Diving into the world of mortgages can sometimes feel like learning a new language. There are so many different terms and mortgage lingo that can be hard to understand. But don’t worry, Edge Mortgage Inc. has got you covered. In this guide, we’ll break down some of the most important mortgage terms in a way that’s easy to understand. So, whether you’re buying your first home or your fifth, this will help you navigate the mortgage maze with confidence.
At Edge Mortgage Inc. we not only help with mortgage terms, but we also help remove costly and difficult processes by replacing them with high-quality customer service. We guarantee honest answers and have no hidden or extra fees to keep more money in your pocket. We serve all of Colorado, Ohio, Wyoming, and Nebraska. Now that you know the best mortgage broker to choose when buying your home, let’s beak down the different terms to be sure you are informed and empowered in the home-buying process.
Basic Mortgage Terms
Mortgage: Let’s start with the basics. A mortgage is more than just a loan for buying a house. It’s a commitment that typically spans decades. It has two main parts: the principal (the amount you borrow) and the interest (the cost of borrowing that money).
Principal: This is the total amount of money you borrow to buy your home. When you make a mortgage payment, part of it reduces the principal, which means you’re slowly paying off the amount you owe.
Interest: Think of interest as the price you pay for using the lender’s money. It’s usually a percentage of the principal, and it’s a big part of your monthly mortgage payment.
Term: This is the length of time you have to repay the mortgage. Common terms are 15 or 30 years. The term you choose affects your monthly payment and how much interest you’ll pay over the life of the loan.
Types of Mortgages
Fixed-Rate Mortgage: A fixed-rate mortgage keeps the same interest rate throughout the entire term. It’s great for those who like stability and predictability in their payments.
Adjustable-Rate Mortgage (ARM): Here, the interest rate changes over time, usually in relation to an index. While ARMs often start with lower rates, they can fluctuate, meaning your payments can go up or down.
Government-Insured Loans (FHA, VA, USDA): These loans are backed by the government and offer some unique benefits, like lower down payments or no down payment. They’re tailored for specific groups of people, like first-time buyers or veterans.
Understanding Interest Rates and Payments
Annual Percentage Rate (APR): The APR is broader than the interest rate. It includes the interest rate plus other costs, like broker fees and closing costs, giving you a more complete picture of what you’ll pay.
Amortization: This is the process of spreading out your loan payments over time. Early on, a larger portion of your payment goes towards interest rather than reducing the principal.
Escrow: An escrow account is like a holding tank. Part of your monthly payment goes into this account and is used to pay things like property taxes and homeowner’s insurance.
Fees and Other Costs
Closing Costs: These are fees you pay at the end of the mortgage process. They can include appraisal fees, title insurance, and more.
Points: Points are fees paid directly to the lender at closing in exchange for a reduced interest rate. This can save you money over the life of your loan.
Private Mortgage Insurance (PMI): If your down payment is less than 20%, your lender might require PMI. It’s a type of insurance that protects the lender if you stop making payments.
The Approval Process
Pre-Approval vs. Pre-Qualification: Pre-qualification is a quick assessment of your ability to afford a mortgage. Pre-approval is more in-depth and involves a thorough check of your financial background.
Credit Score: This number is crucial in determining your mortgage eligibility and interest rate. The higher your score, the better your chances of securing a favorable rate.
Debt-to-Income Ratio: This ratio compares your monthly debt payments to your monthly income. Lenders use it to judge your ability to manage monthly payments.
Special Mortgage Terms and Considerations
Refinancing: This is when you replace your current mortgage with a new one, possibly with better terms or a lower interest rate.
Underwater Mortgage: This term is used when you owe more on your mortgage than your home is worth.
Foreclosure and Short Sale: Foreclosure happens when a borrower fails to make payments, and the lender takes over the home. A short sale is when the home is sold for less than the outstanding mortgage.
Understanding Mortgage Terms Makes You an Empowered Buyer
Understanding these terms is key to navigating the world of home buying with confidence. Every homebuyer’s journey is unique, and we are here to help guide you through yours. Not all Mortgage Brokers or Mortgage Lenders are created equal. It’s also important to know the difference between using a big bank or a broker for your home loan. As your trusted Mortgage Broker, we truly have your best interests at heart and can shop many different loans to find the best one for you and your situation. At Edge Mortgage Inc. you’re not just another number. We are invested in our clients and finding the greatest mortgage outcome. If you have any questions or need more information, feel free to reach out. Your dream home is closer than you think!
Read some of our 5-star reviews from our happy clients
“Keri and Edge Mortgage made our dream a reality. She was very professional and knowledgeable about the entire process. Keri went out of her way to make sure we were always informed on where we were in the process and what was next. Great experience. Would highly recommend Keri and Edge Mortgage.” -Gary
“This was my first home loan and Keri was very easy to work with! she made the process of getting a mortgage a little less daunting, she made sure to keep my fiancé (now wife) and I informed without making it feel overwhelming. Any time we encountered something that looked like it might be a problem to me, Keri helped walk us through it and we were able to make it to closing day! I would definitely recommend Edge Mortgage, Inc. to anyone looking to purchase a home!” -Nathanael
“Keri was amazing helping us every step of the way purchasing our first home. We had no idea where to start or what type of loan to consider. She was very quick to answer us with our busy work schedule all times of the day! I highly recommend Keri and her team.” -Angie
Edge Mortgage Inc. is your trusted choice for the best Mortgage Broker
Edge Mortgage Inc. is located in Johnstown, Colorado, and serves all of Ohio, Colorado, Wyoming, and Nebraska. We offer the loan process made simple and top-notch customer service. We are your trusted Mortgage Lender and the top mortgage specialist in Ohio, and every state we serve! Call us today at 970-744-0000.
You may also be interested in Best Ohio Mortgage Broker and What is a Mortgage Rate Buydown and How Can I Benefit?