When shopping for a first home and a first mortgage, smart shoppers quickly realize that they have a lot of homework to do. The first thing you can do is study some of the basic vocabulary that is so specific to this industry. There are a lot of terms to pick up that you, as a first-time buyer, may not have ever heard. Here are a few you should know before you talk to your Wyndham Capital Mortgage advisor.
Principal
The principal on your loan is the amount you have contracted to borrow. It’s usually the purchase price minus any down payment you have made.
Interest
The interest on the loan is a percentage of the principal that the lender charges you for the privilege of securing the loan. This rate can vary depending on your credit score, the cost of the home, the type of mortgage you choose and other factors.
Collateral
Collateral is something of real value that you offer to secure the loan. Typically, the property you are buying will serve as the collateral that you will have to give back to the lender if you default on your loan.
Amortization
Amortization is the schedule of mortgage payments you will make over time to repay your loan. For a while, most of you payment will go to interest but after a certain period of time more and more will be paid towards the principal.
Escrow Account
A borrower pays a certain amount into an escrow account. Taxes and insurance payments are made from this account so that the lender is confident none have been forgotten and the buyer doesn’t have to remember to pay many different fees separately.
Adjustable Rate Mortgage
In an adjustable rate mortgage, the interest rate will change at certain times during the term of the loan. Your monthly payment could go up or down depending on market conditions.
Fixed Rate Mortgage
In a fixed rate mortgage, the interest rate may be slightly higher than with an adjustable rate but your monthly payments will remain consistent throughout the course of the loan.
Loan-to-Value (LTV)
Ratio This is the value of your loan in comparison to the value of the property itself. If your LTV ratio is high you may have to buy additional mortgage insurance.
This is just a list of a few basic terms. Many other specialized terms and topics should be discussed with your helpful Wyndham Capital Mortgage representative. He/She will be glad to help you decode industry terms and learn about your loan choices. Call us at 888-923-9911.
