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RESOURCES

THE PATH TO HOMEOWNERSHIP

If you're a first-time homebuyer, the mortgage process may seem complicated. We're here to share our knowledge and make you a smart homeowner for life. Below is some basic information on the homebuying process.

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Find a Mortgage Broker

That's Me!

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Get Pre-Approved

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Complete an application and provide your financial documents (such as: pay stubs, W2’s, banks statements and mortgage credit report, etc.) to be reviewed. Then a letter can be provided to you/realtor with the amount you are qualified to finance.

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Make an Offer

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Once you find the home you want to make an offer on, It’s time to run the numbers. Do you have enough for the down payment? Can you afford the estimated monthly payment on the home? Be sure to factor in costs like property taxes, HOA dues, insurance and maintenance ( I can help you with this). Have your real estate agent run comps, identifying similar for-sale homes in the area to help you get a feel for an appropriate offer price. Upon reviewing your offer, the seller might accept your offer as-is, decline the offer altogether or counter the offer to start the negotiating process. If the seller accepts your offer, they will sign the purchase and sale contract. If they decline your offer, negotiations end. If they counter, you can either accept their counteroffer or counter back.

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Complete Your
Mortgage Application

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Process Your Mortgage

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Your loan officer/ loan processor collects the many documents necessary for your application. An underwriter then verifies your identification, checks your credit history and assesses your financial situation — including your income, cash reserves, equity investment, financial assets and other risk factors.

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Mortgage Underwriting

A mortgage underwriter’s job is to assess delinquency risk, meaning the overall risk that you would not repay the mortgage. To do so, the underwriter evaluates factors that help the lender understand your financial situation, including:

 

Your credit score 

Your credit report

The property you intend to buy

 

The underwriter then documents their assessments and weigh various elements of your loan application as a whole when deciding whether they think the risk level is acceptable.

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Close on Your Home

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The home closing is the last chapter of this long home buying process. This is where you sign off on the deal and transfer the last of the funds. At the end of closing, the deed will be recorded, and the home will be yours. The closing is handled by a neutral third party closing agent. This may be a title company or a real estate attorney (more on this below).

At closing, significant events include:

  • A home’s title are transferred from seller to buyer

  • The proceeds of the sale are distributed to the seller

  • If the home is financed, the buyers sign the mortgage note

 

The buyer and/or seller pay other fees, too. This may include real estate commissions, title insurance, and pro-rated property taxes.

Ready to Move In!

