Are you looking to refinance your current home mortgage? In order to successfully communicate with your mortgage broker, you should know the basic real estate jargon. There are a plethora of terms that those involved in real estate use, and you need to educate yourself to protect your investment in the refinancing process.
This glossary will help you as a homeowner to understand the basic terms that you will hear before, during and after refinancing:
Appraisal – An opinion made by an appraiser that suggests the market value of a house that a homeowner wants to sell or refinance. It protects the lender from lending money on a house that is worth less than what the buyer has agreed to pay for it.
Adjustable-rate mortgage (ARM) – A mortgage whose interest rate and monthly payments vary throughout its life. If interest rates fall, so does the monthly payment.
Automated valuation model (AVM) – A service that uses mathematical modeling to value properties, and they do not factor in the condition of the property to determine its value.
Broker – Higher on the totem pole than a real estate agent. A broker supervises real estate agents.
Closing costs – Costs that include the appraisal fee, credit report fee, loan origination fee and other charges. They generally add up to 5% of the home’s purchase price.
Debt-to-income ratio – Measures your future monthly housing expenses in relation to your monthly income.
Equity – The difference between the market value of house and the amount the homeowner owes on it.
Escrow – The holding of important documents and money associated with the sale of the house.
Fair market value (FMV) – The price an educated home buyer will pay and a seller will accept.
Fixed-rate mortgage – Allows you to lock into an interest rate that doesn’t change during the term of a 15- or 30-year mortgage.
For sale by owner (FSBO) – When a home owner attempts to sell their house themselves.
Homeowners insurance – Insurance that is required and necessary to protect your home from fire, storms and other events that can cause damage.
Home inspection – An inspection of the interior and exterior of a house to make necessary repairs.
Home value report – An estimation of your home’s worth to help you decide whether or not to buy or sell.
Listing agent – An individual that helps homeowners sell their home and negotiates with the selling agent.
Private mortgage insurance (PMI) – Insurance that the borrower will probably need to purchase if the down payment of a home is less than 20% of the purchase price. Also known as mortgage default insurance.
Real estate agent – The “salesperson” of real estate sales who is paid through commissions generated by selling property.
Refinance – When you get a new mortgage on your current home in order to lower your monthly payments, change mortgage companies, or take cash out for debt consolidation, medical bills, or college tuition.
While this list of terms isn’t exclusive, it should help you to better understand the jargon so that you can put it to good use in your when you decide to refinance!
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