14 Basic Real Estate Terms That Everyone Should Understand

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So you are entering the real estate world?
Whether you are  trying to buy or sell a home (or do both!), you need to familiarize  yourself with the lingo.
You don’t want industry jargon to confuse you  and keep you from missing something crucial.

Here are 15 real estate buzzwords  to keep you in the know

1. Adjustable Rate Mortgage  (ARM)
When applying for a home loan, you can get an  adjustable-rate mortgage (ARM) or a fixed-rate mortgage. An ARM usually has a  specific interest rate for a set time and then the interest rate fluctuates.  Most of these mortgages have a cap on how high the interest rate may increase.

2. Amortization Schedule

First off, amortize basically means to reduce a debt. An amortization  schedule is a detailed breakdown that illustrates how much interest and  principal of the mortgage has been paid off and how much remains with each  payment.

3. Closing

The final step in a real estate transaction, a closing is the transfer of the  title of the property for money or other considerations.

4. Bubble

Perceived inflationary view that Prices are in a “Bubble” and when it Bursts Prices will fall

5. Escrow

When a third party holds property, cash and the property title until all  conditions of the property agreement have been satisfied. The third party,  likely a lawyer, will then hand over the assets to the respective parties, as  outlined in the agreement.

6. Fannie Mae/Freddie Mac

The Federal National Mortgage Association (Fannie Mae) and the Federal Home  Loan Mortgage Corporation (Freddie Mac) are two government-sponsored enterprises  that purchase mortgages from lending institutions. Their purpose is to promote  stability and affordability in the housing market.

7. Flipping

Flipping is a way to invest in real estate with the goal  of purchasing a property to re-sell it. Investors profit from the resale of the  property if its market value increases either through price appreciation or  repairs and remodeling.

8. Good Faith Estimate

A good faith estimate is an approximation of the total cost of the purchase  of property. It is provided before the mortgage loan is secured so the homebuyer  can compare the offers of different lending institutions.

9. Lien

A lien occurs when a legal claim is put on a  property in order to receive payment for debt or for services rendered. The  holder of the lien can sell the property in order to recover the money owed.  Points Mortgage points are upfront charges the lender may add  to the overall price of the mortgage. One point is equal to 1% of the total  amount of the loan.

10. Pre-Approval

Pre-approval from a bank locks in an interest rate for a specific amount of  time. It is an in-depth process that requires a  potential buyer to provide a lending institution with proof of income and debts.  The lender will most likely check your credit report in this process.
If  you’re considering getting pre-approved for a home loan, it’s smart to make sure  your credit is in good shape before you apply. You can get a breakdown of your  credit strengths and weaknesses using the free Credit Report Card which also updates  two of your credit scores for free every month.

11. Prequalification

When a potential buyer is screened by a lender or third party to see how much  the buyer can borrow as well as the terms of the loan. This is purely  informational and does not obligate the lender.

12. Prime Rate

This is the interest rate that commercial banks offer to their best  customers. This generally means large corporations that are the most  creditworthy.

13. Underwater

When a property’s market value is less than the balance of the money owed on  the mortgage. This is usually associated with drastic falls in the market value  of the property.

14. Underwriting

The process a lender undergoes in determining whether to extend credit. A  lender makes its decision based on a variety of factors including the borrower’s  credit scores, credit history, income, other debt obligations and property  value.

Uniting All The Best In     Real Estate ~Nino M. Gaetano~      650.207.1986
Uniting All The Best In Real Estate
~Nino M. Gaetano~

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