Individuals and real estate companies use mortgage loans to finance their projects. This shows how mortgage has been beneficial in the real estate industry. If you ask those who have used mortgage loans, they will tell you that some terminologies are very difficult to understand. We’re here to help you understand some of this mortgage terminology!
You will come across brokers in the mortgage business. These are people who help you in the process of securing a mortgage loan. When securing a mortgage loan, you can opt to transact with a bank direct or use a mortgage broker. There are several reasons to use a mortgage broker; one of the reasons is making you understand mortgage terminology. A mortgage broker should make you understand the most important terminologies used in mortgage, if not all. You can assume you know all the terminologies since they are many. Maybe the ones you don’t know are the most important. Now, let’s see some of the mortgage terminology a broker should help you understand.
Mortgage Terminology at it’s Finest
This should be the number one terminology your mortgage broker should tell you. The reason is that the interest rate will determine the full cost of your mortgage. The interest rate is calculated in the form of a percentage. After securing a mortgage, there will be extra pay you will have to make for your mortgage loan. Now, that is what is called the interest rate. The broker should show you the lender with the least interest rate.
Annual Percentage Rate (APR)
If you don’t have an experienced mortgage broker, the annual percentage rate may sound similar to the interest rate. The APR includes any points, interest rate, mortgage broker rates, and other charges to get the mortgage loan. This is the real and full cost of getting the mortgage loan. Every cost is included. For more information on APR, click here!
This may sound obvious, but still, it’s very important. Not every person knows that a certain application fee is needed before processing a mortgage. You have to understand that almost everything you apply needs an application fee. So, your mortgage broker should give you all the details about the application fee, including the amount.
An asset is basically any property that you own. Even your bank account is your asset since it has your money. When applying for a mortgage, the bank agent will ask you if you have any assets. The bank will use your assets as collateral to secure the loan they have given you.
In any loan that you will borrow, collateral is very important. This is among the important terminologies you will come across when applying for a mortgage loan. Collateral is any asset that lenders you to secure the loan they have given out. The debtor is the one who gives out an asset to become collateral. In short, collateral is a security of the loan. In case you refuse to pay the loan, the lender will take the item listed as the collateral.
Deed of Trust
Another mortgage term is deed of trust. This is the agreement that the borrower accepts and signs stating that he/she has given out a certain item or property as collateral. The deed of trust acts in favor of the lender. If the borrower does not pay the loan, the lender has the authority to take over the property as per the agreement. If the borrower pays the loan, the deed of trust becomes invalid.
When applying for a loan, you will be given a certain time to pay the loan. Sometimes the agreed time elapses before the loan or debt is paid off. After the time elapses, the lender will add another interest over the normal one. The added interest amount is referred to as deferred interest.
This is simply the period of time it will take to pay back the loan. From start to finish, this is the projected time to finish paying. It assumes all payments are on time and full payments.
Rate Lock or Lock-In
A lock-in or rate lock on a mortgage loan means that your interest rate won’t change between the offer and closing, as long as you close within the specified time frame and there are no changes to your application. … Rate locks are typically available for 30, 45, or 60 days, and sometimes longer.
To be pre-approved for a mortgage means that a bank or lender has investigated your credit history and determined that you would be a suitable candidate for a mortgage. Pre-approvals might only be good for a certain amount of time but they usually signify that a lender is ready and willing to lend you money.
Hopefully, this article has proven helpful. You can always call a mortgage broker directly and ask for help with anything you don’t understand! Check us out at stcharlesmortgage.biz!