Common Real Estate Terms and What They Mean
If you’re buying a home and find yourself wanting a special dictionary explaining real estate jargon and acronyms, you’re not alone. Many home buyers tend to feel a little frustrated throughout the home buying process. The majority of home buyers and sellers rely on a professional licensed real estate agent to help guide them through the entire process. However, you should learn some basic real estate terminology in order to familiarize yourself. Here are some basic terms that you may encounter.
ARM or Adjustable Rate Mortgage
Adjustable mortgages have interest rates that change pertaining to indexes. These indexes are based on market conditions. Ask your lender to be more specific on which index your ARM loan is based.
If you have a mortgage, your monthly payment consists of both principle and interest. The amortization of a loan is the calculation of how much percentage is moved towards the principle or how long it takes to repay the mortgage.
Appraised Value and Assessed Value
While many think appraised and assessed are the same thing, they aren’t. An appraised value is provided by a specific appraiser and based on current market value. An assessed value is based off of a government tax assessed value, which includes an entire area for calculation. This calculation determines the property taxes for specific property. A lender will use an appraised value versus an assessed value.
Broker and Agent
In California, there are differences between real estate brokers and agents. A broker has more education within the industry and is a step up from an agent. Brokers can work independently in California. A real estate agent or broker associate must work for a licensed broker.
If you move to a neighborhood with an HOA (homeowner’s association), you will have covenants. Covenants are rules issued by a governing body for real property. The purpose is to restrict the use of land for varying reasons in order to maintain the property value or provide rules for usage of common areas.
An escrow contains monies that are set aside in an escrow account to pay third parties. For example, your taxes and insurance may be paid using escrow. These monies are set aside by your lender and disbursed once per year.
PMI (Private Mortgage Insurance)
PMI is insurance that is usually required when a borrower has a loan for more than 80 percent of the appraised value.
Keep in mind that it is encouraged to ask questions whenever you’re having a hard time comprehending certain terminology. Let professionals help better your real estate understanding!
For more of our perspective on this subject read our recent blog, “Real Estate & Millennials: The Next Generation of Homebuyers”
Thinking of buying or selling a home in the La Jolla area? As consistent top producers in real estate, Linda Daniels and The Daniels Group are your La Jolla housing specialists. Working with The Daniels Group will give you with the advantage of having local experts to ensure that you have a successful real estate transaction. From buying, selling and investing to financing options and more, we have the expertise and resources to help you achieve your goals. Call us today at (858) 361-5561 or email us anytime by clicking here.