There are literally hundreds of Mortgage Terms that you may not have heard of before, but don’t you worry, our loan officers can answer all of your questions, Find a Loan Officer.
As a home buyer, your mortgage is specific to your situation and lifestyle. The Mortgage Professors specializes in a variety of loans that can meet your needs. Your Loan Officer will explain your options and deliver a mortgage with the best loan terms available.
What is an APR?
Annual percentage rate: This number allows you to make comparisons between loans offered by different lenders by giving you the total cost of the loan in combining the base interest rate and other add-on fees. This includes points, private mortgage insurance, closing costs and other fees that are charged by the lender. APR isn’t always calculated in exactly the same way, but The Mortgage Professors loan officers can help you get to the bottom of the numbers.
What is a Credit Score?
This is a statistically derived number that is supposed to help lending agencies assess the likelihood that an individual will repay his or her debts. Your credit score is based in part on your past credit history and is expressed as a number between 300 and 850, the higher the number the better your score. The number is calculated using a mathematical formula that takes into account the numbers in your credit report compared to those of many other individuals. Your credit score is a very important number; if you plan to take out a loan, the interest rates and terms of the loan you can qualify for are contingent upon what kind of credit score you have.
What is Down Payment?
When you buy a property, the down payment is the amount you pay upfront in cash towards the total value of the home. The remainder of the property value is then financed with your mortgage. The larger your down payment is, the smaller the mortgage amount and often the interest will be. A typical down payment is 20% of the property value, so for a $300k home, this would be $60k.
What is Home Equity?
This term is the difference between the market value of your home and the amount you owe on it through an outstanding mortgage or any other loans on the property. For a home worth $300k, if you have an outstanding mortgage of $120k, your equity would be $240k.
The most common type of mortgage is a fixed-rate mortgage. For this type the interest rate and monthly payment will remain the same throughout the life of the loan, and these loans typically have repayment terms of 15, 20, 30 or 40 years. Fixed-rate mortgages are best for buyers who are likely to be in their home for a long time and want to know how much their payment will be every month. Interest rates for fixed-rate mortgages are higher than the starting interest rates for variable-rate mortgages.
This is the rate lenders charge you to borrow their money expressed as an annual percentage. For a $240k 30-year fixed mortgage with an interest rate of 5%, over the life of the loan you would end up paying the lender $240k in principal and $228k in interest. The interest rate remains the same throughout the term of a fixed-rate mortgage but fluctuates according to market interest rates in a variable-rate mortgage. Interest makes up a part of your monthly payment on your loan.
This is the amount you actually borrow for a loan. Interest is calculated on the principal. For a $240k mortgage, your initial principal is $240k. A portion of your monthly payment, not including interest or taxes and fees, goes towards paying off the principal you still owe on your mortgage. At the end of the first year, your principal in this example would be roughly $236k. You would have paid $16k in total, $12k in interest and $4k in reducing the principal balance from $240k to $236k.