10 Mortgage Terms You Should Know Before You Sign

10 Mortgage Terms You Should Know Before You Sign

Buying a home can be stressful, confusing, and make you question everything you thought you knew about buying a home. Here at DSLD Homes and DSLD Mortgage, we want to make the home buying process, easy, stress-free, and fun! A home is the biggest purchase you'll ever make, so we're here to educate you on the basic terms you should know when starting your home search.

 

Mortgage

The transfer of an interest in property to a lender as a security for a debt. This interest may be transferred with a Deed of Trust in some states. 

Settlement Costs/Closing Costs

The customary costs above and beyond the sales price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower at the time the GFE (Good Faith Estimate) is given.

Debt-to-Income (DTI) Ratio

A debt-to-income ratio is one way lenders measure your ability to manage the payments you make every month to repay the money you have borrowed.

Loan to Value (LTV) Ratio

A percentage calculated by dividing the amount to be borrowed by the price or appraised value of the home to be purchased (whichever is less). The loan value ratio is used to qualify borrowers for a mortgage, and the higher the LTV, the tighter the qualification guidelines for certain mortgage programs become. Low loan to value ratios are considered below 80%, and carry lower rates since borrowers are lower risk.

Down Payment

The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.

Loan Estimate

The loan estimate tells you important details about the loan you have requested. The lender must provide you a loan estimate within three business days of receiving your application. When you receive a loan estimate, the lender has not yet approved or denied your loan application. The loan estimate shows you what loan terms the lender expects to offer if you decide to move forward. If you decide to move forward, the lender will ask you for additional financial information.

Interest Rate

The charge by the lender for borrowing money expressed as a percentage.

Rate Lock

A rate lock happens when a lender guarantees, in writing, to give you a specific interest rate as long as your loan closes in a certain time period (usually 30 or 60 days) and there are no major changes in your loan application.

PITI: Principal, Interest, Taxes, and Insurance

The four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance goes into an escrow account to cover the fees when they are due.

Pre-Paid Items

Lenders often require the payment of items such as insurance premiums for private mortgage insurance, homeowner's insurance, and real estate taxes.

To learn more about the mortgage process and to set up an appointment with one our our Loan Originators, please visit the DSLD Mortgage website by clicking our logo below. Our trained Loan Originators will walk you through the entire process and work with your budget to figure out which type of loan is right for you!