Homebuyer | KNOW the 7 most important MORTGAGE words/definitions

Warren Oberholser
Warren Oberholser
Published on June 10, 2021

Hi, I’m Warren Oberholser. I’m a realtor in the East Bay Tri-Valley area in Northern California. My goal is to help both buyers and sellers get maximum results for one of their biggest investments, their home.

Homebuyers, are you getting a mortgage to purchase your home? I’m going to go over seven of the most important words you need to know so you can thoroughly understand the mortgage process.

Like anything you do for the first time, you’re about to face a whole new vocabulary when you purchase your home. Sure, you’ve likely heard some of these terms, but whether or not you know what they mean is an entirely different matter. Therefore, I’m going to break down seven of the most commonly confused terms you’ll encounter when you get a mortgage to purchase a home.

Number One: Closing Costs

Closing costs are just what they sound like, the cost to close the purchase process. These fees range from origination fees, notary fees, local taxes, and others, and some are negotiable. Your lender will send you a form known as a loan estimate within three days of receiving your application. This document contains important information including estimated closing costs. Use this form to compare this lender’s costs to other lenders when shopping for a mortgage.

Number Two: Down Payment

Most first-time homebuyers understand that unless you’re using cash to purchase a home, they will need a down payment. The confusion centers around who is making this requirement. Let me give you a hint, it’s not the home seller. Indeed, this is a lender requirement and the amount you’ll need to pay varies according to the risk factor you present to the lender. USDA, Rural Development, and Veterans Administration require no down payment for the loans they guarantee. Something to keep in mind, FHA offers low down payment options to certain borrowers. You may also find that you qualify for municipal, state, and federal down payment assistant programs. Work closely with your lender to find all the help that you’re entitled to.

Number Three: Escrow

Think of escrow as a special type of account that’s administered or regulated by a third party, in which all the documents and monies pertaining to the real estate transaction are kept until closing. Some of the items kept in an escrow account include the buyer’s earnest money deposit and the deed. There’s also commonly a second escrow account in which the lender keeps your taxes and insurance payment until they are due.

Number Four: PITI

This is your monthly loan payment and it stands for what is included in your payment. This would be principal, interest, taxes, and insurance.

Number Five: Points

You may hear people referring to buying down your mortgage rate. What they are referring to is the payment of points or percentage points of the loan. If you plan on living in your home for a long time, paying a point upfront will usually save you on money allowing you to get a lower interest rate.

Number Six: Security

You may hear this referred to as collateral, and the word means the same thing, but security is more often used in a mortgage transaction. The home that was purchased is the security for the loan.

Number Seven: Title Insurance

Since the home is the security for the loan, the lender will want to ensure that nobody else has a claim on it. A title insurance company will research the chain of title to make sure that there are no liens or any person who can claim inheritance on the property that may pop up down the line. This title insurance policy is a guarantee against this occurrence. I recommend speaking to a mortgage specialist for clarity on any of these terms I just went over. If you need a mortgage referral, I’m more than happy to provide it for you.

Wishing you all the best with your home purchase!

I hope this BLOG gives you some clarity on the home mortgage process, and I wish you all the best in getting your offer accepted.

I hope you enjoyed this article. Please let me know if you have any questions. Warren

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Hello…I work with both buyers and sellers in the Tri-Valley area of Northern California. The Tri-Valley is comprised of 6 cities: Pleasanton, Livermore, Dublin, San Ramon, Danville, and Alamo. To better understand what each city has to offer, I have created a Pros and Cons video and BLOG for each – (Pros & Cons for Pleasanton, Pros & Cons for Livermore, Pros & Cons for Dublin, Pros & Cons for San Ramon, Pros & Cons for Danville and Pros & Cons for Alamo). If you are thinking about purchasing or selling a home, please reach out to me by text, phone, or email. If it is convenient, I can schedule a Zoom chat so we can discuss your home goals. Wishing you all the best on your home journey. Cheers!

Warren Oberholser

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Warren Oberholser

eXp Realty

[email protected]

(925) 980-4603

DRE # 01861944

ALL MATERIAL PRESENTED HEREIN IS INTENDED FOR INFORMATIONAL PURPOSES ONLY. THE INFORMATION CONTAINED HEREIN HAS BEEN OBTAINED THROUGH SOURCES DEEMED RELIABLE BUT CANNOT BE GUARANTEED AS TO ITS ACCURACY. SUBJECT MATERIAL MAY HAVE ERRORS, OMISSIONS, CHANGES OR WITHDRAWAL WITHOUT NOTICE. ANY INFORMATION OF SPECIAL INTEREST SHOULD BE OBTAINED THROUGH INDEPENDENT VERIFICATION.

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