Navigating life as a homeowner can be quite difficult. This is usually because of the many things you have to deal with, ranging from managing your house mortgage loans to finding the best mortgage lender. Life is especially tough for new homeowners who are trying to figure out how everything works. In fact, one of the biggest challenges that come with this is understanding all the terms involved in being a homeowner.
This is why we thought it would be useful to prepare a list of the most important terms that every homeowner has to know. Here’s a list of our picks of homeowner terms and what they mean!
Essentially, escrow is where your mortgage payments go. The money will be deposited into this account every time you make a monthly payment. Once the money is here, you can forget about it as the escrow money will ensure that the money is disbursed to all the parties that need to receive it. This includes both taxes and insurance.
Loan servicing is the company that collects your monthly payments, although they aren’t always necessary. Some lenders don’t use 3rd party services, as some are direct seller servicers. If your lender does use loan servicing, they essentially act as a middle person, and all questions regarding your mortgage should be directed to them.
Private Mortgage Insurance
Private Mortgage Insurance or PMI is the insurance that borrowers have to pay to lenders in the case that they put down less than 20% as a down payment. This insurance is more for the lender’s sake as it keeps them safe if ever you, for whatever reason, default on your mortgage. While it is an additional cost for you, this enables lenders to take on borrowers that are considered to be high risk.
Now, it’s important to note that not making payments doesn’t necessarily mean you’ll default on your mortgage. There are special cases wherein you can temporarily halt payments, and this is called forbearance. It’s when your mortgage servicer lets you momentarily cease making payments in times of hardship. Yet, this doesn’t come without a catch, as this often requires a large payment once the forbearance period is over. This is why you should be wary of making use of this, as it can cost you a lot of money down the line.
A refinance is where you negotiate with a lender to get a new loan on your current home. This can help you do a couple of different things, as it means you can replace your current home loan with a new one.
Refinancing can help you manage your finances better by lowering your interest rate or reducing the term. It also allows you to change the loan type and is one of the few ways you can pull out cash from your equity. This can be useful if you are in need of funds.
We hope this article proves to be useful in giving you a good starting point to understand all the terms involved in being a homeowner. While it can be a little overwhelming at first, all it takes is a little bit of research, and you should be up to speed in no time.
If you’re looking for a mortgage lender in Sacramento, CA, you’ve come to the right place. Mortgages and loans can be tricky to navigate for many homeowners, but with the help of Hawkins Home Loans, this process becomes infinitely easier. Get in touch with us today to see how we can help!