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By Charlestien Harris

I hope that last week’s article helped you understand the home buying process terms a little better. It is my desire to educate my audience and to make a difference in their lives. Going into the process armed with knowledge can make the difference between making a huge mistake and a more confident decision.

Here are some additional common terms involved in the home buying process.

Closing Costs: The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed, and other costs. Ask your lender for a complete list of closing cost items.

Closing Disclosure: A form that provides the final details of the selected mortgage loan. It includes the loan terms, projected monthly payments, and lists all fees and other costs to get the mortgage (closing costs). The lender is required to give the borrower the Closing Disclosure at least three business days before closing on the mortgage loan.

Debt-to-Income Ratio: The percentage of gross monthly income that goes toward paying for your monthly housing expenses, alimony, child support, car payments, other installment debts, and payments on revolving or open-ended accounts such as credit cards.

Gross Monthly Income: The income you earn in a month before taxes and other deductions. It may also include rental income, self-employed income, income from alimony, child support, public assistance payments, and retirement benefits.

Home Inspection: A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation, and pest infestation.

Homeowners Insurance: A policy that protects you and the lender from fire or flood damage to the structure of the house, liability for injury to a visitor to your home, or damage to your personal property, such as your furniture, clothes, or appliances.

Loan Estimate: A written statement from the lender itemizing the approximate costs and fees for the mortgage. A lender is required to provide potential borrowers with a loan estimate within three business days of receiving a loan application.

Loan Origination Fees: Fees paid to your mortgage lender for processing the mortgage application. This fee is usually in the form of points. One point equals 1 percent of the mortgage amount.

Mortgage: A loan using your home as collateral. In some states, the term mortgage is also used to describe the document you sign to grant the lender a lien on your home. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.

Mortgage Broker: An independent finance professional who specializes in bringing together borrowers and lenders to complete real estate mortgages.

Points: One percent of the amount of the mortgage loan. For example, if a loan is made for $50,000, one point equals $500.

Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.

Pre-Qualification Letter: A letter from a mortgage lender that states that you’re pre-qualified to buy a home but does not commit the lender to a particular mortgage amount.

Principal: The amount of money borrowed to buy your house or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid.

Truth-In-Lending Act (TILA): A federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit, such as the APR and other specifics of the loan.

The home buying process is a serious commitment. A home purchase is among the largest financial transactions you will make in your life and is not a decision to be made lightly. Knowing the terms can help you better navigate the sometimes-difficult process of buying a home.

For additional information on this and other financial topics, visit our blog at, email me at, or call me at 662-624-5776.

Until next week – stay financially fit!