The documents you
may need may vary; so check with your lender. You will save
yourself a lot of worry and frustration by planning ahead.
To facilitate a smooth application process, gather these documents
early. Your application cannot be completed if you are unable
to produce each of the required items.
Making sense of mortgage
speak
Applying for a home loan
can be overwhelming. You will need to contend with mountains
of papers, contracts, documents; and do lots of planning and
coordination. Add to that a whole language unique to the mortgage
loan process and you have the makings of an experience unlike
any other.
Agreeing to the terms of your home
loan is no small matter. It is important to understand every
word of the contract and terms to which you are agreeing.
Although it may be easy to ignore terms you don't understand
now, you may be haunted by what you did not know when you
are ready to sell or refinance.
Eliminate the mystery by taking
the time to familiarize yourself with the terms that are common
among lenders. Following are explanations of some of the most
common terms used in the home loan process. Also, don't be
afraid to call on the expertise of your credit union representative.
They are happy to answer any questions that you have.
- Adjustable Rate Mortgage: The amount of
interest the lender charges on your principal varies.
ARM's generally carry provisions for minimum and maximum
interest rates. If you choose an adjustable rate mortgage,
you can expect to make higher payments when interest rates
move closer to the maximum and lower payments when rates
hover nearer the minimum.
- Annual Percentage Rate: The extension of
credit is a privilege, but it is not free. The annual
percentage rate of your loan gives you a picture of the
annual cost of the credit that had been extended to you.
You will find your annual percentage rate outlined in
your initial contract, and on your monthly statements.
- Appraisal: A trained professional will
evaluate your home to determine its value. The estimated
figure is derived from a combination of factors including
market conditions and the property itself.
- Closing Costs: These are costs, such as
points, taxes and title insurance that must be paid at
closing. These costs are not included in the cost of the
home and are paid separately. Depending on your situation,
there are a few lenders that may be able to extend you
a loan that includes the amount of purchase and the closing
costs.
- Default: Failure to repay your mortgage
loan according to the terms set forth in the loan contract.
- Equity: This term is used in reference
to the value in your home above the total amount of liens
against your home.
- Escrow: Your lender may hold money from
each payment. This money is collected to satisfy expenses
of home ownership such as taxes and insurance. If you
have an escrow account your mortgage company will pay
tax and insurance payments as they come due.
- Fixed Rate Mortgage: Unlike an adjustable
rate mortgage, a fixed rate mortgage maintains constant
interest rates throughout the life of the loan.
- Good Faith Estimate: Potential lenders
may provide written documentation of anticipated costs
and fees for your mortgage. This document is called a
good faith estimate. It will give you an idea of how much
you can expect to spend to secure a mortgage.
- Mortgage: Your mortgage is the amount of
the loan you secured to purchase your home, minus the
down payment. Your home serves as collateral and is considered
a guarantee for the loan.
- Points: Each point represents one percent
of the amount of your mortgage loan. Two points on a $100,000.00
mortgage loan equals $2,000.00.
Of course, there are a number of
other terms that you will encounter during the loan process.
Make sure you fully understand every word of your contract
before you sign on the dotted line.
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