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Redmond, Washington
Buy Right Guide - Lesson 2
Real Estate Terminology Quick Reference Guide
Adjustable-Rate Mortgage
(ARM): Also known as a variable-rate loan, an ARM usually
offers a lower initial rate than a fixed-rate loan. The interest
rate can change at a specified time, known as an adjustment
period, based on a published index that tracks changes in
the current finance market. Indexes used for ARMs include
the LIBOR index and the Treasury index. ARMs also have caps
or a maximum and minimum that the interest rate can change
at each adjustment period.
Amortization:
Paying off a loan over the period of time and at the interest
rate specified in a loan document. The amortization of a loan
includes the payment of interest and a part of the amount
borrowed in each mortgage payment.
Balloon Mortgage:
A mortgage with monthly payments based on a 30-year amortization
schedule, with the unpaid balance due in a lump sum payment
at the end of a specific period of time (usually 5 or 7 years).
The mortgage contains an option to "reset" the interest
rate to the current market rate and to extend the due date
if certain conditions are met.
Closing (Closing Date):
The completion of the Real Estate transaction between buyer
and seller. The buyer signs the mortgage documents and the
closing costs are paid. Also known as the settlement date.
Closing Costs: The costs to complete
the Real Estate transaction. These costs are in addition to
the price of the home and are paid at closing. They include
points, taxes, title insurance, financing costs, items that
must be prepaid or escrowed and other costs. Ask your lender
for a complete list of closing cost items.
Earnest Money Deposit: The deposit to
show that you're committed to buying the home. The deposit
will not be refunded to you after the seller accepts your
offer, unless one of the sales contract contingencies is not
fulfilled.
Escrow: The holding of money or documents
by a neutral third party before closing. It can also be an
account held by the lender (or servicer) into which a homeowner
pays money for taxes and insurance.0
Points: 1% of the amount of the mortgage
loan. For example, if a loan is made for $50,000, one point
equals $500.
Ratified Sales Contract: A contract
that shows both you and the seller of the house have agreed
to your offer. This offer may include sales contingencies,
such as obtaining a mortgage of a certain type and rate, getting
an acceptable inspection, making repairs, closing by a certain
date, etc.
More Real Estate term definitions can be found at the
source of this information: Freddie Mac http://www.freddiemac.com/
Tomorrow Lesson 3 - Redmond Buy Right Guide
Tomorrow you'll receive Lesson #3 of the
Redmond Buy Right Guide that will help you ask the tough
questions that you must have the answers to before
buying your home.
Don't want to wait until tomorrow?
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