REO Proteams: Las Vegas Real Estate News

So you’ve finally decided to try making a mortgage in order for you to purchase that home on top of the hill of that house located near the beach. But before you go and proceed in taking that loan, it may be a wise idea that we take a look at some basic terms. When you finally decide and talk with the bank you would surely hear some these terms. Making the best decision and negotiating for the best deal is simple if you can equip yourself with basic knowledge on some of these terminologies.

What is a mortgage?

These are transactions made by a borrower (you) to a lender (financial institution such as banks) for the purpose of acquiring or purchasing homes.

The term Mortgage also actually refers to the contract made by the lender and borrower which is only terminated upon full payment of the loan or when the lender takes possession of the property in case the borrower defaults in payment or is not able to continue his obligations.

Mortgage Lending Terminologies

Downpayment

This is the initial amount paid for the buyer in financing the cost of the house. It is the amount subtracted from the total cost of the house to be financed by the bank or financial institution. A 5% downpayment is required by banks from the buyer for loan approval. 20% is the ideal figure for making a downpayment because it gives you an option of avoiding mortgage insurance that adds to the cost of the loan.

Private Mortgage Insurance (PMI)

Private mortgage insurance (PMI) is usually required for down payments lower than 20% percent. This is initiated by bank in order to protect itself from the risk of potential losses from loan defaults or foreclosures. PMI’s are not tax deductible, they add up to your monthly loan payments so making sure that you have at least a 20% downpayment is advised.

Amortization

A 30 year repayment is the most popular amortization schedule, however 15, 20, 25 year periods are available. Monthly payments are based on the type or length of amortization. The final figure or amount of monthly payment is calculated by multiplying the monthly interest on the amount borrowed to the loan and spread out through the repayment schedule.

Closing Costs

A “Good Faith” estimate is given to you once you have completed your application. This is a summary of projected cost such as fees for surveys, professional appraisals. It is important that you understand that they are just estimates and the final costs may vary.

Purchase Price

This is the amount agreed upon by the buyer and the seller (owner of the house).

Loan Type

There are different loan types tailored specifically for each type of buyer. Different types give you maximum flexibility. Finding the right one for you insures that you meet your obligations and make that monthly payment.

Be Smart and Understand

If you’ve finally decided in making a mortgage, learn the basics. If you plan on purchasing the house give time in understanding how mortgages work and what type would fit your needs. Buying a house is a lifetime decision; it greatly affects how we would be living our lives and entails a commitment. Be sure that you make that right decision by knowing the basic in and outs of the deal.

Reported by REOProteams

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