It’s like a different language, APR, Fannie Mae, FHA, Freddie Mac, CFPB, PMI, HELOC—you can get lost in the terms of the lending industry.
Don’t worry. Your Utah mortgage broker can help you understand the ones relevant to your situation. But it’s a good idea to understand some basic terms that apply in many circumstances. Here are nine to get you started.
Amortization
Paying off principal (see below) over time. You normally pay off the principal in a mortgage loan over the loan’s term through a fixed schedule.
Appraisal
A written report by a qualified professional that estimates the value of the property being purchased.
Closing Costs
Expenses in addition to the price of the property that buyers and sellers incur when transferring ownership of that property. Examples of such costs are loan-origination fees, appraisal fees, attorney fees, taxes, title insurance, surveys and discount points.
Down Payment
Cash that a buyer puts toward the purchase of a property. The amount required for a down payment varies depending on the type of loan.
Escrow
A neutral account where the documents and money in a real estate transfer are held until the sale is completed.
Principal
The amount of money you owe.
PMI
Private mortgage insurance, which protects the lender against default on mortgage loans. Many lenders require the borrower to purchase PMI, a monthly fee added to the mortgage payment, if his down payment is less than 20% of the purchase price of the property.
Title Insurance
This policy ensures that the owner of the property, in fact, owns the property and can transfer his ownership to someone else.
Loan-to-Value (LTV) Ratio
How much is borrowed compared to the value of the property. An 80% LTV on a property valued at $300,000 means the borrower put down $60,000 and mortgaged the remaining $240,000.
Hundreds of lending terms exist, but these nine apply to many mortgage loans. Your Utah mortgage broker will make sure you understand the ones that relate to your financing.