Buying a house, especially your first one, can be very confusing, even intimidating. At ChoiceOne Bank we strive to do our best to make the process clear and understandable. We recognize that the language used and terms included in your purchase agreement can be a challenge.
With that in mind, here’s a directory of the most common terms you will come across when applying for and getting a mortgage approval:
- Adjustable-Rate Mortgage (ARM): A mortgage loan with an interest rate subject to change over the term of the loan. The interest rate is tied to the performance of a specified market rate.
- Amortization: The paying down of principal over time. In a typical mortgage loan, the principal is scheduled to be paid off, or fully amortized, over the term of the loan.
- Conventional Loan: Most common mortgage program. These loans can have either a fixed or adjustable rate.
- Construction Loan: A temporary loan used to pay for the building of a house.
- FHA Loan: This is a mortgage issued by federally qualified lenders and insured by the Federal Housing Administration (FHA). FHA loans are designed to make housing affordable for families, especially with a lower down payment.
- Fixed-Rate Mortgage: A mortgage loan with an interest rate that does not change over the term of the loan.
- Home Equity: The difference between the current value of the house and the amount of money owed on the mortgage.
- Home Equity Line of Credit: An open credit line secured by the equity in your home.
- Home Equity Loan: A loan that is secured by a home and limited to one lump-sum amount.
- Home Improvement Loan: Money lent to a property owner for home repairs and remodeling.
- Home Loan: Money provided by a bank or lending institution to pay for a home.
- Interest Rate: A measure of the cost of borrowing.
- Annual Percentage Rate (APR): The annual rate charged for borrowing which expressed as a percentage that represents the actual yearly cost of funds over the term of a loan.
- Difference Between APR and Interest Rate: An interest rate doesn’t factor closing costs or other costs associated with a loan or credit. APR does account for costs associated with a loan.
- Loan-To-Value Ratio (LTV): In a mortgage loan, the amount borrowed is relative to the value of the property. An LTV of 80% means the mortgage loan is for 80% of the value of the property, with the borrower making a 20% down payment.
- Mortgage: A loan lent for the purpose of buying real estate and secured by the real estate.
- Mortgage Calculator: An online form that calculates how much a borrower will pay each month for a home loan.
- Mortgage Rate: The amount of interest charged on money lent for the purchase of a home.
- Mortgage Refinancing: The process of taking out a new mortgage with different terms or interest rates. The proceeds are used to pay off the original loan on the same property.
- MSHDA Loans
The Michigan State Housing Development Authority (MSHDA) provides financial assistance through partnerships to create and preserve safe and decent affordable housing. With MSHDA assistance, a borrower may be eligible for Down Payment Assistance on FHA and RD loans.
- Second Mortgage: A mortgage on real estate which has already been pledged as collateral against another mortgage. Typically used to draw cash from a home for other purposes.
- USDA RD Loans
A USDA home loan from the USDA loan program, also known as the USDA Rural Development Guaranteed Housing Loan Program, is a mortgage loan offered to rural property owners by the United States Department of Agriculture.
- VA Loan
A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA). The loan is issued by qualified lenders. The VA loan is designed to offer long-term financing to eligible American veterans and their surviving spouses (provided they do not remarry). ChoiceOne is a qualified VA lender.
Information is powerful. Just know, at ChoiceOne Bank, we’re committed to serving you with quick, friendly service to help you become a serious buyer. With the experience of our team of mortgage lenders, underwriters and local decision makers, we’ll help you understand all the terms, loans and process…and close your loan promptly within 28 days or less. We take care of you in every step of the process.
20-Minute Pre-Approvals and 28-Day Closings
All pre-approvals and mortgage loans are subject to approval of credit. Final loan approval is contingent on property appraisal, clearance of title and confirmation of current loan application information. A 28-day mortgage loan closing timeline is not applicable to government insured loans such as VA, FHA, USDA or MSHDA. Timeline calculations are based on completed application and is not a guarantee. Equal Housing Lender.