When entering into the world of real estate, whether buying or selling, there are going to be many words thrown at you that you may not understand. You may feel embarrassed to ask because your agent or mortgage loan officer throws them around with ease. It’s a good idea to have a grasp on some common real estate terms before you get started. It’s also a good idea to ask if you don’t know.
Adjustable Rate Mortgage (ARM)
This is a type of home loan that your loan officer may discuss with you when trying to obtain a mortgage. An Adjustable Rate Mortgage is one in which has a lower initial rate for a set number of years and then the rate fluctuates depending on the specified index rate used for determination. This type of loan is better for those that don’t plan to stay in the loan a long period of time.
Contingencies are discussed when writing an offer on a house you wish to buy. These are conditions that must be met prior to closing the real estate transaction. A buyer might want to include a financial contingency (if the loan falls through), or one that is dependent on the buyer selling their current home.
This can also be called a “good faith” deposit. These are funds held by a neutral party to show that the buyer has serious interest in purchasing the property.
Fixed Rate Mortgage
Another type of loan that will be discussed with the mortgage loan officer is the Fixed Rate Mortgage. This is a conventional loan with a pre-determined interest rate for the duration of the loan.
Points are prepaid interest on a loan. It is equal to 1 percent of the loan amount. The advantage of this is that when you pay points up front, you will be secured a lower interest rate for the life of the loan.
Title insurance is acquired to protect against any unknown liens or debts that may be placed against the property. Before a transaction is complete, a title search is done to ensure that the current owner has legal rights to the title as well as the legal ability to sell the home and that no liens are held against the property.
These are just a few terms that you will hear when preparing to buy or sell a home. Again, it is a good idea to ask an expert if you just aren’t sure.