Mortgage Interest Rate

The mortgage interest rate is what is charged by a mortgage lender. Different lenders offer different rates.  The 30 year conventional loan mortgage rate usually follows the 10 year treasury bond. As a rule of thumb, you can add 1.7 percentage points to the 10 years bond rate to get a ballpark for the 30 year mortgage rate in the current market.

Conventional Loan

A Conventional loan is a loan that is not insured or guaranteed by a government agency such as HUD/FHA, VA, or the Farmers Home Administration. it follows guidelines from Fannie Mae and Freddie Mac. Usually, a conventional mortgage is a 30-year fixed rate loan. That means it has a fixed interest rate for the 30 year term of the mortgage.  Conventional mortgages also typically require at least a 20 percent down payment, although now it may be as low as 5% in 2017.

The Westside (Los Angeles)

It is a debatable term. Here it refers to the neighborhoods west of the 405, South of the 101.

Single Family Home

A single-family home is a free-standing residential building. It is different from town homes, condos as a single family home typically has a yard and it does not have an HOA fee.

Millennials 

Anyone born between 1981 and 1997 (according to Pew Research). Common, but somewhat mis-perceived traits are narcissistic, experience-driven, and tech-savvy.

Down Payment

The down payment is the cash amount you need to provide. It is different from the mortgage amount because that's what the lender provides on your behalf.

Closing Costs

Closing costs includes a laundry list of costs, which typically runs 3% to 5% of your purchase price. Some typical costs include appraisal fee, inspection fee, reserves , and many more.

Fannie Mae/ Freddie Mac

They are not people! They are government sponsored enterprises. They set up guidelines for mortgage lenders. In return, lenders can sell mortgages that are conformed to the guidelines to Fannie and Freddie for risk diversification.

Conforming Loan Limit

Conforming Loan Limit is the limit on the size of a mortgage which Fannie Mae and Freddie Mac will purchase and/or guarantee. It varies by county.

Upfront MIP (FHA)

Anyone who takes out an FHA loan is required to pay this. The current upfront MIP fee is 1.75% of the borrowed amount. My take. It's just extra costs that provides you, the mortgage borrower, absolutely no value.

Monthly MIP (FHA)

Mortgage Insurance Premium (MIP) is the insurance premium you need to pay only for an FHA loan, in exchange to pay a small amount of cash to close a loan. There is no way to avoid MIP on FHA loans because the minimum down payment is only 3.5%. The function of MIP is identical to the PMI on a conventional loan.

Private Mortgage Insurance (PMI)

Private Mortgage Insurance (MIP) is the insurance premium you need to pay on a conventional loan, in exchange to pay less than a 20% down payment to close a loan. Unlike the MIP on an FHA loan, you can get it removed after your reach 20% equity in your house.

Refinance

Refinancing is the process of obtaining a new mortgage in an effort to reduce monthly payments, lower your interest rates, take cash out of your home for large purchases, or change mortgage companies. 

CONSUMPTION SMOOTHING

Consumption smoothing is the economic concept used to express the desire of people to have a stable path of consumption. In other words, people would rather make $5,000 a month every month, instead of a making $60,000 a year at a random time once a year.