Introduction:
welcome back and if it's your first time here welcome today we're discussing mortgage terminology now make sure you stay tuned to the end because i've got a little surprise freebie checklist for you that we'll talk about at the end of this Post.
my name is stephanie and i've been helping people finance their homes for over 18 years and the week's team would love to help you with your financing we can help in louisiana mississippi alabama and florida thank you again for tuning in let's dive.
Understanding the mortgage loan process Tips:
1 Mortgage Terminology2 APR
3 Closing Costs
4 Prepaids
5 Down Payment
6 Debt to Income
7 Loan Types rundown
8 Escrow
9 Principal & Interest, PropertyTaxes, and Insurances
10 LTV
11 PMI / MIP
12 Term
Mortgage Terminology:
right in these are some of the top mortgage terms and what you need to know and the explanation for each and every one of them the first thing i want to talk.
APR:
about is apr that's actually the cost of the interest rate so let's say that your interest rate is three and a half percent but it costs you three thousand dollars to get that interest rate so then your apr is going to be a number that you see higher than that 3.
5 percent some people really get confused on this disclosure because there's a disclosure that does show your apr and does show you all that went in to calculate that because not every fee is taken into consideration to determine that apr so apr again that is going to be the cost of the money now on to the.
Closing Costs:
next one is closing cost you've got i want to decipher that you've got when you're buying a house you've got down payment if any closing cost always prepaids always and then total cash out of pocket closing costs are things like the lender the appraiser the title company the clerk of court and the fees that are associated with all of those different parties that is different
Prepaids:
than the next term which is prepaids prepaids would be your prepaid home insurance property taxes maybe flood insurance things like that there are pre-paid items that go into financing a home you've got closing costs you've got your prepaids which leads us to the next term which is your cash to close that's.
Down Payment:
going to be your down payment if any plus closing plus prepaids equals total cash to close now if you're liking this material please be sure to smash that like button don't forget to to the and share the Post with your friends and family now on to the next common term is dti.
Debt to Income:
that is debt to income that's a ratio that we use to determine if you can qualify to purchase or finance what you're looking to purchase or finance what we do is we take your minimum payments owed every single month on your debt in relation to the new proposed housing payment
in relation to your income and we come up with a percentage and we use that as a reference point to determine your debt to income which helps us determine your capacity to repay all right the next one we've already talked about down payment not every program requires a down payment so sometimes you can do 100 va.
Loan Types rundown:
loan 100 usda rd or rural development loan you've got conventional with as little as three percent down you've got fha with around three and a half percent down and sometimes there's down payment programs that you pair with these programs that do require down payment that might help offset how much down payment you actually have to bring to the tables there's down payment.
Escrow:
the next thing is escrow what is an escrow what is an escrow account now there are some exceptions to this rule generally speaking if you're putting down at least 20 percent or leaving at least 20 equity in the property you can choose to waive escrow that's where you pay your taxes and insurances separately
from your mortgage payment what your escrow is is a non-interest bank account held by the lender to make sure that enough is collected for taxes and insurances so when those bills come due there's enough money in escrow to go ahead and pay that this runs right into the next term which is p i t i.
Principal & Interest, PropertyTaxes, and Insurances:
principal interest taxes and insurances so let's say that your principal interest which is another term which is just the principal and interest think about this like when you buy a car however you much you finance for however long of a term and that gives you ultimately your monthly payment that's just principle
and interest so you've got principal and interest then you've got taxes and insurances which is going to be your escrow account so you've got principal and interest plus escrow gives your total monthly payment and the lending world we call that p-i-t-i all right what's next we've got.
LTV:
ltv that means loan to value what is the value of the property what is the loan amount that you're looking for and what is that in a percentage let's say that the property value and or purchase price is a hundred thousand you're looking to do an eighty thousand dollar loan that is an eighty percent loan to value all right what's our next one that's.
PMI / MIP:
going to be pmi private mortgage insurance not to be confused with mip mortgage insurance premium they're kind of the same but the difference is pmi is private mortgage insurance it's not government-backed or government-funded and pm mip is mortgage insurance premium which has to do with government loans and so they use different terminology for that if the pmi which is the private mortgage insurance is insurance that the is being charged basically to protect the lender in case you default and that is charged when you're putting down less than 20
now there are different options for pmi there's monthly there's single and there's split pmi there's a few different ways to do it a lot of people don't know more than just the monthly option but there are definitely more options out there when it comes to the mip there are not more options and typically if you're putting down 20 it still does not alleviate you having to pay that mip so keep that in mind we're talking government loans versus non-government loans in this particular situation all right what do we have next.
Term:
we have term so we have the term of the loan or the the amortization which is like are you doing a 10-year loan a 15-year loan a 20-year loan or a all right so that is your list of mortgage terms of things you must know as promised i've got a checklist i will.