Navigating the mortgage process will be complex, particularly with a lot of industry-specific terminology. Familiarizing yourself with common lending terminology will facilitate the process. In this article are definition of common lending terminology.
Common Lending Terminology
A pre-approval is a letter written by a lender outlining the dollar amount and type of loan that a buyer may obtain using their current income, debt, and credit report. This varies from a pre-qualification, which is only an "unverified" estimate. Full approval is typically provided after someone is under contract for a specific property.
After a home buyer is under contract for a home, a lender audits all of a necessary paperwork and the information on the real estate. A mortgage commitment is later issued to state that the up-front criteria are fulfilled and that the loan will be officially granted upon completion of a few remaining conditions.
An appraisal is required by a home mortgage provider to verify the market value of real estate. It must be due prior to a mortgage commitment or final approval.
There are several typical expenses in connection with the transfer of a home. These are called closing costs. They may include real estate commissions, transfer taxes, mortgage charges, legal costs, title insurance, and municipal recording fees. Pre-paid charges such as home owners insurance are often also lumped into the closing cost terminology, but they are really a different type of expense billed at closing.
Title insurance protects against issues with the ownership trail and the costs associated with defending your ownership. Although title searches are performed prior to a purchase, there could be glitches that impact your ownership to a property that are not easily identified in a title search. Title insurance is a one-time charge that remains valid for the length of time that you remain the owner of a piece of real estate.
Mortgage Insurance (MI)
MI is mortgage insurance and is almost always required on mortgages for more than 80% of the purchase price. There is sometimes an up-front charge and a monthly bill, both based on the starting loan amount. How long MI remains depends on the loan program.
Additional Definition Of Common Lending Terminology
This article provides definition of common lending terminology. There will be other terminology that you encounter while obtaining a home loan or during the home buying process. For more assistance, contact Bradford Pratt at 781-316-5760 or firstname.lastname@example.org.