Wednesday, March 9, 2016

Making Sense of Mortgages

Often one of the most intimidating parts of the home buying process is applying for a mortgage.  To help diffuse some of the mystery surrounding this step, we've provided definitions for some of the most commonly used mortgage terminology.
  • Adjustable Rate Mortgage (ARM) - A type of loan where the interest rate changes periodically based on a standard financial index
  • Closing Costs - Costs to both the buyer and seller that occur during the home buying process. This includes items such as fees, insurance, escrow and taxes
  • Down Payment - A portion of the purchase price of the home that is paid up front without financing
  • Escrow - An account where money for taxes and insurance is held until it needs to be paid
  • Fixed Rate Mortgage - As opposed to an ARM, a Fixed Rate Mortgage has an interest rate that does not change for the duration of the mortgage
  • Good Faith Estimate - An estimate of closing costs provided to the buyer from the lender
  • Principal - The amount of debt that needs to be paid, not including interest
  • Private Mortgage Insurance (PMI) - Sometimes required if the buyer cannot provide at least a 20% down payment, PMI protects the lender against possible default
Which financing terms do you struggle with the most?  We can help provide information to make the process less intimidating!

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