Navigating the world of home financing can be daunting, especially when faced with unfamiliar industry jargon. That’s why we’ve compiled this glossary of financing terms and definitions, as well as private lending terms and home loan terms. Whether you’re a first-time homebuyer or a seasoned real estate investor, understanding these terms is essential for making informed decisions about your home loan.
Adjustable-Rate Mortgage (ARM) – A mortgage loan with an interest rate that can fluctuate over time, typically starting with a lower interest rate than a fixed-rate mortgage.
Appraisal – An evaluation of a property’s value by a licensed appraiser, typically required by lenders as part of the mortgage loan process.
Closing Costs – Fees associated with purchasing a home that are paid at the closing of the mortgage loan, including title search fees, appraisal fees, and loan origination fees.
Closing Disclosure – A document provided to borrowers by the lender before closing on a mortgage loan, outlining the final terms and costs of the loan.
Down Payment – The amount of money a borrower pays upfront when purchasing a home, typically a percentage of the home’s purchase price.
Equity – The difference between the current value of a home and the amount owed on the mortgage loan.
Escrow – An account held by a third party to manage payments for property taxes and homeowners insurance, typically required by lenders as a condition of the mortgage loan.
Fixed-Rate Mortgage – A mortgage loan where the interest rate remains constant for the entire loan term.
Loan Officer – A professional who works for a mortgage lender and is responsible for helping clients obtain mortgage loans, including evaluating their creditworthiness, processing loan applications, and coordinating the loan closing.
Mortgage Broker – An intermediary who works with multiple lenders to find the best mortgage loan options for their clients.
Mortgage Points – Fees paid by a borrower to a lender at closing to lower the interest rate on their mortgage loan.
Origination Fee – A fee charged by lenders to cover the cost of processing and approving a mortgage loan.
Pre-Approval – The process of obtaining preliminary approval for a mortgage loan based on a borrower’s creditworthiness and financial situation, typically done before beginning the home search process.
Private Mortgage Insurance (PMI) – Insurance required by lenders for borrowers who make a down payment of less than 20% of the home’s value, designed to protect the lender if the borrower defaults on the loan.
Rate Lock – An agreement between the lender and borrower to lock in a specific interest rate on a mortgage loan for a set period of time.
Refinance – The process of replacing an existing mortgage with a new one, typically to take advantage of lower interest rates or to obtain better loan terms.
Survey – A process of determining the boundaries and physical characteristics of a property, often required by a lender as part of the mortgage loan process.
Title Insurance – Insurance that protects the buyer and lender from financial loss in case of defects in the property’s title.
Title Search – A process performed by a title company to verify that the property being purchased has a clear title and is free of any liens or encumbrances.
Underwriting – The process of evaluating borrowers’ creditworthiness and financial situation to determine if they qualify for a mortgage loan.
We hope this glossary has been a helpful resource in clarifying financing terms and definitions to demystify the world of home financing.
At The Associate’s Home Loan of Florida, Inc., we’re committed to empowering our clients with the knowledge and tools they need to make informed decisions about their mortgages. If you’re ready to take the next step, submit an application today to learn more about our loan options and find the right fit for your unique needs.