In Pittsburgh Mortgage Terms Ac-Ag, we discussed 7 key terms related to the real estate and home buying process that all mortgage borrowers should know. This included “A” Credit, ARM or Adjustable Rate Mortgage, Adjustment Interval, Agreement of Sale, Amortization, APR and Appraisal. In this part of the series we’ll continue covering these terms in alphabetical order in an effort to create a better informed, self-empowered borrower.
Assumption
An assumption is a type of real estate transaction that allows for a buyer to assume a current mortgage from the seller. The benefit to the seller is obvious, but the benefits to the buyer are significant as well. This includes the ability to avoid closing costs and – depending on the rate – save a substantial amount of money in interest and other fees.
Balloon Mortgage
A balloon mortgage allows a borrower to get a low rate up front, but at the end of a certain period the entire remaining mortgage balance will become due and payable. In most cases the balance will be paid off via a new loan, although this may be with a different lender than the original loan. The risk is that, unless rates are lower when the balloon payment is due, there could be a significant increase in the overall cost of the new loan.
Bridge Loan
In some cases there can be a gap between the closing of a property purchase and the closing of a property sale. A bridge loan “bridges” this gap by proving temporary funding to allow a mortgage borrower to fulfill a contract on one home while their current home is still tied up in a sale.
Buy Down/Buy Up
Mortgage borrowers can often opt to pay points in order to get a reduction in rate. This is referred to as a buy down. A buy up, on the other hand, allows a borrower to pay less fees up front, and in return pay a higher rate of interest. These features can allow a borrower to have a mortgage custom tailored to their needs, taking into account future income and other changes.
Closing
The closing is aptly named, as it signifies the end of the home buying and selling process. During the closing, all critical documents will be executed and loan disbursements will be made. Once closing is finalized, the buyer may take possession of the home and the process is complete. Therefore, the closing is usually thought of as the most important part of buying or selling a home or property.
In the next installment of Pittsburgh Mortgage Terms, we’ll detail 6 more terms related to the mortgage industry that all mortgage borrowers should know. But if you’re ready to take action now, call the number at the top of your screen for an immediate free quote and consultation. For even faster service, simply click the “Apply Online Now” button to fill out an application today.
