Applying for a home loan is an exciting, but also a stressful time. There are so many decisions that need to be made so it is easy to get overwhelmed. That is especially true when you get a bunch of new terms thrown at you. To help you feel prepared, we have prepared a list of a few important terms that will help you throughout the process.
Here are five mortgage terms that everyone applying for a mortgage needs to know.
1. 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.
2. Escrow
A lender-held account where a homeowner pays money toward taxes and insurance of a home.
3. Gift Letter
A letter that a family member writes verifying that s/he has given you a certain amount of money as a gift and that you don’t have to repay it. You can use this money towards a portion of your down payment with some mortgages.
4. Truth-in-lending Act (TILA)
Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit, such as the APR and other specifics of the loan.
5. Underwriting
The process a lender uses to determine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage.
