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Mortgage 101

Overwhelmed by banking acronyms? Unsure of the steps needed to take out a loan? Confused about different lending options? Don’t worry. We’ve got you.

We cover all these topics and more in our video series, Making Cents. Our knowledgeable associates break down a variety of banking topics, offering viewers education and clarity. Each video will leave you feeling empowered to make smart financial decisions that fit your needs.

In this edition, Mortgage Banker Tracy Allen answers some rapid-fire questions from our host, Marketing Director Hannah Willis. Here’s what we learn:

  • Tracy has been working in the mortgage industry for twelve years. Which means her career is almost a teenager.
  • A mortgage is a lien placed on a home. Which is jargon. Which Tracy has to pony up a quarter for. Bad Tracy.
  • Let’s try this again: A lien is a loan that a bank places against a property. In essence, a lien is tied to something.
  • A mortgage, then, is a loan tied to a property or piece of land — basically any type of real estate.
  • The lender is a bank, the ones who borrow the money you need to purchase your real estate.
  • The borrower is you, the person purchasing the real estate.
  • The down payment is kinda exactly what it sounds like — the money you’re putting down towards the purchase of the real estate. The down payment reduces the total amount of your loan.
  • The standard down payment is 20% but that is not a requirement. Some buyers qualify for mortgages with much smaller — or even no — down payments.
  • If you don’t have 20% of the purchase price to put toward a down payment (which most people don’t) you’ll need to carry private mortgage insurance, which is very common.
  • Private mortgage insurance protects the lender in the event a borrower defaults on their mortgage, and homeowners are required to pay for it until they owe less than 80% of the value of their home on their mortgage.
  • Good news? You don’t have to track that math yourself. Talk to your banker at any time and they can tell you when you’ll be able to drop private mortgage insurance.
  • Your monthly mortgage payment will include a portion paid toward the principal — the total amount you owe on the loan — as well as a portion paid to interest.
  • The interest rate is the rate you pay to borrow the money. And, once you lock in during the application process, your rate is fixed for the life of your loan.
  • Most people choose a 30-year mortgage, but you can choose the life of your loan.
  • There are no prepayment penalties on an NBC mortgage. You can always pay your loan off faster.
  • Fannie Mae and Freddie Mac are not people. They are loan programs offered by the federal government. Though it’s fun to pretend they are a married couple who own an antique store together.
  • Hannah wants to google the terms to find out how they got those names. But no need: They are acronyms created from the full names of the federal program. The Federal Home Loan Mortgage Corp. became Freddie Mac and the Federal National Mortgage Association became Fannie Mae.
  • Tracy thinks she can just throw the term “underwriting” around without having to pay a quarter to the Jargon Jar. She is wrong.
  • Underwriting is the full evaluation of your loan application.
  • Applying for a mortgage is simple, easy and not scary. At NBC you can do it online or in-person.
  • Pre-qualified and pre-approved are different. Pre-qualification comes from an incomplete examination of your application performed by the banker. Pre-approval comes from a thorough examination of your application performed by the underwriters.
  • In today’s market, you NEED to meet with a banker before you begin shopping for houses in order to ensure you have the best chance to snag your dream home.
  • A pre-approval letter will include the home’s address, not the dollar amount. You and your realtor will know what amount you are comfortable with and it won’t show up on the letter.
  • Something that might make us different from other lenders? We are focused on your comfort level. Just because the paper says you qualify for a larger mortgage, doesn’t mean you should shackle yourself to a house you can’t really afford. We make sure you’re comfortable with your payments and keep you grounded on what you want and what you can actually afford. 
  • We know this is a lot of info. But don’t be intimidated. All you need to do is reach out to one of our mortgage bankers to begin the process at a pace you’re comfortable with.

Explore Our Step-by-Step Mortgage Guide

Ready to dive deeper into the home loan process? Equip yourself with the knowledge to navigate the mortgage landscape with ease. Click to learn more and embark on a confident path toward homeownership.

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