In this second installment of our mortgage terminology series, we share even more essential terms that first-time and seasoned home buyers alike should be aware of when looking to purchase a home. Read on to learn more, then get in touch with United Mortgage Group today to learn about our many home loan options for individuals looking to buy or refinance a house in Florida or Alabama. Our mortgage broker can help you find a variety of home loan options at unbeatable rates, including fixed-rate mortgages, adjustable-rate mortgages, FHA loans, VA loans, jumbo loans, USDA loans, and more.
Discount Points – Discount points are optional closing costs you can pay to reduce the interest rate on your loan. Each discount point is equal to 1% of the loan’s value. Essentially, you’re paying more up front in order to enjoy more savings over the life of the loan.
Down Payment – The down payment is the portion of the purchase price of a home that the buyer pays up front. For example, if you have a 20% down payment on a $100,000 home, you’d bring $20,000 to closing. Many people believe that you need at least a 20% down payment in order to purchase a home, but this is not true. Many government-backed loans, such as FHA and VA loans, allow borrowers to purchase a house with a down payment of 3.5% or even less.
Earnest Money Deposit – The earnest money deposit is a check that you will write to a seller when you make an offer on their home, as a token of good faith that you are serious about the purchase. It is usually 1%-3% of the home’s value. If the seller accepts your offer, the earnest money deposit will go towards your down payment at closing.
Equity – Your home’s equity refers to the difference between the value of your home and the outstanding balance on the mortgage.
Escrow Account – Most people with a mortgage have an escrow account with their lender, consisting of the money paid to cover property taxes and insurance. Payments are made monthly, and accumulate until the taxes or insurance premiums are due. Alternatively, a buyer may choose to pay these costs directly.
Fannie Mae and Freddie Mac(Forbes) – These government-sponsored entities (GSEs) lend to mortgage lenders, so that they in turn can lend to borrowers.
Federal Housing Administration (FHA)- The FHA is a federal agency that is part of the Department of Housing and Urban Development. It provides mortgage insurance to protect lenders from loss, thereby making it easy for buyers with lower credit scores and lower down payments to qualify for mortgages.
FHA Loan – FHA loans are home loans provided by the Federal Housing Administration that allow for a down payment of only 3.5%. Use our free FHA Loan Qualifier tool to get a quote now on a FHA loan for your dream home in Florida or Alabama.
First-Time Home Buyer (FTHB) – An FTHB is someone who has not previously owned a home, or has not purchased a home in the last three years. Many popular loan programs cater to FTHBs. At United Mortgage Group, we can help FTHBs get special rates through home loan options such as FHA, VA, and USDA loans.
Fixed-Rate Mortgage – A fixed-rate mortgage has the same interest rate throughout the entire term of the loan, which is typically 30 or 15 years. They offer predictability and stability, and are a great option for buyers who plan to stay in their home for many years to come. United Mortgage Group can help you find great rates on fixed-rate mortgages for homes in Alabama and Florida.
Forbearance – Forbearance is when your lender allows you to temporarily pay your mortgage at a lower rate or temporarily stop paying your mortgage altogether. Forbearance may be granted for instances such as illness or injury, where you face unexpected healthcare costs and/or an inability to work. You will have to make up your reduced or missed payments once the forbearance period is over.
Good Faith Estimate – A good faith estimate is a list of the costs and fees that a mortgage lender must give to a borrower within three days of applying for a loan.
Home Equity Loan – Sometimes referred to as a “second mortgage,” a home equity loan allows homeowners to borrow against the equity of their home. It is based on the difference between a home’s current market value and the outstanding balance on the mortgage.
Home Inspection – Home buyers have the right to hire a licensed home inspector to examine a property and point out any potential issues, such as problems with structural and mechanical systems like heating, ventilation, air conditioning, and electricity. Some mortgage companies require that borrowers get a home inspection as a condition of getting a loan.
Homeowners’ Association (HOA) Dues – An HOA manages shared expenses, such as landscaping and other maintenance costs, for a planned subdivision or other organized community. Buying a home that belongs to a neighborhood with an HOA requires paying monthly dues that are separate from your monthly mortgage payment. It is important to factor in HOA dues when calculating whether or not you can afford a certain property.
Homeowners’ Insurance – Homeowners’ insurance is a type of protection that provides financial compensation should your home get damaged during a covered incident, such as a flood, fire, burglary, etc. Many mortgage lenders require that borrowers maintain at least a certain level of homeowners insurance for the life of their home loan.
Buy or Refinance a Home in Alabama or Florida With United Mortgage Group
Your time and money matter when it comes to purchasing or refinancing a home. That’s why we offer a streamlined, customized loan application and approval process for borrowers in Alabama and Florida. Get in touch with our mortgage broker, Gwynne Price, now to learn more!