Understanding Real Estate Lingo As It Relates To Financing
When you hear all the different terms being thrown around by your Realtor while purchasing a home, your head may begin to spin. Realtors might occasionally use a word that you might not understand, though by and large they try to explain things in simple terms. Knowledge of real estate terms, well in advance, helps a lot. Find below some of the common terms related to obtaining financing for your new home which you might come across.
Adjustable Rate Mortgage (ARM)
An Adjustable Rate Mortgage is that type of loan whose interest rate changes on a periodic basis. Since the mortgage loan stays in sync with the current index, which is similar to the method used with one-year treasury bills, the rate too changes. Adjustable Rate Mortgages can increase more than two percentage points each year and may raise as much as six points above the original rate.
Amortization
Amortization is a special type of payment plan that allows you to reduce the amount of your debt in a gradual way by making payments each month on the principal amount of the loan.|A special type of payment plan that allows you to reduce the amount of your debt in a gradual way by making payments each month on the principal amount of the loan is referred to as Amortization.|A unique type of payment plan that permits you to reduce the amount of your debt in a gradual way by making payments every month on the main amount of the loan is referred to as Amortization.
Appraisal
An appraisal is an estimate of the value of or the quality of your home on specific date. An appraisal must be completed by an expert and is required by lenders prior to approval of a loan. The lender will determine if the home you wish to purchase is worthy of the investment required when loaning you the money based upon the results of the appraisal.
Conventional Mortgage
A conventional mortgage is a type of home loan that is not backed by the VA (Veterans’ Administration) or by HUD. Hence, a conventional loan adheres to the conditions that have been established by the lending institution as well as by the state of Texas. This means the mortgage rate may change according to the lending institution and may even change if you acquire the loan in a state outside of Texas.
Earnest Money
Earnest money is a term given to the deposit that you make to the seller or to his or her agent. You need to make this deposit when you sign an agreement of sale and the seriousness of your interest in purchasing the home is demonstrated by this deposit. The earnest money you paid will be adjusted with your down payment on the home when you purchase the home. If the sale does not take place, you will lose this earnest money unless the purchase offer dictates the money is to be refunded.
