A Guide to Mortgage Terminology
Shopping for your first home can be really exciting – and also really confusing. One thing that makes it more confusing is all the complicated lingo you’ll hear your real estate agent or loan officer throwing around: DTI, LTV, APR, and so on. Trying to sort out all these initials can feel like swimming through a bowl of alphabet soup.
Here’s a quick glossary to help you out. It covers some of the most important terms you’re likely to hear when you apply for a mortgage – not just what they mean, but why they matter to you as a home buyer.
What It Means: Amortization is the process of paying down the principal on your mortgage loan. When you make a mortgage payment, part of it pays the interest on the loan and part (a small part, at first) goes toward the principal. As your loan gets paid off, or amortizes, the share of each payment going toward the principal gets bigger.
Why It Matters:
Your lender will give you an amortization schedule showing how each payment you make is split between interest and principal. This schedule shows how fast you’ll gain equity (ownership) in your home. You can also use it to figure out how much money you could save by making extra payments toward the principal.
Agora Lending is a new type of mortgage lender. We use technology to keep our operational costs as low as possible. From closing costs to interest rates, we made it our mission to make the process of buying a home more streamlined and affordable. Get in touch with one of our mortgage specialists to learn more.