Exploring the home loan process can be complex, especially with a lot of loan-specific terms. Understanding commonly used lending terms may facilitate the process. Below are details on commonly used lending terms.
Commonly Used Lending Terms
Pre-approval
A pre-approval is paperwork written by a mortgage professional indicating the dollar amount and type of loan that a buyer might be approved for based on their current earnings, debt, and credit report. This is not the same as a pre-qualification, which is merely an “unverified” guess. Actual approval is typically provided after someone signs a purchase agreement a particular home.
Home Loan Commitment
After a buyer enters into a P&S Agreement on a property, a lender inspects all of a necessary paperwork and the data on the property. A loan commitment is subsequently granted to verify that the general requirements are approved and that the mortgage will be officially granted upon completion of a few final items.
Appraised Value
An appraisal is ordered by a mortgage company to confirm the value of a property. It must be completed before a mortgage commitment or final approval.
Closing Charges
Closing Costs
There are many expenses related to buying and selling real estate. These are referred to as closing costs. They can include broker commissions, transfer taxes, mortgage charges, legal costs, title insurance, and local recording charges. Pre-paid expenses such as property taxes are frequently also lumped into the closing cost category, but they are really a different type of fee billed at settlement.
Title Insurance
Title insurance protects against problems with a title and the fees related to defending your rights. Although title searches are performed prior to a closing, there could be defects that affect your ownership to real estate that are not readily identified in a title search. Title insurance is a single expense that remains valid for the entire time that you remain the owner of a piece of real estate.
Mortgage Insurance (MI)
MI stands for mortgage insurance and is traditionally required on mortgages for higher than 80% of the home price. There is frequently an up-front fee and a recurring fee, both calculated against the starting loan balance. How long MI remains depends on the specific program.
Additional Details On Commonly Used Lending Terms
This blog includes details on commonly used lending terms. There might be other terminology that you come across while applying for a mortgage or purchasing real estate. For more definitions, contact John Montanaro at 617-484-2494 or giam24@aol.com.
