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10 Terms You Should Know
Dated: October 12 2018
If you're in the market to buy your first home, 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:
Adjustable-Rate Mortgage (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 change with interest rates.
Amortization Schedule - This is a very important table that outlines every monthly payment you'll make and its contribution toward equity. Equally important, it will show the real cost of the home at the end of your loan term.
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 charges you are required to pay. The APR is the bottom-line number you can use to shop and compare rates among lenders. Be sure you understand the difference between
Appraisal – An analysis usually 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. Understand the importance of home appraisals.
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 your credit score and how you can improve it.
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.
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?
Private Mortgage 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.
Original post from Freddie Mac
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