You cannot buy a house without having money to pay it. This is why getting approved for mortgage in Milwaukee comes into play.
Mortgage is a loan that helps you afford your house payments. As you probably don’t have tens or even hundreds of thousands of dollars in cash just waiting to be spent, getting a mortgage in Milwaukee is a necessary step if you want to buy a new property. Once the mortgage is approved, you can repay it by making monthly payments to the lender.
If you’re confused about getting approved for a mortgage in Milwaukee, we’ve gathered some of the most important terms that you might find useful.
Appraisal – a rough estimation of how much a property is valued. The appraisal of the select property is necessary for lenders to determine how much loan you need.
Principal – the amount you have on your loan. At the beginning, it is the same as the amount of money borrowed, but as you’re repaying debts, this shrinks down.
Term – an exact number of years you’ll have to spend repaying your mortgage in Milwaukee before you are a legal owner of the property. Mortgages are usually given on a 15-year or a 30-year term.
Annual Percentage Rate (APR) – the additional fees you’ll pay yearly on the mortgage amount, including interest rate and lender fees. This is usually expressed in percentages.
Amortization – a process of spreading out payments over time. Whenever you pay your monthly rate, a percentage of that goes toward interest and a percentage of interest. In the beginning, most of your payment goes toward interest. As the loan is slowly being paid off, you’ll pay less and less in interest. An amortization can help you understand how you can pay off your loan within the required term.
Pre-approval – a document that proves the lender and underwriter have checked your finances and determined you qualify for a mortgage in Milwaukee.
Pre-qualification – a paper that lets you know how much loan you could take if all the statements you’ve given about your finances are verified and approved. This is not the same as mortgage pre-approval.
Assets – any belonging or anything that you own that has a financial value. These include saving accounts, other properties, cars, IRA accounts, stocks, Certificates of Deposit, bonds, and mutual funds.
Fixed-Rate Mortgage – a mortgage with the same interest rate all the way throughout its term.
Adjustable-Rate Mortgage – a mortgage with an interest rate that varies depending on the market.
Debt-to-Income (DTI) Ratio – a ratio that is equal to the value you get when you divide your recurring monthly debts by your monthly gross household income. If your DTI is high, you might have a problem getting approve for mortgage in Milwaukee.
Down Payment – a payment in cash that you need to make when you take on your mortgage loan. This is usually 20% of a total loan, but there are various low down payment options out there.
Property Taxes – taxes you pay to your local government. They depend on your location and the property’s value.
Homeowners Insurance – a document that gives you protection in case your home is damaged in some of the perils it covers. These covered perils are usually burglaries, fires, and windstorms.
Private Mortgage Insurance (PMI) – an insurance that protects your lender in case you can’t repay your loan. It is usually mandatory when your down payment is less than 20%.
Title – a paper that proves you own the home. A title includes the description of the property, the names of its owners, and any existing liens. Anyone who is on the title has a legal ownership of some sorts of the property in question.
Title Insurance – a document that protects you in case someone wants to claim your property. Unlike other insurances that are paid monthly, you pay title insurance only once, during closing.
Deed – a document that proves you’re now a legal owner of the home. A deed is given when you repay your mortgage.
Earnest Money Deposit – a check that equals 1-2% of the home’s value that you write to a seller when you make an offer. This proves that you are a serious buyer.
Home Inspection – a professional service that ensures the home is in good condition. If it isn’t, the seller needs to make necessary repairs, or a home’s value is lowered.
Closing Costs – additional fees, including settlement costs, appraisal fees, pest inspection fees, and loan origination fees. They typically cover 3-6% of the home’s value. You have to pay them during closing of the sale.
Seller Concessions – clauses you include when you make an offer on a home. In them, you let the seller know that they need to pay some costs, such as repairs or closing costs.
Escrow – a virtual account where your lender holds the money for taxes or insurance.
Discount points – optional closing cost that enables you to buy lower interest rate. One discount point is worth 1% of your total loan. The more points you buy, the lower the interest rate. However, you’ll have to pay them in cash during closing of the sale.
Closing Disclosure – a document with final terms of your loan, such as the interest rate, loan principal, and closing costs. Legally, you’ll have to be given at least three days to review the Closing Disclosure.