Buying a home can be a daunting and complex process, but it doesn’t have to be. With the right Realtor, you can feel confident that you are being well represented and that she has your back. It can also help to understand real estate lingo. Here is part two of a Freddie Mac real estate glossary you can use to educate yourself on the home buying process.
Margin: A percentage added to the index for an ARM to establish the interest rate on each adjustment date.
Market Value: The current value of your home based on what purchaser would pay. An appraisal is sometimes used to determine market value.
Mortgage: A loan using your home as collateral. In some states the term mortgage is also used to describe the document you sign [to grant the lender a lien on your home]. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage is usually the purchase price of the home minus your down payment.
Mortgage Broker: An independent finance professional who specializes in bringing together borrowers and lenders to complete real estate mortgages.
Mortgage Insurance (MI or PMI): Insurance needed for mortgages with low down payments (usually less than 20% of the price of the home).
Mortgage Rate: The cost or the interest rate you pay to borrow the money to buy your house.
Net Monthly Income: Your take-home pay after taxes. It is the amount of money that you actually receive in your paycheck.
Offer: A formal bid from the homebuyer to the home seller to purchase a home.
Points: 1% of the amount of the mortgage loan. For example, if a loan is made for $50,000, one point equals $500.
Pre-Approval Letter: A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer.
Pre-Qualification Letter: A letter from a mortgage lender that states that you’re pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount.
Principal: The amount of money borrowed to buy your house or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid.
Real Estate Professional: An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you’ve specifically contracted with a buyer’s agent, the real estate professional represents the interest of the seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers, but are generally not involved in the lending process. [Note: A real estate agent and a Realtor are not the same thing. Click here to learn the difference.]
Refinance: Getting a new mortgage with all or some portion of the proceeds used to pay off the original mortgage.
Title: The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land.
Title Insurance: Insurance that protects lenders and homeowners against legal problems with the title.
Truth-In-Lending Act (TILA): Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit, such as the APR and other specifics of the loan.
Underwriting: The process a lender uses to determine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage.
[Source: Freddie Mac]