Whether you’re a first time home buyer or have moved in and out of more houses than you care to remember, we’re willing to bet there were times when you had some trouble following the common lingo bantered about real estate agents. All those abbreviations and letters can be confusing, so we decided to come up with a handy reference for some of the more popular ones that every buyer and seller should know.
A Quick Reference To Real Estate Vocabulary
With no further adieu, here are some “letter” real estate terms broken down into simple English—in alphabetical order of course!
Yes, it is spelled like one of your limbs, but if you’re considering an Adjustable Rate Mortgage, it’s important that you completely understand what is involved. Also known as a Variable Rate Mortgage, quite simply it means that the interest rate you pay will vary each month based on various criteria. If you’re the type that likes to know to the penny how much to budget each month, don’t let your lender twist your “arm”, look instead at a Fixed Rate Mortgage.
If you did a quick survey of your neighborhood you might find that a majority of people really like the Country Music Awards, which is great, but has absolutely nothing to do with a Comparative Market Analysis. This is actually a study, usually performed and provided by your real estate agent, of neighboring homes that have sold which are similar to your property. The data collected can help you initially price your home properly.
There is no doubt that Honda makes a great vehicle, but how much is it worth? Well, you could always request a Certificate of Reasonable Value but we don’t think the Veterans Administration would appreciate it too much. See, they issue CRV’s to help buyers get a VA Mortgage loan, a document based on an approved appraisal that sets the maximum loan principal allowed.
All things being equal, our Founding Fathers believed that everyone deserved the right to life, liberty and the pursuit of happiness. The Equal Credit Opportunity Act was created to add that all legal residents will have the opportunity to apply for a loan. Enacted in 1974, the ECOA states that it is against the law to discriminate against any credit applicant based on race, color, religion, national origin, sex, marital status or age.
Funny, but we can’t think of anything else that someone could confuse the Federal Housing Administration with….This government agency sets standards for construction and underwriting, insuring loans made by banks and other private lenders in regards to home building.
You may think you’ve never heard of this one, but if you watch any amount of television we guarantee that you have. Home Equity Conversion Mortgages are better known as Reverse Mortgages. If you’re at least 62 years old you can convert your home’s equity into cash. No principal payments are required until the home is sold or the person who borrowed the money passes away, but at that point the entire mortgage must be repaid. Want to learn more about this nifty financial program? Simply turn your television to any local channel and Robert Wagner will show up on your screen several times a day with a toll free phone number!
For some reason this term looks like it would come up with some really curious variations if used with with your smart phone’s auto correct function. LTV is just a shorter, cooler way of saying “Loan To Value”. Ok, you ask, what does that really mean? It’s a term used by lenders when it comes to assessing the risk of issuing a mortgage. Normally the LTV is represented by a ratio that incorporates the cash loaned compared to the value of an asset, in our case, a residential dwelling.
Not enough money for a down payment? That’s TMI—Too Much Information! PMI, however is what you will need to pay each month when you don’t have enough cash to put down on your dream property. Primary Mortgage Insurance is required to protect lenders from the risk of borrowers defaulting on their mortgage. Usually when buyers put down less than a 20% payment for their new home, PMI is paid monthly to help the lender sleep a little better at night knowing their loan is insured. As equity is accumulated in your home, the lender may no longer require this payment.
Wasn’t it Mr. T who used to say “I pity the fool that doesn’t know what PITI means!” No? Well, in the event that you ever run into our favorite Rocky villain, you can let him know that you do, in fact realize that Principal, Interest, Taxes & Insurance are what makes up your total monthly mortgage payment!
Did we leave any of your favorite real estate terms out of our list? Feel free to respond below and let’s see how many we can share with our readers!