There are various things that you must take into consideration before you make an entry into the real estate world. You must get familiar with the real estate terminology before you make a decision to either sell or buy a house. It is evident that you would surely do not wish to be in a situation wherein you are confused with the industry jargon. And apart from that you certainly do not wish to miss on something important. Find below 15 real estate buzzwords that will help you keep abreast of the know-how.

Adjustable rate mortgage

You can get either a fixed-rate mortgage or an adjustable-rate mortgage while applying for a home loan. Generally, an ARM consists of a precise interest rate for a particular period of time. Moreover, the interest rate varies. It is also noticed that majority of the mortgages consist of a cap on how high the interest rate might raise.

Amortization schedule

Amortization usually means to minimize a debt.

Closing

This is considered to be the last step in a real estate transaction. It means that closing is nothing but the transfer of the title of the property for money or other considerations.

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Down payment

In order to purchase a property, that a buyer pays upfront for it is known as down payment. Usually, this amount varies between 5% and 25% of the value of the property.

Escrow

This is the condition wherein a third party holds cash, the property title and property unless and until all circumstances of the property agreement have been met. Herein, mostly a lawyer who will be the third party, will later hand over the assets to the respective parties, as has been depicted in the agreement.

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Fannie Mae/Freddie Mac

The Federal Home Loan Mortgage Corporation and Federal National Mortgage Association are basically two government-sponsored enterprises which buy mortgages from lending institutions. Their target is basically to make sure they endorse affordability and stability in the housing market.

Flipping

This is a manner of investing in realty market with the intention of buying a property to re-sell it.

Good faith estimate

This is basically an approximation of the whole price of the purchase of property. This is usually given prior to the mortgage loan is secured. This enables the homebuyer to compare the offers of different lending institutions.

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Lien

This happens when a legal claim is put on a property with an intention to get payment for services rendered or debt.

Points

Mortgage points are basically honest charges that the lender might add to the overall cost of the mortgage. Herein, one point is equivalent to 1% of the total amount of the loan.

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Preapproval

For a specified period of time, preapproval from a bank locks in an interest rate. This is a deep procedure which needs a latent buyer to give a lending institution with proof of debts and income. Herein, the lender will mostly check your credit report.

Prequalification

This is when a latent buyer is screened by a third party or lender to verify how much the buyer can borrow apart from the terms of the loan.

Prime rate

What interest rate is offered to the best customers of the commercial banks is known as prime rate.

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Underwater

This happens when a given property’s market value is lesser than the balance of the money owed on the mortgage.

Underwriting

This is a procedure wherein a lender undergoes to determine whether to extend credit.