Making yourself knowledgeable about the terms related to the mortgage industry is a great way to ensure that you know what you are talking about if and when you go to apply for a loan. Many people don’t know what they are talking about as they attempt to navigate the mortgage process. It is because they lack knowledge that makes them ignorant. Therefore, we need to look into some loan terms that repeatedly appear in the business world. Understanding these terms may not take care of everything, but it can help you get more informed about certain aspects of the industry that you might not have been so clear on in the past.
VA Loan Terms
It is helpful to start with some VA loan terms as this is a common type of loan taken out by military members. A firm knowledge of some of the words that come up with these types of loans may be hugely helpful for people interested in borrowing this type of mortgage.
When referring to the size of land, the word acres is often used to discuss the size of the property. However, few people know that an acre is a precise measurement. It comes out to 4,840 square yards of land.
Adjustable-Rate Mortgage (ARM)
Adjustable-Rate Mortgage refers to the type of loan that one is borrowing. An adjustable-rate mortgage is a loan that allows the lender to adjust the interest rate that they are charging on this mortgage from time to time. Borrowers can typically qualify for an ARM more quickly than they might a fixed-rate mortgage. They run the risk of having a mortgage with an interest rate that can change on them without notice. Some have gotten themselves in trouble by doing this because the rate climbs too much for them to handle.
The value of a property as determined by a professional is referred to as an appraisal.
Closing is the final step in the purchasing process. In the closing meeting, you will sign the final papers and close out the mortgage terms. The buyer will pay closing costs at this meeting.
A down payment is the amount of money one puts down to begin securing their stake in the home they have their eyes on.
Equal Credit Opportunity Act
The Equal Credit Opportunity Act is a law passed by Congress which prohibits discrimination based on race, color, religion, national origin, sex, marital status, age, or handicap.
It may be necessary for some homes to purchase hazard insurance that protects the home’s value if a natural disaster or other issue impacts that property. Natural disasters or other problems happen more frequently in some areas than others, which is a big part of why this insurance is so commonly requested to protect certain assets.
This is a fee that the mortgage lender may charge if the borrower does not pay their mortgage payment on time. A late charge is used to encourage people to make their payments on time as they are supposed to.
A lien is a legal claim against the property if the borrower defaults and does not keep up with their mortgage payments. If a lien is served, the homeowner may have their home taken from them. Liens are not possible against properties that one owns outright.
When a loan application has been accepted, the lender has given their consent for the applicant to borrow the money they need. Only then can it be called an approved loan.
The lender gets a fee for generating the mortgage loan in the first place. This is typically a small amount of money, but it is necessary to get a mortgage loan started.
The amount of money a borrower may be approved for before they begin the formal process of requesting a mortgage.
Mortgage refinancing is when one borrow’s an additional loan from someone else to pay off their existing mortgage. They get it at a lower interest rate which saves them money in the long term.
These are just some of the terms one may encounter when they borrow either a VA loan or a traditional mortgage.
With a better understanding and knowledge of what some of these terms mean, you can walk into a loan application meeting with a bit more confidence than you otherwise would have had.
You must have the knowledge and information you need to make informed decisions about any mortgage you may borrow. Now you have some of those facts!