Demystifying Mortgage Finance Definitions

Escrow and mortgage insurance and discount points… oh my!

Understanding finance-related mortgage technology can be as easy as following the yellow brick road… all you need to do is take a quick look at our easy-peasy definitions.

Here are a few of the common financial terms that you’ll probably come across during your homebuying process:

• Closing Costs – The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed, and other costs. Ask your lender for a complete list of closing cost items.
• Discount Points – A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage.
• Down Payment – The down payment is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available for veterans/active military servicemembers and USDA loans for eligible rural areas of the country. Waterstone Mortgage also offers a no-down-payment Wealth Building Loan.
• Mortgage rate – Your mortgage interest rate is what you pay each year to borrow the money to buy your house. It is usually expressed as a percentage.
• Private Mortgage Insurance (PMI) – PMI helps homebuyers purchase a home with a small down payment. PMI is typically required on conventional loans where a homebuyer has a down payment that is less than 20% of the home’s purchase price. PMI serves as an added insurance policy that protects the lender if the homebuyer is unable to pay their mortgage. A loan originator can explain PMI in much greater detail.

Of course, if you would like more detailed explanations of the terminology above (or have any questions related to the mortgage loan process), any of our experienced loan originators would be glad to help.

Even if you would like to buy a home in the next several years, it’s never too early to learn about your financing options, so give us a ring or shoot us an email!

This article is presented to you by Waterstone Mortgage. Please click here to read the full article.