As with most industries there’s a lingo that goes with the trade. The real estate industry is no different, and while most people have heard of these terms, it’s good to refresh your knowledge on what they mean. Whether you are buying or selling these are ten real estate terms you need to know.
Think of escrow as a holding account of sorts. Typically a third party such as a lawyer will hold the property, cash, and title until all agreements have been met. It’s basically a way to make sure you are in agreement with the buyer and seller before money changes hands.
Good Faith Estimate
This is an approximation of the total cost associated with purchasing a property. This occurs before you obtain your loan, which allows you to compare offers from various lending companies.
This is an important term for a buyer. Pre-approval is where you get your financial ducks in a row and get pre-approved for a determined dollar amount of a loan. This is something you want to do in advance of shopping for homes.
This is the rate that banks lend to their top clients, usually large corporations. This rate plays a role in the rate you receive on ARM (#5), and home equity lines of credit. It also affects buyer confidence in the mortgage industry.
Adjustable Rate Mortgage or ARM
These are types of mortgages with rates that adjust over time. These mortgages can help buyers looking to get in the home ownership game who project to have more income in the future. Be careful with this type of mortgage. If you don’t like change then seek a fixed rate mortgage.
This is that fun chart that shows you how much of your loan you’ve paid in principle and interest and how much further you have to go until it’s all paid. It’s always fun to picture yourself at the end of this chart.
This is the process your lender goes through to determine how much money they will let you borrow. Many factors are included in this process such as credit score, credit history, current debts, etc.
Points are charges from the lender added to the overall price of the loan. One point equals 1% of the amount of the loan. Sometimes buyers will “buy points” in order to reduce the interest rate of their loan. You have to determine if paying the money up front will be worth it over the course of the loan.