Before borrowing a loan from home mortgage lenders, it is really important to understand the mortgage terminologies, especially if you are new to mortgage. This is not a formality but a precaution. If you can understand mortgage system and its terms correctly, you will be able to make wiser decision when dealing with home mortgage lenders. When you buy a house through home mortgage lenders, your house becomes the security of your loan. So, make sure to always pay the money in time. Another thing you should keep in mind is to use well-know home mortgage lenders, like Supreme Lending, so you can avoid any scam. Following are the terms used in mortgage system.
Principal: This term describes the sum of money borrowed. Before paying the principal, you have to provide a down payment, a percentage of principal you must pay. Sometimes, the sum of down payment you must pay depends on the value of house you are buying. You can acquire your house when you have paid the principal completely.
Interest: This is a term used for a percentage charged on the sum of money you have borrowed for your home. Sometime, home mortgage lenders charge you with points, beside the interest. Interest, as well as principal, makes the major part of money you have to pay monthly for borrowing home. This is known as amortization. This is a way of reducing loan in a set period of time. Payments in early years cover the interests, whereas the payments in later years cover principal.
Taxes: You should be very familiar with this word. Taxes are something you came across very often. This is a sum of money you must pay to authorities of your state. When talking about taxes on your house, it is described as property tax.
Insurance: Insurance of your home is something that is needed to close your mortgage. Insurance covers any damage your home receives from incidents like burglary, fire, etc. Insurance of houses have become very important so you avoid spending huge sum of money to cover the damages.
Premiums: Sometimes, home mortgage lenders charge extra premium on insurance. This is mostly when down payment doesn't exceed 20% of the total worth of your house. This policy is just to save you from the troubles, when you are unable to pay the amount. If it's not for this policy, it would be risky for people to purchase house from home mortgage lenders.
The above were some fundamental terms used in mortgage system. If you have understood them correctly, you will be able to avoid any scam and purchase great house at great price.
Supreme Lending is a professional mortgage firm in Chicago, Illinois. They provide assistance and information to those who are looking for a reliable Chicago mortgage lenders.