Amortization
How a loan gets paid off over time. Early on, most of what you pay is interest and only a little touches what you borrowed. That flips as the years go by. It is worth seeing once, because it explains why paying a bit extra early does more than paying a bit extra late.
Ask them Show me what paying a little extra early actually does.
Appraisal
An independent person decides what the house is worth, because the lender is not going to lend more than the thing is worth. If it comes in under the price you agreed, that is a problem with a few known solutions and it is not the end of the deal.
Ask them What happens to my deal if it comes in low?
Asset depletion
A way of qualifying that treats what you have saved as though it were an income stream, for people whose money is no longer arriving as a paycheck. It is the answer to the question I get more than any other, which is how somebody qualifies once they have retired.
Ask them Which of my accounts count toward it and which do not?
Certificate of eligibility
The document that proves you are entitled to use the Department of Veterans Affairs home loan benefit. Getting hold of it is usually quick and it is one of the first things worth doing, because it turns a question into a fact.
Ask them Can you pull it, or do I need to?
Closing costs
Everything you pay to make the sale happen that is not the price of the house. Fees for the loan, the title work, the appraisal, taxes and insurance paid up front. They are not a surprise if somebody shows them to you early, and there is no reason not to.
Ask them Can I see all of them now rather than at the end?
Contingency
A condition in the contract that lets you step back without losing your deposit if something specific does not happen. The inspection, the appraisal, your own loan being approved. Removing one makes your offer stronger and makes you less protected, and that is a real trade rather than a formality.
Ask them Which one am I being asked to give up, and what does it cost me?
Conventional loan
The ordinary kind, not backed by a government program. It is the one most people end up with and the one everything else gets compared to.
Debt to income ratio
What you owe every month set against what you earn every month, as a percentage. It is the number that decides more than most people realize, and it is also the one that moves most easily. Paying off a small loan can do more than saving for months.
Ask them Which debt is doing the damage? Clearing one small balance can do more than saving for months.
Down payment
What you put in yourself. Twenty percent is the number everybody has heard and it is not a rule. There are programs that ask for a good deal less, and putting less down changes other things rather than closing the door.
Ask them What would this look like at a few different amounts?
Earnest money
The deposit you put down when your offer is accepted, to show you mean it. It is not an extra cost. It comes off what you owe at the end. You can lose it if you walk away for a reason the contract does not allow, which is why the contract matters.
Ask them What would actually have to happen for me to lose it?
Escrow
A neutral third party holds the money and the documents until everybody has done what they promised. The word also gets used for the account that collects your taxes and insurance monthly so you are not hit with them all at once. Two meanings, same idea: somebody else holds it so nobody has to trust anybody.
Ask them Which meaning are you using right now?
FHA loan
A loan insured by the Federal Housing Administration. It generally allows a smaller deposit and is more forgiving about credit history, and it has its own insurance cost in exchange. Worth looking at, not automatically better.
Funding fee
A one time charge on a loan from the Department of Veterans Affairs, usually called a VA loan, that the program takes instead of monthly mortgage insurance. It is not the same for everybody, and some people do not pay it at all. Most people have never had it explained to them. They have only had it appear.
Ask them Am I exempt, and have you checked?
Loan estimate
A standard form every lender has to give you, laid out the same way, so that two offers can actually be compared side by side. It exists precisely so nobody can hide anything in a different column. Use it that way.
Ask them Can I have yours, so I can put it next to theirs?
Pre-approval
A lender has looked at your actual paperwork and said what it is willing to lend you. It is not the same as pre-qualification, which is a lender taking your word for your numbers and doing some arithmetic. Sellers know the difference and so should you, because one of them carries weight in an offer and the other one does not.
Ask them Which one is this, and can I have it in writing?
Private mortgage insurance
Usually shortened to PMI. Insurance that protects the lender, not you, and which you pay for, generally when you put down less than a fifth of the price. It is not a punishment and it does not last forever. Ask when it comes off, because there is an answer.
Ask them When does it come off, and what has to be true for that?
Rate lock
An agreement that holds your terms in place for a set number of days while the sale goes through, so they cannot move underneath you. It has an expiry date, which is the part people forget.
Seller credit
The seller agreeing to put money toward your closing costs. Their money spends exactly the same as yours does. Most of the deals I close include one, and asking is free.
Ask them What is a normal amount to ask for around here?
Shift differential
The extra you are paid for working the hours nobody wants. Nights, weekends, holidays. It is real income and it can be counted, but it does not sit on a pay stub the way a salary does, so it takes somebody knowing where to look.
Ask them Which months did you look at, and did you count all of it?
Subsequent use
The plain way of saying you can use your Department of Veterans Affairs home loan benefit again. People believe it is a once in a lifetime thing. It generally is not, and knowing that is often the difference between staying put and moving.
Ask them How much of my entitlement is actually left?
Title insurance
Cover against somebody turning up later with a claim on the house you just bought. An old unpaid bill, a boundary nobody checked, a name on a deed from decades ago. It is dull right up until the day it is not.
Underwriting
The part where somebody at the lender goes through everything properly and decides. It is where the requests for one more document come from, and it is why they sometimes ask for a thing you already sent. Nobody is being difficult. They are being checked too.
Ask them What are you still waiting on from me?
VA loan
The home loan program run by the Department of Veterans Affairs, for people who served and for some surviving spouses. It is the benefit most people know the name of and fewest know the shape of. I used it myself before I ever wrote one.
Ask them Is this actually my best option, or just the obvious one?
Nothing by that name yet. Tell Thad the word and he will add it, because a word that is missing is a word he has not been asked about enough.
