Sometimes, we take for granted that not everyone is familiar with the language associated with a mortgage. Principal? Amortization? Escrow? Supercalifragilisticexpialodocious?
Below is a quick-and-dirty guide to some of the common terms you might hear thrown around when you start researching mortgages. If you go through Michigan First Mortgage, of course, you’ll be guided through the process by our outstanding team – they’ll make sure you fully understand everything before you sign on several dotted lines. But it never hurts to be armed with as much information as possible – learn to speak mortgage!
- Mortgage: a loan obtained to pay for a house and the land it sits on. The home and land is used as collateral on the loan; this means that if you don’t make your payments, the lender can take the home away.
- Principal: the amount actually borrowed to purchase the home.
- Interest: the amount the financial institution charges you to borrow their money. It’s usually a percentage based on current economic indicators.
- Amortization: the process by which a loan amount is divided into equal payments over the life of the loan.
- Closing costs: costs associated with “wrapping up” the loan; these typically include appraisals, title, broker fees, underwriting, and document prep, but many more costs are usually included.
- Origination fee: paid to a lender to process a loan application.
- Pre-approval: a process that determines how much money you are eligible to borrow before you apply for a loan.
Of course, this is just a start. Your mortgage lender should be more than willing to help you understand the entire process. If not, you really need to jump over to Michigan First Mortgage – you’ll be taken care of from start to finish!