Best Title Company, Waynesboro, Asks You To Know These Mortgage Terms First
As with any industry, though, it has its own jargon.
The sooner you understand it, the more confident you'll feel. As your Waynesboro, Virginia title company, we want you to know the legal buying terms.
It will make you feel more comfortable with the entire buying process. First of all, get pre-qualified. There's no point house hunting if you can't yet afford the price range you want to buy.
Once you know you're good to go, dive in! Here they are:
Sellers Assist--The seller pays a portion of your closing costs. The buyer will bring money to the closing for title search, escrow, and insurance.
Loan-to-Value Ratio--Or, LTV, is the amount of the money you are borrowing divided by the appraised value of the property. Let's say you are buying a home that has been appraised for $100,000. Your down payment is $7500. Your LTV ratio would be 92.50%.
Fixed Rate Mortgage--Your interest rate is fixed at a certain percentage and never changes for the life of the loan.
Adjustable Rate Mortgage--This is the opposite of fixed rate. After a certain period of time, the interest rate increases. That means your mortgage payment changes. This type of loan is usually best for people who know they are not going to be in their home for a long period of time.
Conventional Loans--These loans require 20% down. Government loans require less down payment but have other fees included as part of your house payment.
Federal Housing Administration Loan (FHA)--This is a government backed loan for those that can't afford a conventional loan. It has lower upfront costs and lower down payments. Good for those with poor credit scores.
Private Mortgage Insurance (PMI)--This is an insurance that is paid monthly, which is included in your mortgage payment. Government backed loans like FHA charge it because the borrower cannot pay 20% down.
Appraisal--This is a formal estimate performed by an appraisal company to confirm that the house you want to buy is worth the seller's price tag.
Escrow--Money placed into account such as the down payment or property taxes. The money remains there until it is used for its stated purpose.
Points--Pre-paid interest charged by the lender. One point equals 1% of your loan amount. The more points you pay, the lower your interest rate.
Closing costs--Fees related to buying a home charged by the lender. Zillow.com says that it can be as much as 3%-5% of the sale of the house. Charges include items such as lender's title insurance.
For more mortgage title lending terms, click here.
At Lilly Title & Settlement, we think that becoming an informed buyer makes for a happy homeowner!