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Understanding the technicalities of the mortgage industry can be exhausting. At The Reichert Mortgage Team, we want you to be as comfortable and informed as possible, which is why we’ve compiled a list of the primary terms that you’ll hear during the home loan process. Review these terms and contact us if you have any questions!
The time between changes in interest rates in an adjustable rate mortgage (ARM).
A mortgage with rates that vary up and down from year to year. These are usually combined with periods of fixed rates such as 7/1, 5/1, and 3/1, in which the first number is the amount of years on a fixed rate while the second number is how often the rate is adjusted consecutively.
The entire cost per year a homebuyer spends, including the interest rate along with any other associated fees.
Refinancing the value of your home based on appreciation by borrowing more than you currently owe to receive a cash benefit.
The final step of the mortgage process, before the buyer owns the home. Final paperwork is signed, while the homebuyer provides two forms of identification.
Fees paid at the end of the purchasing process, usually around 2-5% of the home’s total value.
A loan that conforms to the regular standards of government sponsored entities.
A value equal to one percent of the loan amount. Points can be used to lower to interest rate, but may add fees at closing.
The initial sum of money owed to the lender, anywhere between 3.5-20%.
A government loan insured by the Federal Housing Administration to homebuyers with a credit score above 580, featuring competitive interest rates.
A homebuyer who has never taken out a mortgage before. Because of this, they may qualify for special rates.
A mortgage with a consistent yearly rate agreed to by the lender and the homebuyer, usually in periods of 30, 20, 15, or 10 years.
Insurance which adds extra coverage in the event of damage to the home. Some lenders may require this, or it may provide discounts for the homebuyer.
A loan in which the price of the home exceeds the limit of $453,100, which may incur higher interest rates or extra fees.
The agreement between the lender and homebuyer stipulating the loan cost, period, and any requirement that must be met.
A total summary of the costs of the loan, provided to the homebuyer three days after the application is submitted.
The time the homebuyer has in order to pay back the loan, usually 30, 20, 15, or 10 years.
The stage in the mortgage process in which the lender examines the homebuyer’s credentials. If the homebuyer is accepted, the lender formulates a loan approval letter stating that the homebuyer qualifies for a loan of a certain amount.
The time set in which interest rates cannot change due to market fluctuation.
Professionals who assist homebuyers in finding and approving the correct type of loan for each homebuyer.
A fee covering the costs of processing the loan when both parties enter into a loan agreement.
Fees for paying the loan off early.
The contract signed when the seller and buyer agree to the offer made, including contingencies such as house inspections or repairs
Replacing an old mortgage with a new one in order to receive more competitive rates.
The behind the scenes processing of a loan. The underwriter checks for accuracy within the application, along with the homebuyer’s eligibility. Ultimately, the underwriter approves or rejects the loan, sometimes with conditions.
A government loan available to qualifying active duty or veteran service members with competitive APR rates.