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A Guide To Mortgage Terminology |
By:
Hal James |
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A Guide to Mortgage Terminology
by Hal James
Whether applying for your first loan, second or refinancing, the mortgage application process can be overwhelming. Understanding the language of mortgages is a first step to understanding it.
Amortization occurs with every loan, but is a misunderstood concept. It simply refers to the repayment of the loan on a schedule. The schedule is typically monthly payments over a term of years.
If you are cash rich at the closing, you might want to investigate paying a discount point. It is the equivalent of one percent of the loan amount. By paying it, you can pay down the interest rate on the loan and save money over time.
A 203(k) loan is one of those unique government programs found in the mortgage world. It is a FHA loan that combines the cost of purchasing the home with rehabilitating it. All and all, it is usually a very good deal.
Refinancing is one of those terms that sound fairly basic. It is. One refinances to pull cash out of equity or just to get a better interest rate or monthly payment. Be aware, however, that your original loan may have a pre-payment penalty.
If you get into trouble trying to pay your mortgage, it is important to understand a lender does not want to foreclose. If you communicate with them, they will often give you a special forbearance that lowers or eliminates payments for a period of months.
The mortgage industry is full of terms that sound rather drastic such as underwriting. This simply refers to the evaluation process by an underwriter at the lender. These days, it is often a piece of software. It takes all your information, crunches the number and approves or rejects the loan.
Lenders evaluate potential borrowers in many different ways. The loan-to-value ratio is one of them. It is the requested loan amount divided by the appraised value of the property.
Timing is a big issue in the world of mortgages. Specifically, rates change on a daily basis. To avoid this problem, you want to ?lock in? your interest rate when a lender approves you. The cost is usually a few hundred dollars.
Private mortgage insurance is an annoying aspect of buying a home. It protects lenders from some of the losses that can happen if a borrower defaults, but the borrower is required to pay for it! Put more than 20 percent down and you can avoid it.
Obviously, this represents only an introduction to the terminology of the mortgage industry. That being said, you can cut down on the confusion associated with it if you simply take the time to learn the language.
Get more information on mortgage loans at FSBOAmerica.org. You are welcome to reprint this article - but get your own unique content version here.
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Article Source: http://www.statssheet.com/articles/article53832.html |
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