If you’ve never bought a home before, you’re going to be introduced to the world of mortgage lingo – and some of it is downright confusing.
Before you begin shopping for the best rates on loans, have a peek at this mortgage term glossary.
Mortgage Term Glossary for Aspen Homebuyers
An adjustable-rate mortgage is a loan that has an initial fixed-rate period. After that period expires, your rate may change up to once a year; it could go up, or it could go down.
Amortization is the term lenders use to refer to the reduction of debt over the term of the loan. When you pay down the principal – the actual amount you borrowed – you’re amortizing.
An appraisal is simply a written estimate of a property’s value.
Closing costs are the expenses you’ll incur to buy the home, but they don’t include the home’s sale price.
A deed is a legal document that transfers ownership rights to a property.
Your earnest money is the cash you put down on a home to show the seller that you’re really going to buy it. When you close on the home, the earnest money you put down goes toward how much you owe the lender.
A fixed-rate mortgage is one of the most common types of mortgages. The interest rate doesn’t change over the term of the loan (a 30-year loan will have the same interest rate in 30 years as it did when you opened it, no matter what the market does).
Points, sometimes called discount points, are fees that you pay your lender at closing to lower your interest rate. For example, if you’re approved to buy a home with a 5 percent interest rate, you may be able to pay points to decrease it to 4.5 percent (or lower). Typically, one point equals one percent of your loan amount.
The principal is the balance you owe on your loan, not counting the interest.
Private Mortgage Insurance
Commonly called PMI, private mortgage insurance is the insurance you’ll have to buy if you’re putting down less than 20 percent of the home’s purchase price.
A title search is a search for liens and other encumbrances that could affect your ownership of the home after you buy it.
Underwriters are the people who determine what risks are associated with giving you a loan. They’re the ones who come up with the terms and conditions of loans; they evaluate each loan on a case-by-case basis.
Are You Buying a Home in Aspen?
We’d love to help you find the perfect home for sale in Aspen.
If you’re thinking of moving to Aspen or any of the surrounding communities, we’d love to help you find your dream home. Give us a call at 970-429-8275 or get in touch with us online. If you’re selling, get your free Aspen real estate market update and find out how we can sell your home quickly and at the best price.
While you’re here you can also browse our:
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- Woody Creek real estate listings