NuVision FCU March 2015
Shopping for a Mortgage Loan? Know the Talk Before You Shop

In about a month or so, it won't just be spring. It'll be home selling and buying season, and you'll start seeing the "For Sale" signs posted in yards as well as online advertisements beckoning prospective homebuyers.

But before you get caught up in the process, familiarize yourself with the following 10 terms - especially if this is your first time making one of the biggest purchases of your life.

1. Fixed-rate mortgage. This means the interest rate you pay on your home loan won't change, no matter what fluctuations happen in the marketplace.

2. Adjustable-rate mortgage. Also known as an ARM, this is essentially the opposite of a fixed-rate mortgage. At NuVision, your ARM is fixed for a period of time, and then adjusts for the duration of the loan. Your rate can go up or down depending on the rate environment.

3. Prequalified. This can be a confusing term, mostly because homebuyers tend to mix it up with preapproved. If your lender tells you that you're prequalified for a house, that's a good start - but you're still a long way from being a homeowner.

You'll want to get Pre-Approved before you shop and make an offer on a house. Pre-Approvals require the submission of many more documents, such as pay stubs, bank statements and tax returns. Preapprovals are for homeowners who are ready to commit to buying a house. If you're preapproved, you've been told that the bank will lend you money for a house.

4. Conventional loans. These are the typical loans that many people, but not all, apply for when they want a mortgage. However, with the new guidelines from Fannie Mae and Freddie Mac, you can now put a down payment as low as 3 percent.

5. Federal Housing Administration loans. Also known as FHA loans, these are excellent for first-time home buyers. In addition to more relaxed credit scores and lower upfront costs, the down payment can be as low as 3 percent."

6. Appraisal. This is an estimate that determines what your property is worth.

7. Private mortgage insurance. This is a monthly insurance payment you'll have to pay if the down payment on your house is less than 20 percent of the appraised value or sale price. Typically, after your payments reach 20 percent of the value of your home, you stop paying PMI.

8. Closing costs. These are fees related to buying a house that your lender charges you, or you rack up from various third parties, such as a home inspector. According to the online real estate database, expect your closing costs to be 2 to 5 percent of the purchase price of your home.

9. Points. One point is a charge equal to 1 percent of the loan amount. So if you're buying a $200,000 house, and a lender is charging you 2 points, that's $4,000. Three points, $6,000. The more points you pay, the lower your interest rate will be. You'll gain the most from paying points if you are going to stay with your loan for a long period of time.

10. Escrow. The word can be used in a few different ways, but when you think escrow, think of a third, neutral party. For instance, you may have looked at a house, loved it, made an offer and offered a deposit - which would then be put in escrow. You might also hear your lender talking about an escrow account where your property taxes and homeowners insurance go until they're paid.

Knowing these 10 things will help you out in the process. And there's always an experience NuVision Real Estate Loan Consultant standing by to guide your through the process and answer all of your questions. Find out today how much house you qualify for by calling 800.444.6327.

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