Do You Speak Real Estate?

Anyone interested in real estate should be able to talk the talk. Here is a list of common phrases and words with a short explanation. Use it as a reference:

Adjustable Rate Mortgage (ARM). A type of mortgage loan whose interest rate changes periodically up or down, usually once or twice a year. They are tied to an interest rate index like 11th District Cost of Funds.

Annual Percentage Rate (APR). Everything financed in your mortgage loan package (interest, loan fees, points or other charges) expressed as a percentage of the loan amount (usually slightly above the actual interest rate alone).

Assumable Loan. A loan in which the lender is willing to "transfer" from the previous owner of the home to the new owner, sometimes at the same interest rate, sometimes at a new rate. An assumable loan can make your home more attractive to buyers when you want to sell. Often the new buyer has to qualify for the assumption just as he/she would for a new loan.

Closing Costs. Costs the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayments for property taxes, etc. Closing costs average 3% to 4% of the loan amount.

Contingency. A condition put on an offer to buy a home; such as the prospective buyer making an offer contingent on his or her successful sale of a present home.

Conventional Mortgage. A type of mortgage not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), and thus usually requiring a 10% to 20% down payment.

Earnest Money. Funds submitted with an offer to show "good faith" to follow through with the purchase. Earnest money is placed by the buyer into an escrow/trust account until closing, when it becomes part of the down payment or closing costs.

Escrow. A procedure in which documents or transfers of cash and property are put in the care of a qualified third party, other than the buyer or seller.

FHA Financing. Financing for a loan which will be insured against loss by the Federal Housing Administration. Such financing allows for a lower down payment than required by most lenders.

Homeowners Insurance. Insurance that protects the homeowner from casualty (losses or damage to the home or personal property) and from liability (damages to other people or property). Required by the lender and usually included in the monthly mortgage payment.

Loan Origination Fee. A fee charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan.

Mortgage Insurance Premium (MIP). A charge paid by the borrower (usually as part of the closing costs) to obtain financing, especially when making a down payment of less than 20 percent of the purchase price, for example on an FHA-insured loan.

Point. An amount equal to one percent of the principal amount being borrowed. The lender may charge the borrower several points in order to provide the loan.

Property Taxes. Taxes (based on the assessed value of the home) paid by the homeowner for community services such as schools, public works, and other costs of local government. Paid as a part of the monthly mortgage payment.

Title Insurance. Protects lenders and homeowners against loss of their interest in property due to legal defects in the title.

VA Loan. A loan guaranteed by the Department of Veterans Affairs against loss to the lender, and made through a private lender.

When it comes to real estate, now you can sling the lingo with the best of them.

Mark Walters is an investor-entrepreneur helping other investors from his Web pages at http://www.Lease-Option-Sub2.com

AP - Oil slipped below $54 a barrel Wednesday as stock markets across the globe fell and yet another U.S. government report illustrated the disarray in the housing market.

Reuters - The U.S. Department of Housing and Urban Development will loosen terms of its foreclosure-prevention effort so that the program, meant to backstop $300 billion in home loans, can be more effective, the agency said on Wednesday.

Reuters - The shares of big U.S. homebuilders and real estate companies alike slumped on Wednesday as housing starts fell to a record low and concerns spread the commercial real estate market is going the way of residential.

AP - Mortgage application volume fell 6.2 percent during the week ended Nov. 14, according to the Mortgage Bankers Association's weekly application survey.

Reuters - Treasury Secretary Henry Paulson and members of Congress clashed on Tuesday over the best use for the $700-billion financial bailout fund, with lawmakers demanding money to stem a national wave of mortgage foreclosures.

AP - Faced with exasperated lawmakers upset by shifts in bailout strategy, Treasury Secretary Henry Paulson launched a spirited defense Tuesday of his handling of the $700 billion program and expressed fresh reservations about tapping the pool for mortgage guarantees to relieve skyrocketing home foreclosures.

Reuters - Producer prices posted a record decline in October as the weak economy sent energy prices tumbling, data on Tuesday showed, while business confidence among home-builders slumped.

Reuters - Bank of America Corp Chief Executive Kenneth Lewis said on Tuesday it is "pretty clear" the U.S. economy is in a recession, and forecast no recovery until the housing market stabilizes around the middle of 2009.

AP - Homebuilders' confidence in a near-term housing recovery sank to a new all-time low this month, reflecting growing worries over the U.S. financial crisis, rising unemployment and weakening consumer confidence, an industry trade association said Tuesday.

AP - Home prices fell in a record four out of five U.S. cities in the third quarter as low-cost foreclosures flooded the market and the U.S. housing market's decline spread throughout the country.

Reuters - Freddie Mac could post losses totaling $20 billion to $40 billion in 2009, hurt by higher credit costs and write-downs in mortgage assets, an analyst at Friedman Billings Ramsey said.