Knowing the mortgage language or terminology when you go to obtain an Arizona mortgage would be very helpful. This way you will feel comfortable when you complete a Arizona mortgage application and the process will be a smoother one. Here are some common terms that you will come across:
Amortization: Repayment of your loan based upon a yearly period with regular monthly payments. The beginning term you mostly pay interest and the end term payments are applied towards the principal.
Appraisal: A written report regarding the value of your home that your lender requires in order to approve your loan.
APR: Annual percentage rate. The cost of credit based upon a year, which is expressed as a percentage.
Cap: The maximum rate your variable rate mortgage can increase.
Closing costs: Money paid by you to close the loan which includes a loan origination fee, any points, your appraisal fee, credit report, title and escrow fees, title search, title policy and other closing costs. Typical closing costs run about 2% to as much as 6% of your loan.
Closing date: The date the title documents are transferred to you and recorded. The date you take legal possession of the home.
Credit report: A detailed report of your credit payment history.
Down payment: The amount of cash you put down on the purchase of your home. The remaining balance is usually paid in cash at closing or the borrower obtains a loan. A 20% down payment is customary. Otherwise, the lender will require you to purchase private mortgage insurance. FHA loans only require a 3.5% down payment, and VA loans require a zero down payment.
Home Equity: The difference between the fair market value of your Arizona home and what you owe your lender on your Arizona mortgage balance. Or the different between what you paid for the home if you paid cash and today’s market value.
Interest rate: The annual interest you pay on your Arizona mortgage. The lower your interest rate, the lower your monthly mortgage payment will be.
Lender: The bank or financial institution making the loan.
Lock-in rate: A guaranteed interest rate for a set period of time anywhere from 30 to 60 days prior to closing.
Mortgage broker: Assists the borrower with finding an Arizona mortgage and the best Arizona mortgage rates.
Mortgage refinancing: You pay off your existing Arizona mortgage with a new mortgage at a lower rate with more affordable payments. You must have equity in your property to refinance.
Origination fee: Lender’s fee for processing your loan.
Points: 1 point is equal to 1% of your mortgage.
Pre-approved: Completing a mortgage application, credit check, employment verification and the underwriting process. The lender will provide you with a pre-approval letter. If you start the process before you find a home, then you can present the pre-approval letter to the seller so that they know you are qualified to buy their home.
Pre-qualification: Lender or mortgage broker does a credit check and gives you an estimate of how much loan you can afford and a preliminary loan rate. It is non-binding. The lender will give you a pre-qualification letter to use at the time you make your offer. It does not have as much weight as a pre-approval letter because you have not completed a formal application or gone through the underwriting process, but it gives the seller information that you qualify for the loan based upon a formal application process.
Principal: The amount of debt you borrow without calculating the interest.
Private mortgage insurance (PMI): Required by your lender if you put less than 20% down payment. The insurance payment is added to your monthly mortgage payment and protects your lender in case you default on your loan.
Term: Life of your loan.
Title: Ownership document proving you own the property.
If you have any questions about this or if you have any questions you’d like us to answer on our podcast, you can email your questions to firstname.lastname@example.org or give us a call at (602) 535-2171. Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Thanks for listening and reading the Mortgage Brothers Show. Let us know if you have any questions you’d like us to answer on this podcast. You can email your questions to Tom@AZMortgageBrothers.com or Eddie@AZMortgageBrothers.com.
Be sure to ask us for a free quote on your next mortgage. We’ll personally work with you and help you through the whole process.
Signature Home Loans LLC does not provide tax, legal, or accounting advice. This material has been prepared for informational purposes only. You should consult your own tax, legal, and accounting advisors before engaging in any transaction. Signature Home Loans NMLS 1007154, NMLS #210917 and 1618695. Equal housing lender.BACK TO LIST