March 11th, 2015 2:42 PM by Jackie A. Graves, President
Get ready homebuyers: In just a short time,
you'll notice For Sale signs sprinkled throughout your neighborhood. Are
you ready to talk the talk, incorporating what may be new words and odd
acronyms into your daily vocabulary?
If you're in the market to buy a home for the
first time, one of the best things you can do is get your real estate
vocabulary in gear. Why? Because words matter, and soon you'll need
to know your real estate lingo to talk wisely, and with confidence, about one
of the most important investments you'll ever make.
No need to panic. We're here to get you
started with some of the more important terms.
Ready, Set, Go:
(ARM) – A type of mortgage with an interest rate
that adjusts after an initial period of time – typically 3, 5, or 7 years – and
resets periodically. ARMs usually give you lower monthly payments at the
outset, but over time your payments will rise with interest rates. Learn more about
what mortgage is right for you.
Annual Percentage Rate
(APR) – The annual rate it costs you to borrow
over the term of the loan, including the interest rate, points, fees and
certain other credit charges you are required to pay. The APR is the
bottom-line number you can use to shop and compare rates among lenders.
Appraisal – An analysis performed by a qualified appraisal
professional who estimates the value of a property by taking current market
values of similar homes and the quality of the home into account.
Closing – The last step of the real estate transaction when you sign the
final mortgage documents, receive title to the house, and pay all closing
costs. After a successful closing, you have a new house to call home.
Credit Score – A three-digit number – ranging from 350 to 850 – that
represents and summarizes information from your credit report, indicating your
likeliness to repay your debt. Your credit score plays a significant role
in getting approved for a loan and the interest rate you are charged – the
higher your score the better. Learn more about
how you can improve your credit score.
Equity – The difference between how much your home is worth and how
much you owe on your home. If you owe $100,000 on your house but it is worth
$130,000, you have $30,000 of equity.
Fixed-Rate Mortgage – A mortgage with an interest rate that does not change
during the entire term of your loan. This is the most common type of
mortgage, giving you certainty and stability over the life of the loan. Learn more about
what mortgage is right for you.
HUD-1 – A standard form used by your settlement agent, or closing
agent, that itemizes all services and fees charged to you by the lender when
purchasing or refinancing your home. Later this year, the Consumer Financial
Protection Bureau's new Closing
Disclosure form will replace the HUD-1 for most loans.
Points – Sometimes called discount points, these are up-front
payments typically used to reduce your mortgage interest rate on the loan and
obtain a lower monthly payment. A point is 1% of your loan amount,
or $1,000 on a $100,000 loan. Is there a "point" in paying
points? Find out here.
Insurance (PMI) – A monthly premium
required by your lender if your down payment is less than 20%, protecting the lender
if you are unable to pay your mortgage. Get the low down
This list just scratches
the surface of housing market terminology. For a complete list of
important terms from A-Z, visit our Glossary where
you'll find it all. As for the people you'll
meet in the homebuying process, we can help you with that, too.
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