If you’ve decided to buy your first home, or even if you’ve owned a home before, all those buzz words or terms that your Realtor may be using can be really confusing. Here is a quick glossary of the most commonly used terms.
Adjustable Rate Mortgage (ARM) – A mortgage that changes based on the going interest rate, called the prime rate, sometimes a bit more (often the lingo is “prime plus”). It can change up or down, and some are convertible fixed rate (or a mortgage with an interest rate that doesn’t change) meaning the homeowner can opt to change it from adjustable to fixed once during the life of the loan.
Agent– A person authorized to act on another’s behalf. Sometimes the terms agent and broker are used interchangeably, but an agent represents either the buyer or the seller, sometimes both. A broker is licensed by the state to act as an agent, but also has full authority to run a real estate company.
Appraisal – A professional determination of value of a property. Your mortgage companies almost always require an appraisal of the property by a licensed, disinterested party before agreeing to give you a mortgage.
Conventional mortgage – A real estate loan, which is not insured by the government agency (FHA or the Veterans Administration). A mortgage is the document the borrower signs promising to repay. Some states use a “Deed of Trust” instead of a mortgage.
MLS – This is an acronym for Multiple Listing System, which is a database used all over the US for real estate agents to list home for sale or lease.
Mortgage Insurance – Insurance paid by the borrower to insure the lender against default in case of non payment of the mortgage loan. It protects the mortgage company or bank, not the borrower. Most FHA loans require mortgage insurance, as do conventional mortgages if the loan to value is more than 80%. MIP is mortgage insurance premium paid as part of your mortgage payment.
There are plenty of other terms that you will want to know. MLS.com has a great glossary and you can check it out here: http://www.mls.com/Home/Glossary.mvc