Like any other profession, there is a lot of terminology and acronyms in the real estate business. Below is a glossary of the more frequently used:
APR (Annual Percentage Rate) - The yearly cost of a loan, expressed as a percentage of the amount loaned.
ARM (Adjustable Rate Mortgage) - An interest rate that changes periodically, the rate is set in relation to an index.
Balloon Payment - A lump sum payment due at the end of the loan.
Cap - Maximum amount of a payment or rate increase on an adjustable rate mortgage.
Ceiling - Maximum interest rate on an adjustable rate mortgage.
Closing Costs - Fees paid when a property changes ownership, these are separate from the loan. Amount ranges from 3-5% of the purchase price.
CMA (Comparative Market Analysis) - Comparison of similar properties in a local area.
Conforming Loan - A loan under $203,150 that conforms to guidelines used by Fannie Mae or Freddie Mac.
Contingencies - Conditions of the offer and contract that would negate the sale of the property.
Escrow - Monies held in a third party account that are paid out during the closing, this usually contains earnest money and deposit. Afterwards the account is used to pre-pay homeowners insurance and property taxes.
FSBO (For Sale By Owner) - When an owner attempts to sell a property without the benefit of a real estate professional.
Good Faith Estimate - Closing cost estimate that a potential lender must (by law) provide you within 3 days of your application.
Lien - A legal claim against a property, this can prevent the sale of a property until it's paid off.
Lock - The interest rate at which your lender commits, usually for 30-60 days.
MLS (Multiple Listing Service) - A database of homes for sale that is maintained by a local real estate association. Your real estate professional is a member of their local MLS and has access to this database of home.
PMI (Private Mortgage Insurance) - Insurance that the borrower must carry when loan amount is more than 80% of the purchase price. This protects the lender in case of default on the loan.
Points - The amount paid to lower the interest rate of a loan. Each point is equal to 1% of the loan.
Title Insurance - Insurance that the borrower purchases to protect the lender should a legal dispute over the proper arise.
If you come across terms of acronyms not on this list, please don't hesitate to ask us what they mean. We're here to help.