Homeowner’s insurance is a type of property insurance that covers losses and damages to a house, as well as assets within the home. When you purchase a home, it’s also necessary to purchase homeowner’s insurance to cover any losses or damages you might incur, such as natural disaster, theft, or damage.
A life cap refers to the maximum amount an interest rate on an adjustable rate loan can increase over the lifetime of the loan. A life cap is also known as an absolute interest rate or interest rate ceiling and keeps interest rates from ballooning too high over the term of the loan.
A mortgage broker shops several lenders, acting as a middle man between lending institutions and the borrower. A broker can compare mortgages from several different institutions, giving the borrower a better deal.
A bridge loan is a short-term loan a homeowner takes out against their property to finance the purchase of another property. It’s usually taken out for a period of a few weeks to up to three years.
Escrow is a legal arrangement in which a third party temporarily holds a sum of money or property until a particular condition has been met, such as the fulfillment of a purchase agreement. It is designed to protect both the buyer and the seller in a real estate transaction.
Closing costs are fees paid when you close on a mortgage loan. Typically, closing costs equal 3% to 5% of your total home loan balance. Appraisal fees, attorney’s fees, and inspection fees are examples of common closing costs. Closing costs are usually comprised of between 2-5% of the total purchase price of the home.
Discount points are also known as mortgage points. They’re fees homebuyers pay directly to the lender at the time of closing in exchange for reduced interest rates which can lower monthly mortgage payments. Discount points lower your interest rate in exchange for paying an upfront fee at closing.
Comparable sales, also known as comparables or comps, is a real estate appraisal term referring to properties with characteristics that are similar to a subject property whose value is being sought.
A conventional mortgage is a loan that’s not backed by a federal government agency. Instead, conventional mortgages are available through private lenders, such as banks, credit unions, and mortgage companies. Conventional loans are broken down into conforming and non-conforming loans.
A co-borrower is any additional borrower whose name appears on loan documents and whose income and credit history are used to qualify for the loan. Under this arrangement, all parties involved have an obligation to repay the loan.
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