Home-Buying Lingo Explained: All Things Mortgage, Part II
In Part I of this explainer series, we guided potential ICI Homes customers and readers through some basic, but not always understandable, mortgage terms and acronyms.
Every industry has a shortcut language that makes sense to those who work in it, or are familiar with it. But that terminology can be impenetrable for folks who are new to it.
Today, we’re back with more deconstructions of mortgage terms and other key words you’ll hear during the home-buying and building process.
Here’s home-buying lingo explained, for all things mortgage, Part II.
Pre-approval
This term might be a bit more self-explanatory, but it’s also an important step in the process.
For most of us, the journey to home ownership requires a mortgage. This means applying for one — also known as a home loan — from a bank, credit union or other mortgage lender.
Once you’re ready to search for a new home, it’s important to know your price range so you won’t waste time and effort on homes that don’t meet your financial parameters. You might have a good idea what price home you’re seeking, but pre-approval makes that price range real.
To be pre-approved, you must produce all the personal financial history required by your lender, which uses that info to determine your mortgage eligibility.
Pre-approval means you’ve been vetted for a mortgage, along with providing a price range to work within. For example, you might be pre-approved for a mortgage in the $350-400,000 range.
Doing this beforehand not only helps focus your search, it also speeds up the process on the back end. Pre-approval can reduce the odds of falling for a home outside your price range, or having to pause the buying process once you find what you want, while seeking pre-approval.
Equity
We mentioned this term as generally understood in Part 1, but not everyone has been through the home-buying or building process, and sometimes folks hesitate to ask for an explanation they feel they should know.
Don’t worry — we’re glad to help. If you’re a homeowner paying down your current mortgage, equity means the portion of your home that you’ve paid for, and thus own. It’s the value of that paid-for portion.
If you’re within sight of those last few monthly mortgage payments, congratulations! You almost own your current home. And, if you’ve paid off your current mortgage, you own your home in totality. Or, all of its equity (value, worth) is now yours.
Closing costs
These are common fees you’ll pay when you buy your new custom Florida home. The “closing” is the meeting where you sign all the paperwork and formally enact your mortgage. It’s also where you’ll write the check for your down payment on your new home.
Examples of typical closing costs include an appraisal fee, a loan processing fee and a home inspection fee.
