Understanding Mortgage Terms:– The Application Process

The home-buying process can be confusing, especially for a first-time buyer. Initially, it can be hard to understand the technical terminology used by real estate agents and lenders. 

Terms Used in the Application Process

Loan Estimate: This document specifies the costs associated with a mortgage, such as the interest rate, lender’s fees, title charges and any pre-paid interest and homeowner’s insurance. The listed fees are only an estimate and are subject to change. A loan estimate should be provided to you within three days of submitting an application; if you don’t receive one, consider it a red flag for using this lender.

Down payment and gift funds: The down payment is the money paid on the purchase of the house from the buyer’s own funds. Gift funds may be used with most loans, but a paper trail must be provided by the buyer and the person gifting the funds. A seasoning period of 60 days is usually preferred for deposits that will be used as down payments. For example, if the balance in a savings account has been around the same amount for the past two months, it is generally viewed with less concern than a large deposit suddenly made in the week prior to application.