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Key Terms to Know for Homeowners

December 23, 2024

Key Terms to Know for Homeowners

Buying your first home is exciting, but can feel overwhelming because of all the new terminology and acronyms. Understanding key home-buying terms is crucial to navigating the process smoothly, but juggling that while managing the rest of your home-buying journey can be challenging. To make it easier, TVFCU has created this handy glossary and chart of common acronyms for homeowners. Bookmark this page for quick reference, and if you’d like personalized assistance, use the link at the bottom to connect with our mortgage team.

Glossary:

Amortization: This is the process of gradually paying off your mortgage through monthly payments. Each payment covers both the loan’s principal (the amount borrowed) and the interest (the cost of borrowing).

Annual Percentage Rate (APR): The APR, shown on your mortgage papers, is a standardized way of showing you the total cost of borrowing money. The APR is a combination of the interest rate charged by the creditor along with any fees they might charge. The fees are expressed as percentages and added to the actual interest rate to calculate the total APR.

Closing Costs: These are fees and expenses you’ll pay when finalizing your home purchase. They include things like loan origination fees, title insurance, and escrow deposits.

Construction to Permanent Loan: a "single-close" loan that combines the financing for the construction of a new property with a traditional mortgage for the completed property.

Conventional Mortgage: Fixed-rate or Adjustable-rate (ARM)

Adjustable-Rate Mortgage (ARM): An ARM will have interest rates and payments that change over the life of the loan. Depending on the type of ARM you have, your interest rate may increase gradually every few years until it reaches a pre-set ceiling. When you apply for an ARM, you’ll be told how, when, and why the rates may change.

Fixed-Rate Mortgage: A mortgage with an interest rate that stays the same throughout the loan term. It offers predictable monthly payments, which many homeowners find reassuring.

Earnest Money: Earnest money is a deposit you pay to the seller of real property to show your good faith and intentions of getting a mortgage to buy the property. Depending on circumstances, you may or may not be able to get this money back if you decide not to complete the purchase.

Government Loans: VA, FHA, USDA, Bond Loans:

VA Loans: VA loans are available to veterans and active-duty military members, typically offering lower interest rates and requiring no down payment. They are backed by the Department of Veterans Affairs, making homeownership more accessible for those who have served.

FHA Loans: FHA loans are government-backed loans that are designed to help low-income borrowers qualify for a mortgage. They typically require lower down payments and have more flexible credit requirements.

USDA Loans: USDA loans are government-backed loans that serve rural areas. They are designed to promote homeownership in eligible rural and suburban regions, often offering zero down payment and competitive interest rates.

Bonds Loans: Bonds loans are state and local government-backed loans. These programs provide down payment assistance or lower mortgage rates to help low- and moderate-income families achieve homeownership.

Homeowners Association (HOA): If you live in a community with shared amenities, an HOA may manage them. HOAs charge fees and set rules to maintain the neighborhood’s standards.

Jumbo loans: Loans that exceed the maximum amount allowed for a conventional loan. They are typically used to purchase high-value properties.

Market Value: The current value of your home based on what the purchaser would pay. An appraisal is sometimes used to determine market value.

Mortgage: This is a legal document that pledges real property (such as a home) to the lender as security for the repayment of a debt.

Portfolio Loan: typically offered by smaller lenders or credit unions, and they may have more flexible underwriting requirements. These loans are kept on the lender’s books rather than being sold on the secondary market, allowing for customized terms to meet unique borrower needs.

Private Mortgage Insurance (PMI): Insurance written by a private company protecting the mortgage lender against financial loss occasioned by a borrower defaulting on the mortgage.

 

Did You Know?

Private Mortgage Insurance (PMI) is a common cost for homebuyers, typically adding 0.5% to 1.5% of the loan amount to your mortgage bill annually. This can add up to thousands of dollars over time—money that could go toward your home, savings, or other goals.

At TVFCU, we don’t require PMI for our portfolio loans. That means more of your money stays in your pocket, helping make homeownership more affordable. It’s just one of the ways we prioritize your financial well-being over unnecessary costs.

 

Ready to speak with an expert? Check out our Mortgage Team Directory to connect with someone for personalized assistance.

Common Acronyms