Loan & Mortgage


If you are unfamiliar with the home buying process, these terms and procedures may be of value in your quest to buy your own home.

Prequalification 
Prequalification is the best way to get started. Ask a lender to analyze your current income, debt and credit history to qualify for a maximum loan amount. The loan amount plus your closing costs and down payment gives you the maximum sales price you can anticipate paying for a home. A certificate of prequalification does not mean that the mortgage loan is approved. Loan approval means you are a qualified buyer, ready, willing and able to perform.

Down Payments 
Down payments may vary from 0% to upwards of 25%. As an average, most home buyers make down payments in the 5%-15% range. You may choose to make a larger or smaller down payment if a specific amount is not required to qualify for your loan.

PITI
PITI refers to the four elements that make up the monthly payment.
Principal Repaying the original loan amount on a monthly basis
Interest The cost of borrowing the principal amount, repaid on a monthly basis 
Taxes Property taxes paid to a local government agency.
Insurance Homeowners insurance on the home. Also any mortgage insurance that is paid to protect the mortgage company.

Types of Mortgages

Fixed 
A fixed term as well as a fixed interest rate. The interest rate and term are fixed at the start of the mortgage. The monthly amount of the payment of principal and interest will not change during the term of the loan.

Adjustable 
Also known as an ARM (Adjustable Rate Mortgage). The interest rate on the mortgage will be adjusted up or down to current interest rate levels. The monthly amount for your principal and interest payment will go up or down with these rate changes. The rate is based on one of several indices that reflect the current cost of money.