What are some common mortgage terms I should know?

Common mortgage terms

Every industry makes use of certain terminology and the mortgage industry is no exception. Here is a run down of some regular loan terminology.

Some of the more common terms include PITI, PMI, and title. If you enter the loan process already familiar with these terms, it will help you down the road when other jargon is thrown your way.

PITI is an acronym for the way your mortgage payment will be divided up: Principal balance, Interest, Taxes, and Insurance. You monthly mortgage payments are divided up into these four categories unless you pay your own property taxes or insurance.

PMI is an acronym for Private Mortgage Insurance, which is also sometimes referred to as foreclosure insurance. This insurance is paid by the borrower and is required by most lenders when a substantial down payment (around 20 percent) isn’t made. PMI is not required on all mortgage loans, such as VA guaranteed loans.

The title of a house refers to the legal ownership of the home. A title search will be done to make sure no one else has legal ownership of the home. For example, a divorced couple may not have removed both names from the title, but a refinance could not be done until one of the names was removed. Having a thorough title search protects everyone involved: the buyer, the lender, and the seller

Being familiar with these terms and other basic mortgage terms can help to protect you from jumping into something you don’t fully understand.