First Time Home Buyers - What It All Means-Part 2

Well you were able to read up on the first 5 most used terms within lending now it's time for part 2! As we found before loan terms can be very confusing and very much overwhelming. It is my goal to help you understand what they all mean. If I do not touch on all the lending terms that you are trying to understand feel free to leave a comment with whatever term you do not understand and I will update with the definition.

1. FHA - Federal Housing Authority - The Federal Housing Authority is a federal entity that governs the FHA mortgages, which allow for lower down payments and more flexible credit and qualifying guidelines.

2. VA Loan - A VA loan is a loan in the United States that is guaranteed by the U.S. Department of Veterans Affairs. VA Loans, like FHA, have lower qualifying guidelines and lower down payment reqirements.

3. USDA - Department of Agriculture: the federal department that administers programs that provide services to farmers and those purchasing homes on Rural Land. The USDA or Rural Financing allows for borrowers to purchase a home in a designated area with 0% down.

4. 80/10/10 - Lenders use the 80/10/10 to describe a loan in which a borrower has a 1st mortgage of 80%, a 2nd mortgage of 10%, and a down payment of 10%. By doing this type of loan purchasers can avoid paying Mortgage Insurance (read the last what it all means article to find out more about mortgage insurance)

5. APR - Annual Percentage Rate: the annual percentage rate is not the rate that your mortgage payment is based off of. Every lender has to disclose the true cost of the loan to their potential clients. In order to do this accurately the APR was introduced as a way to break down the cost of your loan, with all fees included, and display this into an interest rate. You will notice when you buy a home or do a refinance that you will get a copy of what is called the Truth-In-Lending disclosure (TIL) this disclosure will show you the principal amount of your loan seperated from the finance charges (which is the amount you will pay in interest during your entire mortgage term) then it will display the total of the two and you will see an APR. Don't worry, your APR is not what your interest rate is, it's just there to show you, in the form of an interest rate, how much your loan is costing you.

These terms complete Part 2 of What It All Means. Don't hesistate from asking questions. I have noticed that a lot of people are visiting my site and reading the information I'm putting out here but no one is interacting and asking questions. I want this site to be a great place for information and conversing. Thank you all again for visiting!