Mortgage Terms
As a home buyer in Florida or anywhere in the US you should familiarize your self with the industry terms so you can feel conferrable and informed when communicating with your realtor, mortgage loan officer and all other parties involved in the transaction.
Here are some of the mortgage terms that you should know
First time home buyer
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An individual who has not held ownership in a principal residence during the three-year period ending on the date of the purchase.
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For couples, if one spouse is/was a homeowner but the other has not owned a home, both spouses are considered first-time homebuyers.
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A single parent who has only owned a home with a former spouse while married is considered a first-time homebuyer.
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An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations (such as a mobile home).
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An individual who has only owned a property not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.
Closing disclosure (CD)
A document that shows the actual terms and costs of a loan and the projected monthly payment
Discount points
Interest paid by the borrower to lower the interest rate on the loan
Escrow
Also called an impound account, it spreads the combined mortgage costs, property
taxes and insurance premiums over the life of the loan into monthly payments
Home inspection
An examination of a property to determine its condition and to report any repairs needed.
Mortgage insurance (MI, MIP, PMI)
Insurance required by some loan programs when the down payment is less than 20 percent of the home’s value
Pre-qualified
A ballpark estimate provided by a lender after discussing a borrower’s financial situation
Pre-approval
Provided by a lender who has reviewed a borrower’s financial documentation and provided a max loan amount
Underwriting
Final evaluation of the documents and conditions needed to secure a loan
Appraisal
A report that provides an estimate of a property’s value
Annual percentage rate (APR)
The cost to borrow money expressed as a yearly percentage—includes the interest rate plus other charges or fees
Closing costs
Expenses above and beyond the price of the property (e.g., loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees, etc.)
Debt-to-income ratio (DTI)
Your monthly debt divided by your gross monthly income
Earnest money
Money a buyer puts as deposit to show the seller that they’re serious about purchasing
the property
Fixed-rate mortgage
A mortgage that has the same interest rate for the entire term of the loan
Loan-to-value (LTV)
Indicates the ratio of the loan amount to the appraised value of the property
Underwriting
Final evaluation of the documents and conditions needed to secure a loan
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Home Equity
Home equity is the difference between the home's fair market value and the outstanding balance of all liens on the property.