Mortgage and real estate terms can often seem confusing to homebuyers. It may even feel like you’re speaking a different language when you start the process but don't worry - you aren’t alone! In fact, nearly half of Americans are unfamiliar with common mortgage terms. At Highcrest Home Lending, we strive to be an educational resource for the community, so we created the following mortgage glossary and reference guide to help homebuyers navigate the mortgage and home buying process.
Appraisal
An appraisal is an estimate of your home’s worth. When applying for a mortgage, lenders will require that you get an appraisal to ensure they are lending you the correct amount of money.
Assets
An asset is anything that you own that has a cash value. When you apply for a mortgage, lenders will verify your assets, such as your savings and investments, to ensure you can afford to repay your mortgage.
Debt-To-Income Ratio
Your DTI is your total recurring monthly debts divided by your total monthly gross income. This calculation allows lenders to evaluate whether you have enough money flowing in to be spending money on your monthly mortgage payments.
Down Payment
A down payment is the first payment you make on a mortgage loan. Down payments are usually required and are listed as a percentage of your total loan amount.
Homeowner’s Insurance
Homeowner's insurance works just like any other form of insurance. It protects your home from common damages like fire, robbery and natural disasters. Many lenders require that you have some form of homeowners insurance throughout the term of your mortgage.
Mortgage Term
The number of years you will make monthly payments on your mortgage loan before you finally own your home.
Preapproval
Preapproval is the first step towards getting a mortgage. This is a document that tells you how much you can afford to take out in a home loan and is a great tool for budgeting while shopping properties.
Private Mortgage Insurance
Private Mortgage Insurance or PMI is a form of insurance that protects mortgage lenders in the case that a homeowner defaults on their loan.
Property Tax
Property taxes are taxes you’re required to pay to the local government. The price of these taxes will depend on the value and location of your home.
Refinance
When you trade in your original mortgage for a new one, you are refinancing your home. This can be beneficial for borrowers looking to get a different mortgage term or lower interest rates.
Title
The title of your home is a document that shows proof of your legal ownership of the property.
At Highcrest Home Lending, we understand that mortgages can be confusing and difficult to navigate. This glossary is a great reference to bookmark and use throughout the process. Remember, we’re always here to answer any questions or concerns you may have, just reach out and we’ll be happy to help!