Here’s your go-to guide for 6 financial terms you should know
“Buying a home is most consumers’ largest purchase they’ll ever make, and there can be wide variations in the costs associated with it,” says Hank Risley, Vice President of Consumer Lending at Independent Bank. Getting the best mortgage at the right price starts with a solid understanding of words and phrases used in the mortgage industry. Risley teamed up with Independent Bank’s Tami Coates, Vice President and State Residential Lending Manager, to explain the most common terms you should know:
Annual percentage rate (APR). Not to be confused with a loan’s interest rate, the APR includes many other costs associated with the loan (e.g., account interest, discount points, lender fees, and mortgage insurance).
Bridge loan. A temporary, interest-only loan used to bridge the gap between the sale of an existing home and the purchase of a new home.
Jumbo mortgage. In Michigan, this term applies to loans over $417,000. Because these don’t fall within the guidelines for government-sponsored mortgages (Fannie Mae or Freddie Mac), different rules apply and interest rates may be higher.
PITI. Stands for principal, interest, taxes, and insurance. PITI is a summary snapshot of monthly housing expenses.
Points (or discount points). Prepaid interest on a mortgage loan (1 point = 1% of the loan amount). By paying more money up front, you may get a better interest rate over the life of the loan.
Servicing (or servicing rights). A contract outlining who services the loan once the mortgage is in place. Quite often servicing rights are sold to another company after the initial closing. Note: Independent Bank retains servicing rights for nearly all of its residential mortgages.
Equal Housing Lender