Adjustable-rate mortgages (ARMs) generally start out with an interest rate lower than a fixed-rate loan. This saves you money early on, and may help you qualify for a more expensive home. However, your rate is tied to a market index. As the index goes up or down, your interest rate and payments will also change at each scheduled adjustment period. "Rate caps" limit the amount your interest rate can change.
APR measures both the interest charged as well as any other costs associated with the loan, such as discount points or lender origination fees. Because APR is designed to show you the total cost of a loan, it can be useful when comparing loans from different lenders.
A buyer's agent is a real estate professional who represents you and only you in the purchase of a home. As a buyer, there's typically no cost to you in working with a buyer's agent, since he or she receives part of the commission paid by the seller when the house is sold. However, be sure to discuss compensation with any real estate agent before you start looking at homes, as conventions can vary by state and region.
Closing costs typically range from 2% to 6% of the loan amount depending on where you're buying. These costs include fees paid to state and local governments, as well as those associated with obtaining your mortgage or purchasing discount points.
An individual's credit score or rating by a credit bureau helps a lender determine how likely you are to repay a new loan. To calculate your score, a credit reporting agency considers factors such as how you pay your bills, your outstanding debt, how long you've had credit, the types you've had and how many times you've applied for credit.
Many lenders require a 20% down payment to avoid mortgage insurance. The amount of the down payment may also affect the interest rate you pay. Today, lenders offer a variety of programs that make it possible to buy a home with less than 20% down.
Fixed-rate mortgages remain the most popular type of mortgage. As the name implies, they offer a fixed interest rate for the life of the mortgage, meaning your monthly principal and interest payments never change.
A home equity loan is a fixed-rate loan based on the available equity in your home. The loan amount is given to you all at once, and you then pay it back in predictable, fixed monthly payments.
In contrast, a home equity line of credit (HELOC) is a form of revolving credit for which your home serves as collateral. The amount of the line is determined based on your credit and the available equity in your home. You may access as much or as little of your approved credit as you need at any time, providing you with maximum flexibility in using your home equity.
A professional inspector performs a pre-purchase home inspection. This is a visual examination of the readily-accessible areas of a home to provide an accurate evaluation of the home's condition at the time of inspection.
A form of insurance that protects your property against loss from theft, liability and most common disasters. Homeowners' insurance is also commonly known as hazard insurance. Mortgage lenders often require a borrower to maintain an amount of homeowners insurance on the property equal to the amount of the mortgage loan or the insurable value of the improvements.
The interest rate is the cost of borrowing, stated as a percentage, charged by a lender on the principal amount of your mortgage.
An introductory rate is a temporarily discounted rate for home equity lines of credit or adjustable-rate mortgage loans–a rate that is usually low and lasts only for an introductory period.
A loan that is for a larger dollar amount than the limits set by the Federal National Mortgage Association (FNMA) or Federal Home Loan Mortgage Corporation (FHLMC) guidelines.
A loan officer, or mortgage banker, is your day-to-day contact with a mortgage lender. Your loan officer can help you create a home-shopping budget and complete your mortgage application. In addition, he or she can help answer questions such as whether or not you should consider paying discount points and which type of loan may best suit your individual needs.
The loan origination fee is the amount charged by a lender or broker to originate a mortgage loan. A loan origination fee is usually one point, where each point is one percent of the loan amount. For example, a one point loan origination fee on a $100,000 mortgage would be $1,000.
You can pay your mortgage online using our award-winning secure site for customers at chase.com. You can also pay through alternative resources such as monthly billing statements.
Paying discount points will lower your interest rate (as well as your monthly payment) over the life of the loan. When you pay a discount point, you are essentially paying part of your interest to the lender upfront. One discount point is equal to 1% of the loan amount, paid at closing. For example, one point on a $100,000 loan would require an upfront payment of $1,000. Generally speaking, the longer you plan to remain in a property or hold your mortgage, the more advantageous it is to pay points. There is no requirement to pay discount points; whether or not you decide to pay points is completely up to you.
Before you start your home search, it's a good idea to see how much financing you may qualify for. At Chase, we're happy to help you become prequalified or conditionally approved for the loan that best suits your needs.
Prequalified means that we have helped you establish a home-buying budget. It is not a loan approval or commitment.
The principal balance is the outstanding amount of your mortgage loan, not including interest–or the amount on the note minus any principal payments you have made.
If you're making a down payment of less than 20%, many lenders will require that you obtain private mortgage insurance (PMI), which helps repay the lender should you default on your loan. PMI costs will likely result in a slight increase in your overall monthly payment, but can be a useful strategy for buying a house with a lower down payment.
The guarantee of a specific interest rate and/or points for a specific period of time. Some lenders may charge a fee for locking in an interest rate.
A seller's agent is a real estate professional that represents the seller. If you are working with a buyer's real estate agent, you generally won't have direct contact with the seller's agent. However, your agent will work closely with the seller's agent on your behalf.