If you’re like most people, you’ll need to borrow money from a lender in order to buy a home in Tampa Bay.
That means you’re going to hear a lot of new terms floating around when it comes to financing… but what do they all mean?
Check out our mortgage term glossary to make sure you can pick up what your lender is laying down.
Mortgage Term Glossary for Tampa Bay Home Buyers
An adjustable-rate mortgage is a loan with an initial fixed-rate period; after that, your rate can change once each year (and it could go up or down).
Amortization is the reduction of debt over the term of the loan; it’s what happens when you pay off the principal, not the interest.
An appraisal is a written estimate of a property’s value.
Your closing costs are the expenses you’ll have to pay to buy the home (not counting the home’s sale price). (See “Are there hidden costs to buying a home?” for more information.)
The deed is the legal document that transfers ownership of a property.
Earnest money is the cash you put down to show the seller you’re serious about buying; when you close, this money is applied to how much you owe on the home.
A fixed-rate mortgage is a loan that has a fixed interest rate that won’t change over the term of the loan.
Points are fees you pay your lender at closing, and in most cases, one point equals one percent of your loan amount. The more points you pay, the lower your interest rate will be on your mortgage loan.
The principal is the balance you owe on your loan. The interest is separate; that’s what you’re paying the lender. The principal goes toward paying down the sales price of the home.
Private Mortgage Insurance
Private mortgage insurance, commonly called PMI, is the insurance many people are required to buy if they’re coming up with a down payment that’s lower than 20 percent of the home’s purchase price. (An exception: VA loans, in which you don’t need to buy PMI even if you don’t put any money down on the home.)
Your lender will most likely require a title search to make sure the seller is legally able to sell the property.
Underwriters determine the risks involved in a particular loan. They also come up with terms and conditions of loans on a case-by-case basis.
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