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.
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.
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.
The final step in a real estate transaction, a closing is the transfer of the title of the property for money or other considerations.
The down payment is the amount of money that a buyer pays upfront in order to purchase a property. This amount is typically between 5% and 25% of the value of the property.
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.
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.
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.
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.
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.