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You are here: Home / Home Buying / Homebuyers Dictionary: 10 Terms You Should Understand When Buying a Home

Homebuyers Dictionary: 10 Terms You Should Understand When Buying a Home

March 10, 2021 By Ralph Gates

People buy homes only a few times in their lifetimes. Some only once. It makes sense that the industry jargon thrown around by lenders and those in the “biz” make it sound so confusing. You need to learn the lingo in order to understand what they’re saying. This homebuyer’s dictionary will help you understand 10 of the terms to know when buying a home.

1) Pre-Approval

This describes a process by which you are essentially pre-approved by your lender for a loan up to a specific dollar amount. For this process, lenders will verify financial information including information about your income, debts, and assets. If you have a pre-approval before beginning your home search, you know how much money you have to work with and sellers will give your offers more weight than those who do not have pre-approved loans.

2) Debt-to-Income (DTI) Ratio

 This ratio is used to determine your likely ability to repay your mortgage loan. Generally, banks prefer your total debt, including monthly mortgage payment, to be no greater than 36 percent of your total income.

3) Loan-to-Value (LTV) Ratio

 This value is about the appraised value of the home compared to the amount borrowed to purchase the home. People who borrow more than 80 percent of the home’s value will often pay higher interest rates as well as private mortgage insurance.

4) Down Payment

Depending on the type of loan you get for your home, a down payment may be a key element in your ability to secure financing. The term refers to the amount of money you’re prepared to put toward the purchase of your home upfront and in cash. Some lenders require as little as three percent down while others will require 20 percent as a down payment.

5) Private Mortgage Insurance (PMI)

If your down payment total is less than 20 percent of the home’s value, lenders will likely require you to purchase private mortgage insurance to protect them against losses if you’re unable to repay your debt.

6) Contingencies

When you make an offer on a home, you’ll want to make that offer contingent upon certain conditions being met, such as the appraisal meeting or exceeding the offered amount, the home passing inspection, or other types of requirements.

7) Appraisal

This is an impartial valuation of the home conducted by a disinterested third-party. The objective is to determine a value for the home to satisfy lenders. It is done at the expense of the purchaser.

8) Closing Costs

For some people, closing costs are complete and total surprises. Don’t let this happen to you. When you get to the closing table, there are various fees involved in the purchase of a home. These fees include things like attorney fees, title insurance, points, title search fees, and other expenses. The total value of these fees is usually between two and five percent of the mortgage loan amount.

9) Escrow

Most mortgage companies seek to protect their investments in your home. For this reason, they require certain payments, such as property taxes, private mortgage insurance, and homeowners insurance to be paid into an escrow account. The same holds true for the deposit you made when placing an offer on the home. It will be placed in an escrow account and then applied to the purchase of the home at closing.

10) Closing

This is the final step in the home buying process. During the closing, you will sign all the documents to complete the sale and accept responsibility for repaying the loan.

Mid America Mortgage understands the challenges you face when getting a mortgage and buying a home. Whether this is your first or one of many, we can help you sort out the fine print and get the financing you need for your home purchase. Contact Mid America Mortgage today to get the ball rolling.

Filed Under: Home Buying

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Mid America Mortgage Services, Inc, NMLS #1142067
200 E Walnut St.
Columbia, MO 65203

Phone: (573) 875-1100

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"I have had mortgages since 2004 in Columbia and have gone through a couple of banks, but over the last several years, the last couple of houses have been with Mid America Mortgage Services, Inc. Michelle has told us many times, 'I am not going to put you in a situation I am not comfortable with you being in, regardless of what it means for our company'.

Heidi always has a smile on her face and when you walk through the door, they recognize you and say “Hi”. I definitely recommend anyone who is in the home buying, purchasing, refinancing, upgrading business to go to Mid America Mortgage Services, Inc, ask for Michelle because they are going to be the best person you can work with."

John

"One of the main things that I loved about Michelle was she was so organized. She would meet us at any location she needed to, and to be honest she had the absolute lowest interest rate. They were always very transparent with fees so there were no surprises. Michelle was always super easy and we would always run in talk to her even it was for a few minutes. The best thing was the process was very, very smooth."

Chris and Jamie

"My wife and I have moved around quite a bit with my job so we have been through the process before, but we have never had anybody help us as much as Michelle West Mid America Mortgage Services, Inc did. We needed a loan for a new construction home and they were able to help us out with all of our needs and make us feel comfortable with what we were doing moving forward. They did a good job of walking us through the paperwork to make sure that we were pre-approved for a certain amount."

Jason

"When we were 18 and 19 years old no one wanted to help us get started. But Michelle took us under her wing 6 years ago next month. There is a lot of people out there that could of taken advantage of us many of times because we had no idea what was going on. For Michelle to stand beside us and walk us through, and not let us get into something that could get us in a lot of trouble means the world. We thank Michelle and we are extremely blessed to be able to work with her and her team. I have never even thought about talking to another lender and will always be loyal to Mid America Mortgage Services, Inc."

Cody and Morgan

"My family owns Tiger Ice Company. My experience with Ralph at Mid America started with Tiger Ice because we needed to expand our facility. When we went in to talk to Ralph at Mid America, he pretty much was straight up with us and told us we needed to go back to the drawing board. We came back with new numbers and a new plan, and we built the facility and everything was fine. Our dream of that would not have been possible at all without Mid America Mortgage Services, Inc and Ralph. They don’t tell you what you want to hear, they tell you the truth and that's what we weren't getting from other banks."

Andy

Selling our home of 17 years and building a new home was a very emotional time for our family. We were ready for the next adventure in our lives but knew there were numerous steps involved. The search for a mortgage officer was simple, Michelle was our choice. Her guidance and knowledge made the process as easy as possible. When we had questions, she was always there to give us an answer and discuss our options. The employees of Mid America Mortgage Services, Inc like Michelle will keep us returning for our mortgage needs.

Chad and Julee

"I’m a very loyal customer at Mid America Mortgage Services, Inc. I have an addiction to building houses and designing them, and they are always right there with me every step of the way helping me get the best loan product and the best rates whenever I am ready to build. They make sure you don’t get a loan that you can’t afford. The whole process was very smooth. I would recommend Mid America Mortgage Services, Inc to anyone because they are always there to teach you, help you, and make it easy for you every step of the way."

Kate

Michelle, I want to thank you for all of your efforts on the loan. I never knew how much information the needed! I appreciate your personal nature and ease of working together. Thank you for making this happen! :)

Amy

"I knew Jeanie Byland for a long time. She made the process so easy. One of the things I probably appreciated the most was that she didn't want to spoil the excitement of closing on a new house by showing up on closing day finding out that we owe a lot more than we thought. They were upfront with that information right from the get-go, and that’s because it’s just like they say, ‘They wouldn’t put you in a loan that they would be comfortable taking themselves.’”

Jamie

"They really explained the process to us very well and made us feel very comfortable, specifically Jeanie Byland. I have never asked a question that I felt dumb about. They really wanted to educate us and have been fantastic. The interest rates changed one day and they called me to say, ‘Hey we might ought to look into refinancing your loan’. I really felt like they had our best interest at heart."

Steve


Phone: (573) 875-1100
200 E Walnut St, Columbia, MO 65203

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