June 13, 2017
Brush up on your mortgage knowledge by learning the definitions of these common home-buying terms.
What is an appraisal? The appraiser determines the market value of the house you have chosen, based on its condition and selling prices of comparable homes in the area. This helps the lender decide a reasonable loan amount for the mortgage. An appraiser does not uncover a home's defects - this is the inspector's job.
What is Title Insurance? Title Insurance is evidence of ownership of property. This is needed to uncover any potential problems with title (legal ownership) to the property. If no issues are found in the search, the title company issues you title insurance. Title insurance guarantees that the property you buy is as it is stated in recorded deeds, surveys, and other documents.
What is PMI (Private Mortgage Insurance)? PMI may be required if the desired loan cannot be granted because it does not meet normal standards for the lender. The most common reason for this requirement is a down payment that is smaller than standard (usually around 20%). This insurance protects the lender from loss if a default occurs. It does not protect you, though it may allow you to qualify for a loan you could not otherwise get.