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First-Time Homebuyer
  • 5/1 Adjustable Rate Mortgage
    A type of Adjustable Rate Mortgage where the interest rate changes periodically. The rate is fixed for five years, after which it will adjust every year.
  • Acceleration Clause
    The right of a lender to demand immediate repayment of a loan in full, minus interest. Typically invoked if a borrower defaults on a loan.
  • Acceptance
    The mutual agreement between a buyer and seller to enter into a contract bound to the terms of the offer
  • Account Termination Fee
    The fee that is possible to be charged if a buyer pays their mortgage in full and terminates the home equity line of credit before five years have elapsed.
  • Additional Principal Payment
    Payments from the borrower that are more than the scheduled principal payment amount. This is done in order to save on interest accruing over the life of a loan, and/or to pay off the loan early.
  • Adjustable Rate Mortgage (ARM)
    With an ARM, the interest rate changes at a certain point, typically after three to five years. The interest rate is typically fixed for the first several years of the mortgage, often a low rate, and then changes on a monthly, annual or other set interval basis. When the interest rate changes, so does the interest portion of the borrower's monthly payment.
  •  Adjustment Cap
    The limit for how much the variable interest rate on a mortgage can decrease or increase within an adjustment period.
  • Adjustment Date
    The predetermined date that the interest rate changes for adjustable-rate mortgages.
  • Adjustment Interval
    The period of time after which the interest changes on an Adjustable-Rate Mortgage.
  • Affordability Analysis
    The thorough analysis of the borrower's ability to afford the fees associated to purchase a home. Factors like income, liabilities/bills, currently available funds, and credit are considered.
  • Amortization
    The process of paying off the outstanding balance of a loan in regular installments. Each payment covers both part of the principle- the initial amount of money borrowed - and the interest on that principle.
  • Amortization Term
    The amount of time to pay off (amortize) the loan, broken down into months. For instance, a standard 30-year fixed-rate mortgage amortization term is 360 months.
  • Application Fee
    A fee some lenders charge to accept a loan application.
  • Appraisal
    An analysis by a professional appraiser comparing other sales of nearby homes to estimate a home’s value.
  • Appraisal contingency
    The contingency in the homebuying contract that states that the property must appraise at the value that is equal to, or greater than, your offering price.
  • Appreciation
    The gradual increase in value of a property over time, not counting value-adding improvements.
  • APR (annual percentage rate)
    A measure of closing costs including points, origination fees and other credit charges included in mortgage financing expressed as an annual interest percentage.
  • ARM margin
    The margin on an Adjustable-rate mortgage is the interest a borrower must pay in addition to the normal index rate.
  • As-Is
    An “as is” property is offered in its present condition, including any repairs or maintenance that must be performed to make it habitable.
  • Assessed Value
    The value of a piece of real estate as set by taxing authorities.
  • Assets
    The more high-value assets you have, the less risky you'll appear to lenders because you have more financial resources to draw from.
  • Assignment
    The process of transferring a contract/terms of a loan, from one borrower to another.
  • Assumable Loan
    A loan that can be taken over or transferred to a buyer.
  • Automated underwriting
    An automated process using technology to analyze a borrower’s credit profile to recommend approval or denial of a loan.
  • Balance Sheet
    An up-to-date financial statement that shows a buyer's total assets, liabilities, and total net worth.
  • Balloon Mortgage
    A type of mortgage that features a fixed-rate for 5-7 years, then requires the borrower to to immediately pay it in full after that time.
  • Balloon Payment
    A final, larger-than-usual payment at the end of a balloon mortgage.
  • Base Rate
    The interest rate that is used as the basis for pricing variable-rates mortgages and loans.
  • Bond
    A certificate that accrues interest with a maturity date. In the context of a mortgage, a real estate bond is a predetermined obligation that is secured by either a mortgage or a deed of trust.
  • Break Even Point
    The point where total income is equal to total expenses, used to determine purchasing discount points for mortgages.
  • Bridge Loan
    A type of mortgage financing utilized between the termination of one loan and the start of another loan; typically used when a borrower transitions between homes.
  • Broker
    A mortgage expert who helps clients with the mortgage process and arranges loans for them.
  • Buydown
    A practice in which the seller of a home subsidizes the buyer so that they can qualify for a mortgage and purchase the property. The seller typically will increase the price of the home to compensate.
  • Caps
    The maximum percentage by which a ARM can change after an adjustment period.
