House terms

1. Mortgage: Legal contract that if u dont pay loan back with interest, lender can sell ur house to get money back.

   • Fixed rate mortgage: G0 for lowest interest rate u can get. Only things that will change will be property tax, any insurance payments included in ur mthly payment. 30yr fixed rate: Easiest to qualify. Best option if u will stay in home for many yrs or else it is the most expensive type. Gives tax & interest deductions, so great advge. 15/20yr fixed rate: Quick pay off, higher equity, lower interest rate but high mthly payment.
   • Adjustable rate mortgage(ARM): Interest rate changes based on market rates & economic trends. Offered initial interest rate that is 2-3% points lower than fixed rate but cant assure u how payment is going to be in yrs to come. If u dont expect to be in home for many yrs, u can go for this. U can choose terms of  loan from 6mths-several yrs. ex, 3/3ARM means initial rate would stay same for 1st 3yrs & would adjust every 3yrs from then. Caps specify how much ur interest can go over life of loan.
   • Balloon mortgage: Interest rate lower than fixed rate mortgages, stays same for 5-7yrs & then requires a balloon/final payment.
2. Down payment: Money u pay upfront reduces amount of money u’ve to finance &  monthly payments.
3. Principal: Money u’re financing, i.e. borrowing after ur down payment.
4. Interest: % of total amount u’ve to pay for loan to lender.
5. Equity: Money u already paid.
6. Pequalify: Lender estimates what u can afford based on ur income level, debt & credit info.
7. Pre-approval: Lender does indepth analysis of ur financial situation
8. Monthly payment: mortgage + property tax + Insurance + PMI(private mortgage Insurance) if u dont make at least 20% down payment.
9. APR(Annual percentage rate): Average annual finance charge(fees, other loan costs) divided by amount borrowed. It is slightly higher than interest rate as incl’s other fees that loan carries with it. It allows u compare actual loan costs.
10. Closing costs: Fees for work done for closing + taxes + insurance. Higher if live in high tax area. Depends on fee scales of realtors, lenders, attorneys. U typically pay 3-6% of total loan. U can negotiate with seller to pay some of the closing costs.
11. Processing fee: Charged by lender to cover initial costs for loan processing.
12. Appraisal: Comparing property value with similar properties in same neighborhood.
13. Discount points: Buying them is buying down the interest rate u’ll be paying. 1point = 1%of loan amount. These points r paid when loan is approved or at closing.
14. Foreclosure: Is a legal process where lender takes ur home, sells to get money.
15. Extra payments:Go directly to principal, so u can cut ur mortgage down tremendously.
16. Bi-weekly payments:Builds extra payment each year, thus shortens loan life.
17. Ways to save money: Negotiate with lender for best rates, choose right type of mortgage, make extra payments & bi-weekly payments, avoid PMI, make sure paying points will save u money.
18. Escrow: Legal arrangement where asset is given to escrow agent to be held in trust till conditions of contract r met, like payment of purchase price.

Add a comment October 10, 2007