Do You Know Your Home Buying Lingo?
Dec 27, 2005 12:00AM
Do you know Home Buying lingo? Here are some important terms to know before you sign on the dotted line.
ARM (Adjustable Rate Mortgage) - A mortgage interest rate that changes over time. ARMs can be fixed for a finite amount of time, five years for instance. After that the interest rate may change monthly, quarterly, bi-yearly or yearly depending on the loan agreement. Your monthly payment will change when the rate changes.
Amortization - Repayment of a loan, in a combination of interest and principal, over the life of the loan.
Negative Amortization - This can occur when interest only payments are made that don't cover the full amount of interest charged. The interest that is not covered is then added back into the loan as principal. After several months, even after making regular payments, you can owe more than you did at the beginning of the loan. This loan is used primarily but real estate investors but has become more popular with home buyers as well.
Contingency - A condition placed on a purchase agreement before you can back out of the deal. For instance, a purchase can be contingent on the buyer getting a loan. Without the loan, there is no sale.
Origination Fee - The fee charged for the work that is involved in preparing a loan application, such as the evaluation of the information, and compiling the paperwork.
Probate Sale - When a deceased person's property is put up for sale as a part of the settling of the estate. It can be simple, with the executor having full power to make the sale; or complicated, with the executor having limited power and need to have the sale approved by the court.
Closing Costs - The amount of money the purchase will cost you, above and beyond the mortgage payment or down payment. These are usually one-time fees paid at the end of escrow.
CC&Rs (Covenants, Conditions and Restrictions) - A document that controls certain types of requirements and restrictions on the property. For instance, a limit to how small the land can be sub-divided or noise restrictions.
Mortgage Broker - One person who, for a fee, will do the loan paperwork for you and act as a liaison between you and your loan company. Mortgage brokers have relationships with a number of lenders and can do the loan shopping for their clients.
Know any more or have any personal tips you'd like to share? Let us know!