When you’re buying a condo or loft for sale in DTLA, there’s a pretty good chance that you’ll need a mortgage loan to do it. Most of us do!
But the mortgage world is filled with alien terms.
Here’s a quick list of mortgage terms you need to know this year if you intend to buy a new home.
Mortgage Terms You Need to Know in 2019
Check out this list of terms that you’ll find helpful if you’re buying a condo in Downtown LA this year:
- Adjustable-Rate Mortgage
- Closing Costs
- Down Payment
- Fixed-Rate Mortgage
An adjustable-rate mortgage, or ARM, is a loan that starts out with a fixed interest rate that’s usually lower than what you’d get on a fixed-rate mortgage. However, after the introductory period ends (usually 5, 7 or 10 years), your rate will fluctuate annually with the market. That may mean your payments will go up significantly.
Related: What is an Adjustable-Rate Mortgage?
The term closing costs refers to money you’ll have to pay before you sign the dotted line that makes the condo or loft yours forever. These fees can include attorney’s fees, title fees and other fees, and they’re usually between 3 and 5 percent of the condo’s purchase price.
Your down payment is the amount of money you have to give the lender, who will then take it and apply it to your mortgage. It’s a lump sum in cash. Your down payment may be 20 percent of the home’s purchase price – that’s been standard for generations – but there are some loan programs that allow you to put down as little as 3.5 percent. (A VA loan doesn’t require anything down, but they’re limited to former military service members and a handful of others.)
Related: VA Loan Requirements
A fixed-rate mortgage is a mortgage loan in which you pay the same interest rate on the money throughout the life of your loan. If it’s 3.9 percent when you sign the papers, it’ll still be 3.9 percent when you make your last payment 30 years from now.
Interest is money that you pay the lender for letting you borrow the money to buy a home in the first place. Interest is a percentage of the principal you borrowed. If you borrowed $400,000 at 4% interest, you’ll keep paying that 4% on the original $400,000 over the entire life of your loan.
If you want to buy down your interest rate, you can purchase points. One point equals 1% of your loan, so if you borrowed $400,000, one point would cost you $4,000. These points are payable at closing (and can be considered closing costs).
The principal is the amount of money you still owe on the condo or loft you buy. As you pay it off, the principal gets smaller. Usually, people take a 30-year loan, and at the beginning, more of the payment goes toward interest for the lender. Toward the end, more of the payment is applied to your principal.
Are You Buying a Loft or Condo for Sale in DTLA?
Call us at 213-254-7626 or get in touch with us online to start exploring your options when you want to buy a loft or condo in downtown Los Angeles.
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