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Securing a home loan can be daunting for first-time homebuyers. There's a lot of industry jargon to understand and paperwork to read and sign. But it is vital for buyers to educate themselves about the process.
A home loan is likely to be the largest sum of money consumers will borrow at one time. You want to get the best deal on your home loan for yourself and your family. From adjustable-rate loans to the annual percentage rate, here's a quick glossary of terms. Print it out, and keep it handy. You are likey to hear these words and phrases when applying for home purchase loans.
* Adjustable-rate loans. These home loans may be offered at lower interest rates than fixed loans, but the mortgage rates will go up and down over the course of the loan.
* Annual percentage rate. The APR is the cost of your credit figured at an annual rate. It includes the interest rate, points, broker fees and other costs.
* Escrow. When money or documents are held by a third party before closing, you are putting it in escrow. Homeowners also put money into escrow to cover property taxes and insurance.
* Fixed-rate home loans. The interest rate stays the same on fixed-rate home loans, which often are paid back over 30 years.
* Loan origination fees. Lenders charge these fees for processing home loans.
* Points. These are fees owed the lender for the loan. One point represents 1 percent of the loan amount.
* Private mortgage insurance. PMI usually is required for home loans when the down payment is less than 20 percent of the sales price.