Real Estate Lingo for The Newbie
In today’s real estate market there is a lot of uncertainty. The sub-prime mortgage crisis is the buzz word phrase that has a lot of people talking. One lesson that can be learned from this situation, is that it is so important for prospective homeowners to know what they are getting themselves into. Buying a home can be stressful, and overwhelming, but knowing what you are signing on for is paramount to securing an investment that will serve you well. A little education can go a long way. Below is a glossary of key terms associated with all things real estate. If you are a “newbie”, familiarize yourself with these as you begin your real estate search:
We’ll begin in the middle of the alphabet with “M” words, as “mortgages” seem to be the hot topic these days.
Mortgage: is a lien on the property that secures the Promise to repay a loan. A loan to finance the purchase of real estate, usually with specified payment periods and interest rates.
Mortgage broker: Is a professional who works for a firm that originates and processes loans for a number of lenders.
Mortgage banker: Is a company that originates loans and resells them to secondary mortgage lenders such as: Fannie Mae or Freddie Mac. “Who????”, you ask. Just, read on.
Fannie Mae: Is a sort of acronym which stands for Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholder. This enterprise purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential home buyers.
Freddie Mac: Is another acronym of sorts is the Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, coverts them into securities, and sells them to investors, providing lenders with funds for new home buyers.
Mortgage insurance: Is a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan. Mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home’s purchase price.
ARM: Adjustable Rate Mortgage is a mortgage loan subject to changes in interest rates. When rates adjust, ARM monthly payments increase or decrease at intervals determined by the lender. The change in monthly -payment amount, however, is usually subject to a Cap. “What is Cap in this case?