  • Cash-Out Refinance
    A mortgage that replaces an existing loan, is larger than the balance on the existing loan and pays out the difference in cash to the borrower.
  • Ceiling rate
    The absolute maximum interest rate that can possibly accrue on an adjustable-rate mortgage (ARM).
  • Certificate of Eligibility
    A Veterans Administration provided document that proves the borrower is eligible for a VA loan.
  • Certificate of Reasonable Value
    A certificate that proves the Veterans Administration has had a property appraised for its current market value.
  • Certificate of title
    A statement from a title company or attorney stating the owner of the title to a real estate.
  • Chain of title
    The history of the title certificate (and all additional relevant documents) of real property, from the earliest incarnation of the title to the most recent version.
  • Clear title
    A title that is free of all liens, legally undisputable to any question of the ownership of a property.
  • Closing
    Typically the last phase of the homebuying process. The final paperwork is completed and the transfer of ownership begins.
  • Closing Costs (Cash to  Close)
    Other fees you may encounter when finalizing your mortgage. Closing costs typically include your origination fee, along with fees associated with your home inspection, appraisal, application, title insurance, credit check and more.
  • Closing Disclosure
    A final evaluation of the various costs and fees associated with the homebuying process. The Closing Disclosure features the loan terms, monthly rates, taxes, and other important financial information about the property.
  • Closing statement
    The accounting and total records of the funds given to the buyer and seller before a real estate purchase closes.
  • Co-borrower
    Any additional person who assumes equal responsibility for repayment of a mortgage, who accepts both the terms and the proceeds of the mortgage.
  • Co-signer
    A co-signer is an individual who has agreed to assume the borrower's debt in the event they are no longer able to pay the loan. If a borrower defaults on a loan, the lender may hold the co-signer responsible. Co signers are sometimes required in the event that a borrower has damaged credit or other concerns.
  • Collateral
    Assets like homes and vehicles, used and leveraged by borrowers for securing repayment of loans from lenders. The assent can be forclosed upon if the loan isn't repaid.
  • Collection
    The process of making a delinquent loan or mortgage current. If not possible, then the borrower proceeds in filing for foreclosure.
  • Combination Loan
    When a borrower is granted two distinct loans for the same purchase. For example, a borrower could take out a loan to cover construction costs of a new home, followed by a seperate, traditional mortgage. A borrower might also take out a loan to cover their down payment, and then a separate loan for the property itself.
  • Combined loan-to-value ratio  (CLTV)
    The Combined Loan to Value Ratio of a property is similar to the regular LTV of a property - the difference is that the Combined LTV Ratio factors in ALL the loans on that property. The total value of each loan together is divided by the total value of the property, producing the CLTV.
  • Comparables (comps)
    Comparables are different properties that a potential buyer might compare against one another, hence the name. Comparing properties gives a buyer a sense of what kind of home they may be able to afford in the area they are looking in.
  • Compound interest
    Simply put, compound interest is increased interest that a loan accrues as it is effected by interest. The value of an unpaid loan increases over time at a fixed percentage known as interest. As the total amount increases, so does the percentage, which is added to the total. For example, if a loan of $100 has a 10% interest rate, the balance will stand at $110 after 1 year. As 10% of 110 is 11, the following year the balance will increase by $11 - and so on, for as long as balance of the loan continues to grow.
  • Comps
    Recent sales of similar properties used to estimate a property’s fair market value.
  • Conforming Loan
    A loan type where the initial balance is less than or equal to the maximum amount set by the Federal mortgage providers.
  • Construction loan
    A construction loan is a loan taken out specifcally to finance new construction or renovation on a property. ∙
  • Contingencies
    Homebuyers can make their offer contingent upon certain requirements, such as the seller completing necessary repairs or improvements to the property.
  • Conventional Mortgage
    A mortgage loan program that is not insured by any government agency.
  • Conversion
    The process by which a borrower changes an non-fixed (adjustable or balloon) mortgage into a fixed-rate mortgage.
  • Convertible ARM
    A Convertible ARM works just like a regular ARM - however, after a set number of times, the borrower may convert their loan to a fixed-rate mortgage.
  • Conveyance
    Conveyance is the process through which a property transfers legal ownership.
  • Credit Report
    Credit reports give lenders a sense of how well you've historically managed your accounts, which helps them predict how likely you would be to default on a home loan.
