If you’re buying or selling a home for the first time you’ll likely come across several terms and acronyms you’ve never heard before. When working with a real estate agent, he or she will likely do their best to put things in simplest terms for you to understand. But, it never hurts to do your research ahead of time so you’re prepared for the lengthy and complex process of buying or selling a home.
In this article, we’ll define some of the real estate terms you’re most likely to read or hear during your search for a new home, or when you put your current home on the market.
Adjustable rate mortgage (ARM) - a home loan with a in interest rate which fluctuates throughout the payback term of the loan. The fluctuation typically aligns with changes in the housing market’s average interest rates.
Fixed rate mortgage (FRM) - Fixed rate mortgages have an interest rate that does not change for a predetermined period of time or for the entire length of the home loan repayment period.
Closing costs - Miscellaneous fees associated with buying a home. These include attorney fees, applications fees, taxes (property taxes, transfer taxes), underwriting costs, and more.
Transfer tax - A tax charged for when a property changes ownership. These vary by state. Some states do not have a transfer tax.
Appreciation and depreciation - Appreciation is an increase in a property value due to things like inflation. Depreciation is a decrease in property value due to market deflation, wear and tear on the property, etc.
Equal Credit Opportunity Act (ECOA) - A U.S. law that makes it illegal for a creditor to discriminate on the basis of the following: national origin, race, color, religion, sex, age, marital status, or to the applicant’s status as receiving public assistance from things like food stamps and social security.
Mortgage escrow - an escrow is a neutral, third party agent or company which holds documents or funds until certain terms and conditions are met and a contract is fulfilled or terminated. For mortgages, lenders will often set up an escrow to pay insurance premiums and property taxes. These are typically added to your monthly mortgage bill.
Homeowners association (HOA) - a group of homeowners who regulate, maintain, and manage common spaces in subdivisions and condominiums. Monthly dues are typically required to upkeep common spaces. An HOA board made up of homeowners meets to vote on rules and regulations that members of the HOA must abide by.
Private mortgage insurance - a type of insurance that protects a lender if a borrower defaults on their home loan.
Exclusive agency listing - an agreement between a homeowner and a real estate broker giving the broker exclusive rights to list the home.
Assumable mortgage - a home loan that enables a buyer to take over the seller’s mortgage payments and loan terms.
Fair Credit Reporting Act (FCRA) - A U.S. law which promotes privacy, fairness, and accuracy in reporting your credit score to lenders. This lets you correct inaccuracies and prevent certain information from being used against you when applying for a loan.
