Is this your first time getting a mortgage? Perhaps, you’ve heard of some mortgage terms that sounded like a foreign language. Well, worry no more. This article will explain three of the most popular mortgage terms widely used in real estate.
In this video, Reach Home Loan’s expert realtor Samantha Outlaw provides a simple and quick breakdown of some of the most confusing terms you’re likely to come across in the real estate market.
Let’s get to it.
APR is a common term in mortgage contracts. Oftentimes, it’s misinterpreted as the interest rate. The APR is different from interest rates. Moreover, your interest rate is included in the APR, Samantha explains.
APR is the cumulative sum of all the fees you will pay when getting a mortgage, including your interest rate. For one, any points that you’re paying on mortgage broker fees and any other charges that will accompany getting a mortgage [are included in the APR as well.]
PMI is a term that always comes up in every mortgage, and many people don’t know what it means. Basically, PMI is insurance to the lender.
If you are getting a mortgage and you’re putting less than 20% down on your loan, you will be subject to paying PMI which is a private mortgage insurance that protects the lender.
The amount of PMI will depend on how much you can pay outright and your credit score. That’s why if you have the cash right now that can satisfy the 20% down payment, you can avoid paying for PMI.
Most first-time homebuyers are apprehensive about balloon payments. The concept of balloon payments isn’t common in residential purchases. However, it is still applicable.
You pay smaller mortgage payments upfront. And at the end of the life of the loan, you’ll pay a lump sum to add to the extra origin. This is usually double the amount of the payments you were making.
In other words, you’ll be making small payments for the duration of the loan. Upon reaching the end of the loan term, you’ll pay the remaining balance. However, this type of payment scheme is not typical for mortgages.
Still anxious about mortgages in general? Let one of our experienced team members help you in understanding home mortgages and walk you through any difficulties that you might encounter in the process of financing a home.
Reach Home Loans is dedicated to helping you actualize your vision of becoming a homeowner and real estate investor. To that end, we offer a number of home loan options, as well as comprehensive mortgage programs across Florida. Call us now at 954-703-1465 to get started.