Wednesday, April 15, 2015

Say Wha???... Learn The Mortgage Lingo!



        For the first time homebuyer, the experience can sometimes be overwhelming.  A whirlwind of terms and house tours, the last thing a homebuyer needs is to feel like they're negotiating in a foreign language.  Once you have a basic understanding of real estate and mortgage terminology, your eyes will no longer glaze over when your broker or agent start talking.  You’ll be able to actively engage in the negotiations and that means getting what you want!  Before you make one of the largest investments of your lifetime, protect your hard earned money by learning the lingo.

Seasoning
You’re downpayment represents your own personal risk in buying your home.  Traditionally, this amount is 20%, although new mortgages made available allow a mere 3.5% downpayment.  When lenders are considering a first-time homebuyer’s downpayment, they examine the “seasoning” of it, making sure the sum has been in your account for 60 to 90 days.

Points
When finalizing your loan, “points” refers to the percentage points your lender will charge you for your loan.  They are negotiable.  For example, 1 point on a $300,000 loan, means you will owe an additional $3,000 at the closing of the loan.

APR
This is a term more people are familiar with, but don’t necessarily pay attention to.  While the interest rate can give you an idea what your monthly payments will look like, the APR gives you a better idea of the true cost of your loan because it includes your fees and points.  If you are deciding between two loans with the same interest rate, it’s best to compare the APR against the two loans because one is likely to be lower than the other.

Origination Fee
This fee is essentially a processing fee for your loan and can take on various forms.  Processing fees, underwriting fees, origination charge or origination points are ways this sum can be expressed on your Good Faith Estimate (GFE).  This fee is also negotiable as it is intended to pay commissions.  A mortgage with no origination fee means the broker is paid by the bank.  While this sum is negotiable, it often translates to higher interest rates which can really add up over the lifetime of a loan.

Discount Points
If you plan on staying in your home for the long term, discount points are a good way to save money.  Discount points is paying interest in advance to buy down your monthly payment, or interest rate.  Recouping the value on buying down your rate can take time, but if you’re planning on staying there for a while, will pay off in the long run.

Closing Costs
This is a blanket term for all the fees and costs in addition to the loan amount.  Originations fees, title fees, appraisal fees, underwriting fees, attorney fees are all included in this amount.  A lot of times these fees are financed as well which can significantly hike up your monthly payment.  It is negotiable that the seller of the home help cover some of these costs.

The Closing
The last official step in closing the deal.  It usually takes place at a title office where the title changes hands after you and the seller sign dozens of documents in the presence of the title company’s escrow officer and real estate agents.

Don’t be afraid to ask your loan officer or real estate agent questions if there is any jargon that you do not understand.  We are industry professionals and have created this lingo to make our jobs easier, but a big part of our job is making sure you understand the terms of the deal.  With a basic knowledge of industry short-hand, you’ll be able to captain a deal that’s best for you and negotiate your way into a new home.

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