5 Homebuying Acronyms You Need to Know

Are you looking forward to purchasing a home? If yes, then what are you already have known about the homebuying process. We may guess, like reviewing credit score, hire real estate agents, getting a pre-approval, hire a mortgage broker, and so forth. But, do you have some knowledge of home buying acronyms? No, then you have come to the right place. In this blog, we are going to share with you five home buying acronyms that is also come under the home-buying tips. 

Homebuying acronyms you need to know:

APR (Annual Percentage Rate) : Annual percentage rate is an annual rate charged for borrowing or earned through an investment. The annual cost of borrowing money on the loan amount, interest rates and certain other fees. The interest rate is different than the annual percentage rate because it includes not only the interest expenses on the loan but also all other fees and other costs involved in procuring the loan. The APR should be greater than or equal to the nominal interest rate, except in the case of a specialized deal where a lender is a rebate on a portion of your interest expenses.

Fixed-Rate Mortgage: Fixed-rate mortgage is a financial product that has a constant interest rate for the life of the loan. Borrowers generally prefer fixed-rate mortgage because the interest remains the same and repay time as well. This makes the fixed-rate mortgage a popular choice for homeowners who prefer a stable, budget-friendly monthly payment. People who don’t want to contend with payment adjustment can avail for this loan. In this loan, each payment is equal to the interest rate times the principal, plus a small percentage of the principle itself. 

DTI (Debt to Income) : The debt to income ratio is a percentage of your monthly income that goes towards your monthly debts payment. Your debt to income ratio is all your monthly debt payments divided by your gross monthly income. This number is one-way lender measures your ability to manage the monthly payments to repay the money you plan for tomorrow. Larger lenders may still make a mortgage loan if your debt-to-income ratio is more than 43 percent, even if this prevents the qualified mortgage. But, you they will have to make a reasonable, good-faith determine to have the ability to repay the loan. 

P&I: This homebuying acronym you need to know stands for Principal and Interest. It is the portion of your monthly mortgage payment that go towards paying off the money you borrowed to buy your home. 

PMI: Insurance that protects lenders from losses if a homeowner is unable to pay the mortgage. It is required for homebuyers who make down payment less than 20% of the home purchase price. It is also known as private mortgage loan insurance, and it’s only made for lender protection. In the event, if a borrower unable to repay the loan, they can require borrowers to pay PMI. 





Leave a Comment