Mortgage Terms

As a first time home buyer in Florida or anywhere in the US you should familiarize your self with the industry terms so you can feel conferrable and informed when communicating with your mortgage loan officer and all other parties involved in the transaction. 

Here are some of the mortgage  terms that you should know

First time home buyer

  • An individual who has not held ownership in a principal residence during the three-year period ending on the date of the purchase.

  • For couples, if one spouse is/was a homeowner but the other has not owned a home, both spouses are considered first-time homebuyers.

  • A single parent who has only owned a home with a former spouse while married is considered a first-time homebuyer.

  • An individual who has only owned a principal residence not permanently affixed to a permanent foundation in accordance with applicable regulations (such as a mobile home).

  • An individual who has only owned a property not in compliance with state, local or model building codes and which cannot be brought into compliance for less than the cost of constructing a permanent structure.

Closing disclosure (CD)

A document that shows the actual terms and costs of a loan and the projected monthly payment

Discount points

Interest paid by the borrower to lower the interest rate on the loan

Escrow

Also called an impound account, it spreads the combined mortgage costs, property 
taxes and insurance premiums over the life of the loan into monthly payments

Home inspection

An examination of a property to determine its condition and to report any repairs needed.

Mortgage insurance (MI, MIP, PMI)

Insurance required by some loan programs when the down payment is less than 20 percent of the home’s value

Pre-qualified

A ballpark estimate provided by a lender after discussing a borrower’s financial situation

Pre-approval

Provided by a lender who has reviewed a borrower’s financial documentation and provided a max loan amount

Underwriting

Final evaluation of the documents and conditions needed to secure a loan

Appraisal

A report that provides an estimate of a property’s value

Annual percentage rate (APR)

The cost to borrow money expressed as a yearly percentage—includes the interest rate plus other charges or fees

Closing costs

Expenses above and beyond the price of the property (e.g., loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees, etc.)

Debt-to-income ratio (DTI)

Your monthly debt divided by your gross monthly income

Earnest money

Money a buyer puts as deposit  to show the seller that they’re serious about purchasing 
the property

Fixed-rate mortgage

A mortgage that has the same interest rate for the entire term of the loan

Loan-to-value (LTV)

Indicates the ratio of the loan amount to the appraised value of the property

Underwriting

Final evaluation of the documents and conditions needed to secure a loan

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Home Equity

Home equity is the  difference between the home's fair market value and the outstanding balance of all liens on the property.