Completing the home loan process will be complicated, especially with tons of loan-specific terminology. Familiarizing yourself with common mortgage terminology will facilitate the process. In this article you will find guidance on common mortgage terminology.
Common Mortgage Terminology
Pre-approval
A pre-approval is a letter written by a loan originator indicating the home price and type of loan that a home buyer might be approved for considering their income, monthly expenses, and credit rating. This is different from a pre-qualification, which is simply an “unconfirmed” estimate. Actual approval is usually provided after a buyer finds a specific home.
Loan Commitment
Once a home buyer finds a property, a lender carefully reviews all of a personal paperwork and the data on the property. A mortgage commitment is later provided to verify that the general requirements are approved and that the loan will be officially authorized pending minor requirements.
Appraisals
An appraisal is mandated by a home mortgage provider to confirm the value of a home. It must be completed before a loan commitment or approval.
Closing Items
Closing Costs
There are a standard set of charges in connection with the transfer of real estate. These are called closing costs. They can include broker commissions, transfer fees, mortgage fees, legal charges, title insurance, and municipal recording charges. Pre-paid expenses such as property taxes are often also lumped into the closing cost category, but they are officially a different class of expense due at closing.
Title Insurance
Title insurance relates to issues with the ownership trail and the fees related to protecting your ownership. Although title searches are ordered prior to a property transfer, there may be issues that affect your ownership to a home that are not clearly uncovered in a title search. Title insurance is a one-time bill that remains valid for the length of time that you remain the owner of a home.
Mortgage Insurance (MI)
MI is an acronym for mortgage insurance and is usually charged on mortgages with lower than a 20% down payment. There is commonly an up-front fee and a recurring bill, both based on the beginning loan amount. How long MI is payable depends on the specific program.
Additional Guidance On Common Mortgage Terminology
This article includes guidance on common mortgage terminology. There may be other phrases that you need to understand while applying for a mortgage or purchasing a home. For additional information, contact Troy Richardson at 802-447-3210 or kathy@kathysollien.com.
