Explaining Mortgage Terms
Understanding mortgages can really help you get a better grasp of the homebuying process. Take a look at these simple definitions to better understand at least part of the mortgage world.
–Underwriting: The process that a lender goes through when deciding whether or not to extend credit. There are many determining factors in this decision such as income, credit, and debt.
–Amortization Schedule: A breakdown of past mortgage payments and how much remains per payment.
–Discount Points: These usually apply mainly to government loans, in the mortgage world. Discount points are percentage points paid in addition to the one percent loan origination fee.
–Good Faith Estimate: A written estimate of closing costs that a lender must provide a prospective homebuyer within three days of submitting a mortgage loan application. The best approach is to request this list before choosing a loan.
–PITI: Stands for Principal, Interest, Taxes, and Insurance. Combined, these make up your monthly mortgage payment.
–Balloon payment: A lump sum payment that is larger than the other, periodic payments. Used to pay off the remaining balance of a loan.