Navigating the world of homebuying can sometimes be overwhelming, especially when faced with a slew of unfamiliar terms. At Lisle Savings Bank, we’re here to guide aspiring homebuyers through every step of the process, from pre-approval to closing. Check out this guide to some key banking terms encountered during the process to get started!
APR (Annual Percentage Rate)
The Annual Percentage Rate, or APR, is a comprehensive measure of the cost of borrowing money. It includes the interest rate, and any additional fees or costs associated with a loan. The APR provides a more accurate picture of the actual cost of a mortgage over its lifetime, making it easier to compare different loan offers. When evaluating mortgage or other loan options, the APR helps buyers better understand the total financial commitment.
APY (Annual Percentage Yield)
While APR is relevant for borrowing, the Annual Percentage Yield, or APY, is crucial for understanding earnings on savings accounts or investments. APY reflects the total amount of interest earned in a year, considering the effect of compounding interest. When saving for a down payment or other homebuying expenses, choosing accounts with higher APYs can help your savings grow faster.
Mortgage Rate Float Down
A Mortgage Rate Float Down is a feature that allows borrowers to lock in a mortgage rate with the option to reduce the rate if market interest rates fall before closing. This can be a valuable tool in a volatile market, providing the security of a locked-in rate with the potential benefit of a lower rate if the market improves. Typically, a fee or specific conditions are attached to the float-down option, but some lenders, like Lisle Savings Bank, offer a Mortgage rate float-down at no extra cost!
Portfolio Lender
A portfolio lender like Lisle Savings Bank originates and retains mortgage loans in-house rather than selling them on the secondary market. This can offer more flexible underwriting criteria and more personalized service. Since we manage the loan for its entire term, borrowers can rest assured we’re committed to their success and satisfaction.
Pre-Approval Letter
A pre-approval letter is a document from a lender stating that a borrower is qualified to borrow up to a certain dollar amount based on a preliminary assessment of their financial status. Obtaining a pre-approval letter is a crucial step in the home buying process, as it demonstrates to sellers that they are a serious and qualified buyer. It can also give buyers an edge in competitive markets and help streamline the buying process on an ideal home.
Appraisal
An appraisal is a professional assessment of a property’s market value conducted by a licensed appraiser. Lenders use the appraisal to ensure the mortgage amount does not exceed the property’s value. It protects both the lender and the buyer from overpaying for a home. Appraisals consider various factors, including the property’s condition, location, and comparable sales in the area. A thorough appraisal is essential for securing a mortgage and ensuring a fair transaction.
At Lisle Savings Bank, we’re dedicated to helping buyers confidently achieve their homeownership dreams. For more information and personalized assistance, visit our website or contact us to get started.