If you’re navigating a mortgage for the first time, there’s probably a lot of jargon that you find confusing. What are closing costs? What is APR? Before you make these big financial decisions, it helps to know just what exactly you’re getting into. In today’s post, we will talk about important mortgage terms to know so you can be prepared to navigate the waters of mortgages with the knowledge of the correct terms. There are a lot of terms that come up during the process of a mortgage. While this post won’t address every term, it will address some of the more common ones. As always, if you have questions, we want to help, so give us a call!
APR: Annual Percentage Rate
This is like your interest rate, but also includes other fees throughout the year. It doesn’t list a monthly bill, because it doesn’t include the principal. Rather it just gives you an idea of what your interest cost will look like.
Agreement of Sale
Basically it’s a contract to buy a house.
This allows the lender the ability to demand repayment of the loan if the borrower does something wrong, such as violating another clause.
Houses are expensive. Not only for their ticket price, but also for other fees, such as closing costs. These are the costs associated with the actual selling/buying of a home. Don’t worry- you might not have to pay these all on your own. Sometimes the seller will help, too. According to Zillow, these closing costs typically make up between 2 to 5% of the home’s purchase price.
Fixed Rate and Adjustable Rate
Check out our blog post about Fixed or Adjustable Rate Mortgage to learn more about what these terms mean and how they apply to you.
Buying a house isn’t a simple process. Even if you find a house you like, you have to start with the application process. This will include filling out a form that gets everything going, including home appraisals and credit reports.
How much a property (home) is worth. There’s normally fees that go along with this appraisal process.
This refers to a payment that is more than 30 days late.
Initial Interest Rate
This is the rate at the start of your mortgage. Sometimes this is just a teaser, so it’s important to make sure that you know the full conditions.
Basically a mortgage loan held by a third party, which takes effect when specific conditions have been met.
This is a kind of complicated term, but it basically means that for a short term (like 5 to 7 years), you have normal payments on a mortgage (like you would for a 30 year term mortgage), but then at the end of those 5 or 7 years, you have to pay the rest of the mortgage off in full.
So here’s a few terms to get you started, but this isn’t quite all you’ll need to know in order to get a mortgage. If you’re interested in learning more about the mortgage process, give us a call and we’ll be happy to answer questions and help you through the process!