When you consult with a mortgage broker about home loans, you may hear terms that are unfamiliar. If that happens, speak up – don’t be afraid to ask for an explanation. You wouldn’t be the first person to question the meaning of the industry-specific jargon, and brokers are happy to help home buyers make informed choices.
However, if you’d like to familiarize yourself with some of the basic mortgage terms ahead of time, take a look at the following home loan glossary.
Adjustable-Rate Mortgage (ARM)
This type of mortgage features a low interest rate at the start, but the rate and, therefore, the home loan payment total, are periodically adjusted.
Mortgage amortization is a term used to describe the way a home loan is repaid and how much of each payment goes toward the interest and principal balance.
Closing costs are the fees that home buyers and sellers must pay in order to close on a loan and complete a real estate transaction.
Debt-to-Income (DTI) Ratio
This figure, which mortgage lenders use in determining an applicant’s ability to manage loan payments, is calculated by comparing debt obligations to monthly income.
The down payment is the amount of money that a home buyer puts toward their purchase, the portion paid in cash or the equivalent at the time of purchase.
The FICO score, developed by the Fair Isaac Corporation, assesses a home buyer’s credit worthiness and is the most widely used credit score among mortgage lenders.
With this type of mortgage, the interest rate and monthly payment of principal and interest remain the same for the entire lifespan of the loan.
Loan-to-Value (LTV) Ratio
The LTV ratio is a figure that compares the sale price or appraised value of a home to the amount of the mortgage taken out on the property.
This fee, which is typically a percentage of the total loan, covers the costs the lender incurs in originating, processing and funding a mortgage.
Private Mortgage Insurance
A form of insurance that protects lenders if home buyers stop making payments, PMI is typical for conventional loans when the down payment is less than 20 percent.
Are you shopping around for a home loan? If you’re looking to buy a property in northern Utah and want to explore your mortgage options, the friendly and knowledgeable team at Intercap Lending is here to help.
Our mortgage brokers can answer your questions, offer advice and guide you in your quest to become a homeowner. For more information, or to start your search for a home loan that meets your needs, contact Intercap Lending in Orem, Utah, today.