Real Estate Terms Made Easy

Do you feel like your real estate agent is speaking another language?

Are you wondering what Escrow or PMI is?

Buying a home should be an enjoyable experience and one of the most exciting times of your life. Sometimes though, searching for a home isn’t everything you dreamed it would be. You may even feel like your real estate agent is speaking another language.

At the Jamey Kramer Group, we want to make sure that you have the experience you have always dreamed about when purchasing your home. Whether you are buying your first home or you are looking to move into something that will fit your family more comfortably, we are here to help.

We would like to provide you with common real estate terms with definitions that are easy to understand to help take the mystery out of real estate terminology. Please take a look at the list below and call our office if you have any questions.

Common Real Estate Terms

  1. Escrow
    Escrow is when a third-party holds cash, property or property title until all the terms of the property agreement are met. Once the terms are met, the assets are distributed. An example of the escrow process is when a mortgage lender collects funds for real estate taxes and/or homeowners insurance on the behalf of the borrower on a monthly basis. The funds are held in an escrow account and the lender pays the payments when they are due on the behalf of the borrower.
     
  2. ARM or Adjustable Rate Mortgage
    An ARM or Adjustable Rate Mortgage is a type of mortgage that may have the interest rate adjusted. They usually start off low then adjust periodically accordingly to the market conditions. The adjustments could take place monthly, quarterly, annually or even at a longer time interval.
     
  3. PMI or Private Mortgage Insurance
    PMI or private mortgage insurance protects the lender in case the buyer’s loan goes into default. PMI is generally required on high-risk loans. For example, if someone is putting less than 20% as a down payment, PMI may be required. The PMI can be lifted once your loan-to-value ratio hits a certain rate.
     
  4. LTV or Loan to Value
    According to RealEstateABC.com, the higher the loan-to-value ratio, the more likely lenders will consider it as a high risk loan. The LTV is the percentage of the appraised value of the home, divided by the mortgage (or money owed).
     
  5. Appraisal
    A real estate appraisal is the process of determining the value of a house or property. An appraiser will evaluate the condition of the property, the location, comparable sales of homes nearby and upgrades to help determine the market value of the house.
     
  6. Closing
    The closing in real estate is the final step when a house is transferred from the seller to the buyer.
     
  7. Closing Costs
    Closing costs are fees required in the final settlement of a real estate transaction that are not included in the price of the property. Examples of fees that may be included in closing costs include loan origination fees, escrow deposit fees (several months of property taxes and PMI if applicable), credit check fees and appraisal fees.
     
  8. Comps
    Comps or comparables are homes that are comparable to the property in question. They are used to help determine the value of the property.
     
  9. Down Payment
    The payment that the buyer pays in cash for real estate sale is considered a down payment. Down payments generally range from 3% - 20%.
     
  10. FHA Loan or Federal Housing Administration
    The FHA loan of Federal Housing Administration loan is a loan that is insured by the federal government. This type of loan allows lenders to have a lower risk if the borrower defaults on their payment. You can learn more about if a FHA loan is right for you in our article, FHA Loans and Qualifications for First Time Home Buyers.
     
  11. Fixed-Rate Mortgage
    A fixed-rate mortgage is a mortgage where the interest rate does not change for the term of the mortgage loan.

Your Turn   

Is there a real estate term that you would like to learn more about that is not covered on this list? We would be happy to help. Please give our office a call.

 248-348-7200