Terminology For Northampton Mortgages

If you are shopping for a Northampton area real estate loan, it is helpful to familiarize yourself with some of the common terminology associated with mortgages in Northampton and of course, other areas of the country.  A solid comprehension of mortgage language will afford you a better understanding of the deal you're about to make in and around Northampton, and the costs associated with it.

A Mortgage is a loan secured on the value of your home.  Generally, mortgages are Amortized Loans, loans which are repaid via monthly payments that include not only the payment on the principal balance of the loan, but also payment on the interest. 

Speaking of interest, the interest rate on a mortgage is called the Annual Percentage Rate (APR).  The APR is calculated on an annual basis and includes all fees and charges associated with the loan.  When choosing a lender, part of your selection process should include a review of the APR associated with the loan.  The lower the interest rate, the less you'll pay over time. 

Once you find a great Northampton area rate, be sure to ask your lender to lock in that rate for you for sixty days.  This Rate Lock will ensure that the interest rate won't change as you move through the mortgage application process.

Also, while researching loan options, pay close attention to Prepayment Penalties, or charges for early payoff of your loan.  Lenders often assess these charges to help recover interest income lost due to early repayment of the principal balance.  You should try to find a Wesern Massachusetts lender who won't charge a prepayment penalty.

Once you've chosen your lender, there a few fees you should be aware of that are charged before the closing of your mortgage agreement.  These Closing Costs typically amount to 6% of the total loan amount.  The lender may charge an Application Fee and Underwriting Fee for processing your loan application.  There are other up front costs paid to third parties for Homeowner's Insurance, Title Search, Credit Report, Appraisal, and Local and Massachusetts Government Taxes.  All of these fees are usually paid out of pocket at the time of the sale or added to the mortgage, increasing the monthly payment amounts.

At the time of the closing, your Western Mass. lender may also offer Loan Discount Points.  Or, to build equity on your loan, you may elect to prepay a lump sum toward the interest on your mortgage, reducing your overall interest rate and, ultimately, your monthly payment.  One loan discount point is equal to 1% of your principal loan amount.

Over time, as you make payments on your loan, you earn equity.  Home equity is the difference between your home's appraised value and the balance of your home loan.  In essence, equity is the dollar value of your home that you actually own. 

On the flip side, if you fail to make regular monthly loan payments, or fail to insure the property as initially agreed, a mortgage agreement also permits foreclosure, or the sale of your home.

Barbara Demerski Real Estate can also provide information and resources concerning Western Mass. and Pioneer Valley mortgages (including Northampton, Amherst, Hadley, Sunderland and others), mortgage terminology, and the mortgage securing process.  The more you learn, the easier and more fulfilling the mortgage process will be!