Mortgage Basics

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This is a great list of the basic terms of financing for those who are thinking of a purchase in the future.  It’s presented simply and understandably for those who are not familiar with the process.

Via Miro Fitkova (Fitkova Realty Group):


Points, fees, and adjustable rates. If you are brand new to the home buying arena, then mortgage terminology can be as foreign as reading Greek.

The famous quote by Sir Francis Bacon rings true for all prospective buyers, “Knowledge is power.” Use the following glossary of terms to help you raise your own awareness.

Underwriting: This lender process is used to determine how much of a risk you and your mortgage would be to their company. An underwriter will evaluate such things as your credit, available collateral, as well as your employment and current debts.

Points: Broken into two categories, discount and origination, this term refers to a fee paid when obtaining a mortgage.

  • Discount — These fees are tax deductible. You can assume to pay 1% of the total loan amount for each point. Paying points can reduce your final interest rate.
  • Origination — Less popular with buyers, as they offer no real benefit to the borrower, these points are fees paid to the lender or loan officer in exchange for their job of evaluating and processing your mortgage loan. These points are not tax deductible.

Fixed Rate: Your interest rate will remain the same throughout the life of the loan.

Adjustable Rate: Your interest rate is adjusted periodically. There also may be a penalty for paying off the loan before its maturation date.

Amortization: The decrease in the principle owed on a home, as it decreases over the life of the loan.

Down Payment: A portion of your total home cost that is paid up-front. It can result in a smaller monthly payment and a lower principle balance.

Good Faith Estimate: RESPA requires the lender to provide a borrower with an estimate of the fees that will be due at closing. They must provide this within three days of taking your application.

Escrow: Your funds are held in an escrow account by a third party until the closing of your transaction.

Refinancing: There may come a time during the life of your loan that you will wish to refinance. Perhaps you want to take advantage of lower interest rates or to consolidate debt. If you are eligible, in great credit standing, you may be able to do just that.

For more information the mortgage process, be sure to talk with a lender or your real estate agent and try to visit: http://realtytimes.com/c/MiroslavaFitkova 

Written by Carla Hill

 

About susanmorrison

After living in Walpole, MA for many years, our family was transferred to the west coast when I was a senior in high school. In 1983, I graduated from Mission San Jose High School in Fremont, California. I am also a 1987 graduate of Providence College with a major in liberal arts and a minor in business administration. I bring to the table many years of sales experience beginning with thirteen years in Corporate Sales at Delta Air Lines. I'm the mother of three children and I'm very active within the Franklin, MA community. I am also a cancer survivor and support the American Cancer Society Charities.

My husband and I have built five homes and I've lived in a variety of other locations including Toronto Canada, Irving Texas and my current home in Franklin, MA. As a result of all my moving around, I came to the conclusion that I was an expert at moving...why not become an expert on the other side of the table? I earned my real estate license in 2004 and believe that I have found my true niche'. I can empathize with my clients on a variety of levels; whether they are buying or selling. And, like so many other good realtors out there, I believe that possessing good communication skills is one of the many keys to success.

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