borrower defaults or doesn’t pay on a loan. Mortgage Insurance can be required with certain loan types.
Notary Signing Agent
This person is a notary public who facilitates loan closings and specializes in the process of getting all the signatures of the parties involved in the property transaction and notarizing them.
Origination Fee
The amount charged by the lender to off-set the costs of preparing the loan documents and other loan maintenance.
Principal
The amount that is borrowed. The principal amount excludes interest and fees.
Queen Latifah
Guess who owned a six-bedroom castle in New Jersey but sold it and moved because she was spending more time in California, according to New York Daily News. You got it! Queen Latifah!
Is your commute too far? Talk to one of our loan officers to see what you can pre-qualify for and cut that commute time down!
Recording Fees
No, not the fees Queen Latifah pays to record albums. In this case recording fees is defined as the money paid to the lender for recording the home sale to make it public record.
Survey
A measurement of land that shows its location and dimensions, as well as, the locations and dimensions of any buildings.
Title Search
A check of public records to make sure that the seller is truly the legal owner of the property and there aren’t any unsettled claims or liens against it.
Underwriting
This is the process where a person designated as the underwriter determines how much risk the lender is willing to accept. They will take into consideration both the property and the borrower.
Verification of Employment (VOE)
A document created and signed by the borrower’s employer that confirms their position and salary.
Walk Through
This is the final inspection of the home before closing—it is your last chance to catch things that need to be fixed!
X-Mark Signature
Due to illiteracy or disability, a person may be unable to write their full signature and confirm they have reviewed and approved the document; there is the option for an x-mark signature. However, this signature must be witnessed.
Yolo
Common slang term that stands for “You Only Live Once”; it is meant to encourage people to get out and follow their dreams. If you would like to achieve your dream of home ownership, contact one of our loan officers: www.smcapproved.com
Zero Money Down
This means that there is no down payment required for your loan. These can be difficult to find because most loan programs require an LTV (you learned this word, remember?) of less than 100%.
Thanks for sticking with me through the ABC’s of the Mortgage Industry! The good news is that you don’t HAVE to know all of these words because there are loan officers who would love to help you navigate the world of the mortgage industry but isn’t it kind of fun to speak a different language?
Source: http://www.smcapproved.com/glossary/
http://www.nydailynews.com/life-style/real-estate/queen-latifah-sell-castle-article-1.1565767