All About Greenville SC Real Estate

If you are planning on buying a home in 2017, congratulations: you will be entering the real estate market at a time when the American economy is recovering at a solid and promising pace. If you are a first-time home buyer about to discover the world of mortgage financing, here are some useful terms for you to start becoming familiar with:

Mortgage

What we commonly refer to as a home loan is actually a conveyance of interest in a property that creates a security for the purpose of repayment. In other words, a mortgage is a debt instrument that ties up a home as the collateral.

Note

This is the actual legally binding instrument that formalizes the borrower's promise to make payments as determined by the mortgage.

Fixed Rate Mortgage

The most common type of home loan features an interest rate that stays constant throughout the life of the loan, also known as the term. In the United States, the 30-year fixed rate mortgage is used as a benchmark of the home lending economy.

Adjustable Rate Mortgage

Unlike the fixed rate home loan, the ARM features a variable rate of interest that can adjust periodically. ARM loans often include an interest-only feature that allows borrowers to only pay the interest rate for an agreed period.

Balloon Mortgage

This mortgage has two terms; the initial period features smaller monthly payments leading up to a large payment that must be satisfied before the second term kicks in. A 30-year mortgage with a balloon feature at the 20-year mark may require the borrower to pay off the remaining balance at the end of the first term.

Mortgage Rate Lock

Many borrowers become fixated on locking the interest rate of their mortgages, which means agreeing to a certain rate well before the closing. In some cases, locking a rate may require a cash payment or agreeing to additional costs that may actually work against the borrower.

Amortization

The way mortgages are structured, borrowers mostly pay for the interest in the beginning of the term and mostly the principal towards the end. With amortization, the monthly payments are calculated in a way that they remain the same throughout the life of the loan.

Closing

This is the final step in the process of executing a mortgage loan and the note. In many cases, a property is formally transferred to the new owner at the closing table.

Refinance

Mortgage loans do not have to be paid off at the full term. The process of refinancing consists of paying off an existing mortgage with a new one that would ideally feature a lower rate of interest and a new term. In some cases, the borrower may cash out of the equity built in the property at the same time the refinance closes.

Lien

Any legal claim against the title of a property is called a lien. When a mortgage is signed at closing, it becomes a lien on title that must be satisfied or cleared before the property can be transferred.

Title Insurance

A policy that protects borrowers and mortgage banks from lawsuits arising from liens and other encumbrances to title. The process of insuring title begins with an abstract and lien search to determine if a property can be legally transferred at closing.

Principal, Interest, Taxes, and Insurance

The PITI factor is the actual monthly expense that mortgage borrowers must manage as per the terms of the note. Taxes and insurance are calculated by the mortgage bank and placed into an escrow account that is kept for the purpose of satisfying local property taxes and to keep the house insured; in other words, the bank actively protects the collateral.