  •  Credit score
    The information on your credit reports.
  • Date of possession
    The date a buyer is entitled to move into a purchased home.
  • Debt-to-Income Ratio
    A figure that shows how your debt obligations compare with your gross (pretax) monthly income. It is calculated by dividing monthly debt payments by gross monthly income.
  • Deed
    The legal document that transfers title to a property from one person to another.
  • Deed of trust
    A deed of trust, while similar to a mortgage, is distinct. A mortgage is between only two parties - the lender and the borrower. A deed of trust adds a third party to the equation; this entity holds the rights to the property until the borrower repays the loan in full.
  • Default
    When a borrower fails to repay a loan.
  • Delinquency
    When a borrower fails to make loan payments on time.
  • Discount points
    Money a borrower may pay in advance to reduce the interest rate on the loan.
  • Down payment
    Money paid upfront from the borrower’s own funds. Mortgage lenders generally require a substantial down payment to demonstrate that you're financially healthy and invested in the purchase. This amount is due upon completion of the closing paperwork for your mortgage, and your loan makes up the rest of the purchase price.
  • Draw Mortgage
    A draw mortgage is a type of construction loan where money is allocated over time. As construction on a new property progresses, the lender will disburse a predetermined amount to cover the costs. This differs from a completion mortgage, where the money is granted to the builder only once construction finishes.
  • Draw period
    A HELOC, or home equity line of credit, is divided into two periods of time - the draw period, where the funds provided by the HELOC are available for withdrawal and use, and the repayment period, where the loan must begin to be repaid.
  • Earnest Money
    A deposit offered by a buyer as a token of good faith when an offer on a home is made.
  • Encumbrance
    An encumbrance is any legal restriction of usage or ownership on a property. This could be a mortgage, a zoning restriction, a lien, or something else.
  • Entitlement
    The amount of money that the Veterans Association will guarantee on a loan.
  • Equity
    The difference between the value of a home and the outstanding balance on the mortgage.
  • Escrow
    A savings account set up by your lender to collect and pay property taxes, homeowners insurance and mortgage insurance as they come due.
  • Fair market value
    The fair market value of a property is the amount it would sell for on the open market assuming both parties are fully aware of the facts and conditions of the property, have an unrestricted period of time to work with, and are acting objectively. Fair market value is often used to determine tax rates and insurance payouts.
  • Fannie Mae
    The Federal National Mortgage Association, often referred to as Fannie Mae, is government-sponsored enterprise that exists to provide mortgages to middle- and low-income buyers. Fannie Mae buys mortgages on the secondary market, and then pools them into mortgage-backed securities. This creates liquidity in the mortgage market that enables lenders to underwrite more mortgages and make them available to more people.
  • Federal Home Loan Corporation (Freddie Mac)
    A federally-backed mortgage company. Enables banks to lend more money to homebuyers. Loans that adhere to Fannie Mae and Freddie Mac lending standards are called conforming loans.
  • Federal Housing Administration (FHA)
    The FHA is a federally backed entity that provides mortgage insurance on loans extended by FHA approved lenders. This way, lenders know they are protected against default and can extend more loans to more people. The FHA is a federally backed entity that provides mortgage insurance on loans extended by FHA approved lenders. This way, lenders know they are protected against default and can extend more loans to more people.
  • Federal National Mortgage  Corporation
    A private corporation created by Congress. Operates with the purpose of helping lower-income borrowers secure loans.
  • FHA Loan
    A mortgage insured by the Federal Housing Administration (FHA) with more lenient borrowing guidelines.
  • FHA Mortgage Insurance
    Insurance required by the FHA as part of each loan they extend. Typically equals 1.5% of the loan amount paid up front and a monthly installment of .5% of the loan amount.
  • Fixed-Rate Mortgage
    A mortgage with an interest rate that stays the same for the life of the loan.
  • Flood Certification
    A surveyor’s determination that property is not located in a flood zone. If the certification shows the property is subject to flooding, a flood insurance policy may be required.
  • Foreclosure
    The legal process by which a lender sells the property securing a loan to repay the loan when the borrower defaults.
  • Freddie Mac 
    The Federal Home Loan Mortgage Corporation, or Freddie Mac, is a government-sponsored entity much like Fannie Mae. The two operate similarly - but while Fannie Mae buys its mortgages from large banks, Freddie Mac sources its mortgages from smaller lenders.

MORTGAGE TERMINOLOGY

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