Thinking about buying a home? Study the terms below to help you make informed decisions throughout the process.
Amortization: The distribution of payments into installments over time. The terms of the agreement will determine how much of each payment goes toward interest and how much goes toward paying down the principal.
A.R.M.: Abbreviation for Adjustable Rate Mortgage. An A.R.M. is a loan program with an interest rate that changes throughout the life of the loan, as opposed to a fixed rate mortgage. This means if interest rates rise, a house payment may increase.
Balloon: The whopper of a payment due at the end of some loans.
CC&Rs: The covenants, conditions and restrictions overseen by Homeowners Associations.
Comps: Short for comparable properties to the home you’re buying or selling, used by Realtors to help determine property value.
Contingency: A section of the purchase agreement that spells out certain conditions that must be met before the sale can proceed. For example, necessary repairs recommended by the home inspector.
Closing: The meeting between the buyer and seller where mortgage documents are signed and the deed is transferred.
Deed: The legal document that transfers ownership of the property.
Disclosures: Information about the home that a seller must provide to a buyer. The extent of disclosures varies by state.
Earnest Money: A deposit of money buyers pay to sellers to prove their genuine intent to purchase. If the buyer walks away through no fault of the seller, the seller may keep the earnest money.
Escrow: Don’t worry — it’s not what you eat if you’re on the losing end of a bidding war. An account held by an independent third party while the buyer and seller negotiate the contract. Funds for earnest money, property taxes and homeowners insurance may be held in escrow.
Equity: What’s left of the fair market value of a home after subtracting the amount the owner still owes on the mortgage. “Sweat equity” refers to the manual labor performed to maintain and improve the property over the years.
Read Part 2 of this list.
Is your head spinning from all the industry jargon? A real estate agent can help translate. Find a qualified one here: http://www.remax.com/officeagentsearch/.