Physician’s Guide: Essential Mortgage Terms Demystified
In the intricate world of home buying, being well-versed in mortgage lingo is not only useful but imperative, especially for busy professionals like physicians. Delve into this guide as we deconstruct commonly used terms, empowering you to make informed decisions.
Mortgage Terms Physicians Should Know
- Principal: This is the base amount you borrow. It doesn’t include interest or additional fees.
- Interest: A percentage of the principal, this is what lenders charge you for the privilege of borrowing.
- Fixed-rate Mortgage: A mortgage with an interest rate that remains constant throughout the loan term.
- Adjustable-rate Mortgage (ARM): A mortgage where the interest rate can adjust at specific times. It often starts lower than fixed rates but can increase.
- Closing Costs: A combination of fees that may include lender charges, title insurance, and appraisal fees, to name a few.
- Amortization: A fancy term that essentially describes the process of paying off your loan over time, with a blend of principal and interest in monthly installments.
- Equity: The difference between your home’s current value and the amount you still owe.
- Private Mortgage Insurance (PMI): An insurance policy that lenders require if you put down less than 20%. It protects lenders if you default.
- Escrow: An account held by a third party, which temporarily holds funds during the transaction process.
- Appraisal: An evaluation of a property’s worth by a licensed professional.
Grasping these terms is foundational for physicians embarking on their home buying journey. Yet, it’s just the tip of the iceberg. Comprehensive understanding comes from conversations with experts.
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For an extensive list of mortgage terms, consider this external guide by Consumer Financial Protection Bureau.
Disclaimer: This article is intended for informational purposes only. Consultation with a professional is always recommended for personalized advice.