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Real Estate Today
The real estate market was born long before there were real estate brokers and
lawn signs. The concept of real estate dates back to early England, and
eventually became the foundation of economic growth of the middle class in the
late Middle Ages. Today’s real estate market is a far cry from the early days
of land owned solely by the king, but it still can get confusing. Here are some
of the common terms you may come across when dealing with buying, selling, or
refinancing a home.
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Adjustable rate mortgage
- A mortgage with an interest rate that is likely to change over the term of
the loan. It is also dependent on influences such as interest rates on Treasury
securities.
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Amortization
- The process of fully paying off your debt by installments over a fixed time.
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Annual Percentage Rate (APR)
- A measure of how much interest credit will cost you.
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Appraisal
- A judgment or estimate of the quality or value of real estate, made by an
professional appraiser, as of a given date.
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Balloon loan
- A short term fixed rate loan involving lower payments for a set period of
time, ending with one large payment for the remaining amount of the principal
at a time specified in the contract.
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Closing costs
- Any costs other than interest added to the loan, which can include any
appraiser fees, points paid, or other misc. fees.
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Down payment
- Your available cash after closing costs, to be paid up front rather than
financed.
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Escrow
- Property or money held by a third party until the agreed upon obligations of
a contract are met.
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Fixed rate
- An annual percentage interest rate that does not change during the term of
the loan.
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Foreclosure
- Foreclosure refers to the lender’s legal action to take possession of the
property (such as a house) used to secure repayment for a loan when a debtor
fails to meet his obligations to pay back a loan.
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Home equity line of credit (HELOC)
- A mortgage loan that allows the borrower to obtain multiple advances of the
loan proceeds at his or her discretion, up to an amount that represents a
specified percentage of the borrower’s equity in property.
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Interest
- A percentage charged to the remaining amount owed when you borrow money,
assuming that there are no prepayments of principal.
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Lender
- A person or company that offers to loan money to a borrower for a given
period of time. The borrower is obliged to repay the loan according to the
agreed upon terms and with specified interest.
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Mortgage brokers
- A trained professional who seeks the best loan rates for borrowers, working
as a connection between banks and borrowers.
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PMI payment
- Private Mortgage Insurance (PMI). For home loans secured with less than 20%
down, PMI is commonly added to insure the bank you are borrowing money from.
PMI occurs until you build up enough equity to exceed 20% of the original
purchase price, at which time you must request that your PMI be removed from
your loan.
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Points
- The total units of prepaid interest used to reduce the interest rate of your
mortgage. Each point equals 1% of your mortgage balance.
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Principal
- The amount still owed on a loan, excluding interest.
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Rate cap
- The maximum amount that the interest rate on an adjustable rate mortgage loan
can rise in a single year.
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Real estate agent
- A person trained and licensed to deal with the purchase, sale, and marketing
of real estate property.
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Refinancing
- To replace an existing mortgage with a new mortgage on the same property,
typically at a lower rate.
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Term
- The length of time you have to pay back a loan.
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Total closing costs - Amount of up front costs paid before your loan can
be issued, such as a loan origination fee and any points.
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