Many first time buyers struggle with the wide array of mortgage jargon and rightfully so. There are points, rates, locks and a variety of fees that all need to be navigated in order to successfully close a loan. The more you know about the loan process and the vocabulary associated with it, the more likely you are to secure the loan that is right for you. Below is a list of some of the most common terms you should be familiar with so you completely understand the conditions of your loan.
Good Faith Estimate (GFE): An itemized list of all the costs and fees associated with closing a loan. A GFE uses a standardized form and is intended to allow customers to compare the costs of one loan with another. The Real Estate Settlement and Procedures act (RESPA) requires that all customers applying for a loan receive a GFE.
Underwriting: The process by which a lender determines a borrower’s eligibility for a loan. Underwriters look at credentials such as income, credit, debt and employment.
Principal: The amount of money owed to the lender.
Amortization: The process by which the principal decreases over the life of a loan.
Down Payment: The amount of money paid upfront for your home. Larger down payments result in lower monthly payments by reducing the amount of principal owed.
Discount Points: Pre paid interest paid by the borrower to reduce the interest rate of the loan. Discount points are tax deductable and typically cost 1% of the total loan amount.
Fixed Rate: A mortgage where the interest rate remains the same for the entire life of the loan.
Adjustable Rate: A mortgage where the interest rate can adjust up or down periodically. With an adjustable rate loan it is imperative that you understand how often and by how much your rate can adjust.
Down Payment: The amount of money paid upfront for your home. Larger down payments result in lower monthly payments by reducing the amount of principal owed.
As always if you have questions about this or anything else relating to Summit County Real Estate, please feel free to contact me at any of the information below.
All the best,
Tyler MacGuire e-PRO®, SFR
Broker Associate
Omni Real Estate Company
Office: 970-468-2740
Web: www.tylermacguire.com
“Your Guide to Summit County
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