Home Loan Terms You Need To Know

Closing costs

Miscellaneous costs associated with the real estate transaction such as application fees, appraisal fee, credit report, escrow fees, homeowners' association fees, tax registration, county taxes, discount points, documentation fee, loan fees, mortgage insurance, origination fees and title insurance premium. Buyers generally spend 4-6% of the total sales price on closing costs.

Down Payment

Amount of money paid at the time of purchase that is not included in the mortgage.

Earnest Money

The amount of money deposited in a trust account when you make an offer on a house. The money is an indication that you are placing a serious offer on the house and is generally 3-5% of the offer amount.

Escrow

The property has an accepted offer with both seller and buyer agreeing to a specified contract.

Escrow account

Place in which earnest money is held.

Mortgage Insurance

Generally, if your mortgage amount is more than 80% of the value of your home, you will be required to pay mortgage insurance. This protects the lender. Mortgage insurance is issued by the FHA or a private mortgage insurer.

Point

One point is equivalent to 1% of the loan amount and is used by the lender to make the loan a better investment from their prospective.

Pre-approved

The lender has already approved the mortgage.

A loan officer has helped you determine what price range you can afford based on your income, debt, down payment, and mortgage amount.

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