Home Mortgage Loan Terms; Time To Do Your Research

Have you been looking to purchase a new home? This should actually be a very good and fun time to be purchasing a house given that the real estate market is somewhat slow, prices are also low and what’s even more important is that interest rates are low too. Not only can you get a great price on a house, but you can also get a good home mortgage loan with a historically low interest rate. There are likewise rather a great deal of houses to choose from at the moment, making it a purchaser’s real estate market. If you are looking to purchase a brand-new house you ought to do your homework and get a great understanding of the real estate terminology that you will quickly come to see throughout the entire process when dealing in the real estate market.

Here are a few of the home mortgage loan terms that you are most likely to hear while in this process; rate of interest, length or term of loan, closing costs, variable rate loans, fixed rate loans, document taxes, velocity, origination costs, house equity, amortization, conventional financing, FHA loans, VA loans, points, deposit and personal mortgage insurance (PMI).

The rate of interest is among the most important of these terms that you need and should fully comprehend as this is the rate at which the lending institution will charge for giving you the loan and it will be included on your payments. This is usually revealed in terms of a percentage of the loan, so the lower the interest rate, the lower your monthly payments will be. The length of the loan is normally referred to as the term of the loan and this is the entire duration and or time that you need to pay the loan off. Many home loans will be taken out for a minimum of a fifteen year term with most lenders and most borrowers going for the thirty year term.

The closing expenses or closing costs of the loan take into account all the costs that become part of purchasing and offering the house. These costs will include title insurance coverage charges, expense of essential repairs, real estate agents and realtor’s commission charges, file stamp tax, points and many other costs.

We have what’s called fixed rate loans and variable rate loans and these are the two most commonly known choices that you usually pick from. A variable rate loan indicates that the rates of interest can increase or decrease according to the current interest rates and how the economy is. If the rate of interest falls, then this is a big benefit for you, the customer, as your payments will be lower. But if the interest rates increase, this can create great problems as your payments can increase out of control. A fixed rate loan is when the rates of interest stay the same for the entire and the specified term, normally five to ten years on ARM loans and even 15 to 30 years for regular home loans. With a fixed rate loan the rates of interest, and therefore your payments, will stay exactly the same for the entire term of the loan.

The term ‘points’ refers to loan discount rate points and these are the fees that are charged to the purchaser from the home loan provider. These are often referred to as pre-paid interest and can contribute to the closing expense amount. A point is equal to one percent of the overall loan amount. If you are borrowing $500,000 and are charged one point by the lender then you would have to pay $5,000 for pre-paid interest at the time of closing.

Personal Mortgage Insurance, or PMI, is an insurance that enables the buyer to make a smaller down payment, usually less than 20 percent on the home that they are purchasing. When you buy the home, the loan amount of your home mortgage will be the cost of the home minus your down payment.

The length of the loan is usually referred to as the term of the loan and this is the entire period that you have, usually stated in years, to pay the home loan off. The fixed rate loans and variable rate loans and pretty much the two basic alternatives that are typically offered when purchasing a home. Fixed rate loans are best if you want to know exactly what the loan payment will be throughout the entire term of your home loan.