1. Adjustable Rate Mortgage (ARM) – Many banks will extend a mortgage or a refinance to you, but the best deal they can offer some is this type of mortgage. It is a loan with an interest rate that varies periodically, and usually one specific rate is guaranteed for the first two or three years of a 30 year mortgage. ex. 2/28 or 3/27 ARM
2. Appraisal – When a professional comes to your home to estimate the property’s value. The estimate may be based on comparable sales around the immediate area or the property’s income-producing ability (two-family home).
3. Balloon Mortgage – This is a loan that has a final lump sum payment of full balance
4. Closing Costs – This is the amount the seller and buyer pay when the real estate purchase is finalized. These costs usually include the fee for the appraisal, pulling your credit report, mortgage insurance, title-insurance premium, and your property taxes.
5. Construction Loan – This is a short-term loan to finance building a new home. The borrower must get permanent financing or pay off loan when the construction is complete.
6. Convertible Mortgage – This is an ARM that lets borrower switch to a fixed-rate mortgage at a specified time. Great if you see the market is going up and you want to lock in your current rate.
7. Equity – Something renters don’t have! It is the difference between what you owe on your home and what its current market value is.
8. Escrow – Money is deposited to a third party (such as your mortgage lender). The money is usually to pay your home insurance and your property taxes.
9. Fixed-Rate Mortgage – This is when your interest rate is constant through the life of the loan. Usually people get a 30 year fixed loan.
10. Lien – This is a claim made against your property usually for taxes or the mortgage.
11. Mortgage Broker – He or she serves as an intermediary between you and a lender. They help you find financing for your home.
12. Points – These are actually charges assessed by a lender. Each point equals 1 percent of your loan amount.
13. Principal – This is the amount of your monthly mortgage payment that excludes interest, insurance and taxes. It is the real cost of your home. You can often pay a little extra every month towards the principal of your home and significantly cut down the overall cost (principal + interest) of your home.
14. Private Mortgage Insurance (PMI) – This is money paid to insure the lender against loss due to default or foreclosure by the borrower. This is required on a conventional loan with a down payment less than 20 percent.
15. Second Mortgage – This is a loan that uses the equity in your home as security. You don’t want to take too many of these out. It may mean you are headed for financial trouble.
Lisa Angelettie, M.S.W., is a psychotherapist, author, and life coach. She has been helping people make smarter life choices since 1998. Get more free tips like this when you subscribe to the GirlShrink newsletter .
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