Let's Play Mortgage Lingo Bingo!
Do you want to buy a new home, but find that all those mortgage-related terms just leave you feeling more confused than excited? Fear not: Mortgage Lingo Bingo will educate you on the home loan process and define of many of the terms you might encounter along the way.
That’s me! The most important job I have is to educate you on the different options available to you so you can make a confident and informed choice about your home financing. I review your finances with you and help you determine which home loan option is the best for your financial situation. I also gather lots of documents from you to start your application moving through the process. Along the way, I’ll be in touch to let you know the status of your application, request any additional documentation we need, and provide answers to any questions you or the processing team may have.
Mortgage Insurance (MI) protects the lender if you fall behind on your mortgage payments. If you put down less than 20% when you buy your home, you’ll have to pay MI (also referred to as private mortgage insurance [PMI] or a mortgage insurance premium [MIP], depending on the type of loan product you choose). The good news is, you don’t have to pay MI forever. There are a few ways to get rid of it:
Once you have 20% equity invested in your home (loan-to-value [LTV] 80%), you can request to cancel your MI. Certain conditions apply, such as being current on your mortgage payments.
Your MI will automatically terminate once your equity reaches 22% (LTV 78%), as long as you are current on your mortgage payments.
Your MI will fully terminate once you reach the halfway point of your loan term (e.g., 15 years on a 30-year mortgage), even if you haven’t reached 78% LTV.
This simply means that you have “locked down” the interest rate on your mortgage and the points you are offered, and that rate cannot change if you close your loan before the lock expires. Locks are usually for 30, 45, or 60 days. When you select the loan program you want, you can guarantee yourself a specific interest rate, no matter how the market fluctuates, for the entire length of the lock. So even if it takes 30 days to close your loan, if your lock is still in effect, you’ll still have the low rate you started with.
Fixed Rate: Interest rate is fixed throughout the life of the loan. A better choice if you want stable payments and plan to live in your home long-term.
Adjustable Rate Mortgage (ARM): The interest rate fluctuates over time, affecting your monthly payment. May be a good option if you only plan to live in your home for a few years.