Mortgages are an important part of your financial life, but a misunderstanding or lack of knowledge about them can have negative financial results. A survey conducted by real estate website giant Zillow.com showed that even though there are more homebuyers entering the market, a scary amount of them don’t know much of the basic terminology.
Make sure you know what your mortgage says by studying these common mortgage terms before you sign on the dotted line.
So, Security State Bank is providing a little definition session to help out. It’s time to break out the flashcards and get studying!
Adjustable-rate mortgage (ARM)- a mortgage in which the initial interest rate is normally fixed for a period of time after which it is reset periodically, often every month. The interest rate paid by the borrower will be based on a benchmark plus an additional spread, called an ARM margin.
Fixed-rate mortgage- a mortgage that has a fixed interest rate for the entire term of the loan. The homeowner will not have to contend with varying loan payment amounts that fluctuate with interest rate movements.
Annual percentage yield (APR)- the annual rate that is charged for borrowing expressed as a single percentage number that represents the actual yearly cost of funds over the term of a loan. This includes any fees or additional costs associated with the transaction; a credit card company might charge 1% a month, but the APR is 1% x 12 months = 12%.
Pre-approval- the process by which a lender determines whether you are qualified for a loan and the maximum amount you are eligible for.
Closing costs- expenses incurred during the transaction to buy your home, often shared between buyer and seller; can include loan origination fees, escrow payments, title insurance, attorney fees and other items.
There are of course other terms and mortgage aspects you need to know, but a Security State Bank mortgage lender can help you understand everything related to your mortgage. The last thing we want to do is have you sign a mortgage you don’t fully understand.
If you have any further questions about mortgage terms or wish to speak with an SSB mortgage lender, just give any of our locations a call today!