If you’re using a mortgage to buy a Knoxville home for sale, the wide array of mortgage terms can be overwhelming, particularly if you are a first time home buyer. To help make the process of buying a Knoxville home easier, here is a brief list of Knoxville mortgage terms from A to Z.
Adjustable Rate Mortgage (ARM) is a loan where the interest rate will change (a.k.a “adjust”) over time. The interest rate changes every three or five years, changing the monthly payment on your Knoxville home.
Credit Score is a number that shows a buyer’s creditworthiness. They generally range between 300 and 850. An excellent score ranges is anything 720 and up, a good credit score is 680 to 719, an average credit score is 620 to 679, and anything below a 620 will make it fairly difficult to get a loan to buy a Knoxville home for sale.
Conventional Loan are when a borrower puts anywhere from 3% to 20% down on a Knoxville home.
Equity is the difference between the home’s fair market value and the total amount owed on the home. Equity is built over time as a Knoxville homeowner makes payments on their mortgage. It is possible to build more equity in your Knoxville home if you make additional principal payments each year.
FHA loans are government insured loans where the borrower can put as little as 3.5% down on a Knoxville home.
Fixed-Rate Mortgage is a mortgage loan that has the same interest rate for the life of the loan (usually 15 or 30 years). For most people buying a Knoxville home, a fixed-rate mortgage is usually the safest loan option.
Home Equity Line of Credit (HELOC) is a second mortgage on a home where a Knoxville homeowner is able to draw on the equity of their home. The homeowner is able to draw on a certain about of their equity with the use of a check book or debt card, up to a certain limit.
Interest-Only Mortgage is a mortgage where a buyer only pays interest at the beginning of the loan, then a year or so later, payments start to be made towards the principal amount of the loan.
Mortgage Points are lender’s fees that a buyer pays in advance to get a lower interest rates. These are sometimes known as “discount points.” Each point is equal to 1% of the loan amount.
PITI stands for the four parts that make up a monthly mortgage payment including principal, interest, taxes and insurance.
Pre-Payment Penalty is a fee assessed by the lender is a Knoxville homeowner pays off their mortgage too early. A majority of mortgage loans no longer have pre-payment penalties.
Rural Housing Loans are loans that offer 100% financing to Knoxville homeowners that buy in “rural areas.”
Qualifying Ratios are calculations that a lender uses to determine how much home you can afford. These ratios are based on your gross monthly income, housing expenses, and any long term debt.
VA Loans are loans that are available to veterans and surviving spouses. VA loans come with a wide range of benefits, including 100% financing.
Are you thinking about buying a Knoxville home this year? If there is anyway Knoxville Home Team can assist you, please let us know, you can give Rick at call at 865-696-9002 or send an email to [email protected]. Kati can be contacted at 865-392-5880 or via email at [email protected]. Also, be sure to check out our Knoxville Home Search Page to see what homes are for sale in the Knoxville area.
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