| What are closing costs? |
| What is a down payment? |
| What is an escrow? |
| What is Homewowner's Insurance? |
| What are points? |
| What is prepayment? |
| What is PMI? |
| What is a homewoner's warranty? |
| What is an appraisal? |
| What is an inspection? |
| What is a VA Mortgage? |
| What is a Variable Rate Mortgage? |
| What is a home equity loan? |
| What is a foreclosure? |
| What is a first mortgage? |
| What is a fixed rate loan? |
| What is equity? |
| What is the Equal Credit Opportunity Act (ECOA)? |
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| What are closing costs? |
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Besides the down payment, home buyers must be prepared to pay a number of additional up-front costs. Collectively called 'closing costs'; these expenses typically range from 1�% to 3% of the amount of the mortgage.
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| What is a down payment? |
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Virtually all home buyers rely on a mortgage loan to finance a home. Few mortgage loan programs will enable you to finance the full purchase price of a home. Instead, you will have to contribute a portion of the cost from your own funds (called down payment). |
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| What is an escrow? |
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An escrow is an arrangement where a neutral third party holds the funds and documents that change hands during the home selling and buying process. An escrow officer sees that items in the purchase contract are carried out and appropriate parties are paid. |
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| What is Homewowner's Insurance? |
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Lenders require home buyers to purchase home-owner's insurance. This protects you against fire and, in some areas, floods as well. Most policies also protect the homeowner against theft and liability should someone be injured on the property. |
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| What are points? |
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Points are finance charges paid to the lender as part of the closing costs. Each point equals 1% of your total mortgage loan. Points can be negotiable and are sometimes tied to your interest rate. Paying more points to get a lower interest rate may be a good idea if you plan to take a long-term loan. |
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| What is prepayment? |
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Making early or extra payments towards the principal (amount borrowed). Prepayment can shorten the length of your mortgage and thus lower your total interest.
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| What is PMI? |
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Private Mortgage Insurance - Insurance the buyer carries to guarantee that the lender is paid off if the buyer defaults on a mortgage. It's required for all mortgages with less than a 20% downpayment. The exact amount depends on the amount of the loan and the size of the down payment. It is usually a few hundred dollars.
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| What is a homewoner's warranty? |
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This warranty covers any repair to the structure, mechanical systems, and major appliances of the house for a certain time. This warranty is usuful when purchasing an older home. |
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| What is an appraisal? |
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An evaluation of the property's value. The appraiser visits the house and reviews recent selling prices of similiar homes within the area. You will probably pay an appraisal fee at closing or before.
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| What is an inspection? |
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An evaluation of the property to find out if there are any problems with it that could change its value. The inspection also helps you decide if there are any items that you want the seller to repair before the final contract is signed. The inspector prepares a detailed report indicating any problems found, after inspecting the entire home. |
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| What is a VA Mortgage? |
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Home mortgage loan by a lending institution to qualified veterans of the U.S. Armed Forces or to their surviving spouses and guaranteed by the VA. The guarantee reduces the risk to the lender of all or part of the purchase price on conventinal homes, mobile homes, and condomimiums. Because of this federal guarantee, financial institutions can afford to provide 30-year VA mortgages on favorable terms with a relatively low down payment even during periods of tight money. |
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| What is a Variable Rate Mortgage? |
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Savings certificate on which the rate of interest payable varies. The interest rate changes periodically and is set by the financial institution, along with other money market rates.
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| What is a home equity loan? |
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A loan where you can borrow against the equity of your home. Your home equity can be collateral for loans such as car, college, bill consolidation, and home repair loans.
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| What is a foreclosure? |
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Process by which a homeowner who has not made timely payments of principal and interest on a mortgage loses title to the home. The holder of the mortgage whether it be a bank, a savings and loan, or an individual, must follow legal procedures to seize the property, which may then be sold to satisfy the claims of the mortgage.
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| What is a first mortgage? |
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Real estate loan that gives the mortgage (lender) a primary lien against a specified piece of property. A primary lien has precedence over all other mortgages in case of default.
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| What is a fixed rate loan? |
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Type of loan in which the interest rate does not fluctuate with general market conditions. There are fixed rate mortgages as well as fixed rate business and consumer loans. Fixed rate loans tend to have higher original interest rates than flexible rate loans because lenders are not protected against a rise in the cost of money when they make a fixed rate loan.
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| What is equity? |
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Value of property that exceeds any claim or lien on it. |
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| What is the Equal Credit Opportunity Act (ECOA)? |
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Federal law that prohibits discrimination against an applicant for credit on the basis of age, sex, marital status, race, color, religion, national origin, or other factors.
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