Edina MN Mortgage Broker Financing The Twin Cities and Greater Minnesota-Venture Development Inc

Twentv Terms You Must Know and Understand
Before You Sign Off On Your Mortgage!

Buying a home is a major achievement in most everyone's life. Pride of ownership, tax breaks and equity are just a few of the many benefits you'll enjoy with your new home. Your home purchase may also be one of the largest you will ever make.

During the emotional excitement of buying a home, you may encounter terms with which you are unfamiliar. For some,it can be bit embarrassingt o ask what they consider too many questions. Others may make a note of their questions but simply forget to revisit those points. To ensure that you have complete confidence during your home loan process, invest a moment to read this report and become familiar with the concepts and terms you'll encounter. Knowledge is power and the more you know the more successful your decisions will be and the more soundly you will sleep at night having made them.

Adjustable Rate Mortgage (ARM)
Also referred to as a Variable Rate Mortgage. A mortgage in which the interest rate isadjusted periodically based on a pre-selected index.

Annual Percentage Rate (APR)
An interest rate that reflects the cost of a mortgage as a yearly rate. This rate takes into account any points and fees and is based on the loan going to it's full-term.

Assumption
An agreement between buyer and seller in which the buyer assumes responsibility for the seller's existing mortgage. This agreement usually saves the buyer money because closing costs and the current interest rate, possibly higher, do not apply.

Buy-down
A method of lowering the buyer's monthlypayment for a short period of time. The lender or homebuilder subsidizes the mortgage by lowering the interest rate for the first few years of a loan.

Caps
A limit in the amount the interest rate or monthlypayments for an adjustable ratemortgage that may change.

Closing
Also referred to as settlement. The meeting at the conclusion of a real estate sale in which the property and funds are exchanged between the two parties involved.

Debt-to-Income Ratio
The ratio, expresseda s a percentage,w hich results from dividing a borrower's monthly payment obligation on long-term debts by the borrower's gross monthly income.

Discount Points
Prepaid interest assesseda t closing by the lender. A point is equal to 1 percent of the loan amount.

Down Payment
Cash paid by the buyer at closing that makes up the difference between purchase price and the mortgage amount.

Earnest Money
Money given by a buyer to a seller as a deposit to commit the buyer to the future transaction. Earnest money is subtracted from closing costs.

Equity
The value an owner has in real estate over and above the obligation against the property. Equity is fair market value minus the current indebtedness.

Escrow
Funds given to a third party which will be held to cover payments such as tax or insurance payments and earnest money deposits.

Fixed Rate Mortgage
A mortgage in which the interest rate remains constant throughout the life of the loan.

Loan-to-Value Ratio
The ratio between the amount of the mortgage loan and the appraised value of the property.

Market Value
The price that aproperty could possibly bring in the marketplace.

Mortgage Insurance
Insurance that protects lenders against loss if a borrower defaults. This is required when the loan-to-value ratio is greater than 80 percent.

Origination Fee
A fee charged by a lender for processing a loan application; usually computed as a percentage of the loan.

PITI
Refers to Principal, Interest, Taxes, and Insurance.

Underwriting
The decision-making process of granting a loan to a potential homebuyer.

Variable Rate Mortgage
Also referred to as Adjustable Rate Mortgage. A mortgage in which the interest rate is adjusted periodically based on a pre-selected index.

We sincerely hope this information will help you in gaining a better understanding of the mortgage process. If we maybe of any further service please contact our office. We will consider it a privilege to be of service to you! If you would like a free consultation, call our office at 952-285-4319.

Seek a Qualified Mortgage Consultant to Ensure the Best Results.  Home Buyers Face Decisions that Affect Their Long-Term Financial Picture
By Patti Mazzara, Vice President

Venture Development Inc. Edina, MN – Taking the step into home ownership is one of the most important financial decisions a person will make in their lifetime. There are many factors to consider when embarking on this venture. Literally hundreds of loan programs are available, and it is important to find the one that best fits your personal long-term goals. First and foremost, you must have a mortgage consultant in your corner that is willing to take the time to know what your long-term goals are. Communication is the key factor here.

Curious prospective home buyers sometimes turn to Internet-based services just to see what current interest rates are. But a faceless web site will not take the prospect’s future financial planning into consideration or guide the potential borrower through the many nuances of the loan process. When shopping for a home loan, be wary of web-based services that offer programs to reel prospects in with attractive rates that are based upon unrealistic time frames.

If a lender is offering a terrific rate based on a 10-day lock-in period, it is unlikely that the potential home owner would actually be able to find their dream home, get through the negotiation process and win approval from a lender within such a short period of time. This is called short-pricing, and when it comes time to close the transaction, the rate that was originally offered is simply no longer available. As a result, the unfortunate prospect is bulldozed into a loan program with a higher interest rate.

It is highly unlikely that a qualified loan originator whose business is based upon referrals will use unscrupulous tactics such as this to get new customers in the door! Once you have found a mortgage consultant that you feel comfortable working with, lay your goals out on the table because it will have a tremendous impact on choosing a loan program that meets your specific needs. One of the most important factors to consider is how long you wish to borrow the money for. For example, if you know you will only be in the home for five years, it wouldn’t make sense to opt for a 30-year loan program or pay points up front to secure a lower interest rate. You would not be in the home long enough to benefit from such action.

Your mortgage consultant should be able to narrow down a selection of programs based on the information that you have provided, and present you with an easy-to-read spreadsheet that clearly defines viable options for your interest rate and amortization schedule, monthly payment and any potential savings you may realize by paying points up front. Moreover, a reputable loan originator will not hesitate to share this information with your tax consultant or financial planner so they may offer additional feedback on your behalf.  Home ownership imparts a rewarding vehicle for building wealth and a strong financial future. The mortgage consultant that you choose should be there not only when your loan closes, but should also provide you with ongoing service to assist you in managing that debt over time.