The mortgage industry isn’t the easiest one to break into and once you’re in it takes some time to learn the ropes. Whether you’re interested in becoming a mortgage agent/broker, or you just need a quick refresher, we’ve got your back. You can’t get far without knowing your ABCs, right?
The essential terms
Once you’ve mastered the terminology, the exciting part of navigating your way around the industry can begin. You’re armed with a boatload of knowledge and you’re ready to start building and nurturing leads with expert advice, confident that you know exactly what you’re talking about. Whether building this arsenal of key terms from scratch or blowing the cobwebs off some well-neglected basics, the following sample we have pulled together for you is bound to give you a boost.
Adjustable-Rate Mortgage (ARM) – a loan type that has a floating interest rate, reviewed at certain periods. This type of loan is riskier than a fixed rate.
Amortization – a process of combining both interest and principal payments. This allows a borrower to build equity from the very first payment.
Appraisal – an evaluation of the value of the property. It’s a necessary step to receive a loan and is done by appraisers.
Closing – the meeting when the home sale is finalized. Requires all signatures and the buyer usually makes the down payment.
Equity – the part of the property actually owned by the buyer, how much of the principal they’ve paid.
Fixed-Rate Mortgage – a loan type where the interest rate is unchanged during the whole duration of the loan.
Foreclosure – a legal procedure taken by a lender to terminate the owner’s right to the property. Usually, it occurs when a homeowner doesn’t meet the mortgage payment terms in their loan contract.
Inspection – a process during which a licensed professional inspector evaluates the condition of the house and whether it needs any repairs.
Interest – a cost of borrowing money. Combined with principal, it determines the monthly mortgage payment.
Mortgage Broker – an individual or a company that acts as an intermediary between the lender and the borrower.
Pre-Approval – a process of determining the borrower’s financial suitability by a lender. It provides an estimate of how much money a borrower can obtain.
Principal – the amount of money borrowed to purchase a property. A mortgage loan is the principal plus the interest.
Realtor – a real estate agent who is a member of NAR (National Association of Realtors).
Refinancing – restructuring the loan, usually by obtaining a new one with a lower interest rate.
Title – a document that proves the rights to the property. These rights are transferred from the seller to the buyer during the purchase.
VA Loans – a special type of loan offered to service members, veterans, and eligible surviving spouses. It is guaranteed by the Department of Veteran Affairs.
The latest mortgage industry trends
Once you know the very basics, it only makes sense to get familiar with the current trends. 2020 is an extremely turbulent year during which many things have changed. A lot of people question whether it’s worth getting into the mortgage business altogether. But as the year draws to a close, there are some interesting trends to consider.
Mortgage lending volume will likely reach $4 trillion for the first time ever
The record-low interest rates in the US seriously boosted the origination volume. This increase will reach $3.9 by the end of the year, maybe even $4 trillion, the highest number ever. Refinancing plays a huge role in it with approximately $2.4 trillion in mortgage refinances this year.
Home price appreciation continues to be strong, as it actually skyrocketed due to a high demand driven by low rates. The current market favors sellers and the demand for housing will remain high.
The whole industry keeps shifting towards digital and remote workflows
Lockdowns, requirements for remote work and social distancing hit the real estate sector hard. But now the industry is adapting to the change by implementing digital workflows into their business. Loan officers and lenders are using more text messages and live chats to communicate with buyers. All steps of the mortgage process, from applications to closing, are becoming progressively more digitized which minimizes the need for physical interaction. We even see appraisers do their job without being present in a home, just using digital databases to access all the necessary information.
Areas with inexpensive housing will become more popular
The pandemic drastically increased the rate at which companies adopted remote workflows. Since workers are getting more freedom to choose where to work from, it will mean expensive metropolitan areas like New York or San Francisco will lose their appeal. We are very likely to see a steady rise of suburbia and a decline in major cities for years to come.
Despite all that’s happened this year, the real estate market has stayed strong, and will likely be one of the drivers for future economic growth. What trends do you see coming with us into 2021 and what will cease as soon as the pandemic ends? Share below.
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