Leveraging - Leveraging allows you to use a small down payment and finance a large real estate
investment. This allows you to own expensive real estate with a small amount of capital.
Closing Cost - Cost associated with the sell and purchase of real estate. Typical cost incurred by the 'seller'
are real estate commissions and the pro-rated portion of the property taxes. Buyers typically pay for cost
associated with securing a loan, attorney's fees, title insurance, transfer taxes and pro-rated portion of real
estate taxes.
Listing Agent - A real estate agent/broker representing the Seller.
Selling Agent - A real estate agent/broker representing the Buyer.
Adjustable Rate Mortgage - Also known as ARMs. Usually have a lower introductory interest rate. Interest
rates change over the life of the loan ( Interest on fixed rate mortgages stay the same over the life of the
loan). The rate is usually tied to some index, such as the Prime Rate. They are typically easier to qualify for.
Fixed Rate Mortgage - A fixed rate mortgage is a mortgage where the interest rate stays constant over the
life of the mortgage. The interest rate is applied to the principal owed. In the beginning, a larger percentage
of your payment is interest paid. Toward the end of the loan, a higher percentage is principal paid.
Credit History - Lenders will want to see a copy of your credit report as part of the loan application process.
The report will list all you debts including mortgage payments, automobile loans and credit cards. It is
generally a good idea to request a copy of the credit report prior to loan application so you have a chance to
correct any errors.
Mortgage Term - Generally fixed rate mortgages have been either 15 or 30 years. Many banks are now
offering 40 year mortgages. Some borrowers choose a longer term loan to receive a smaller monthly
payment. This allows the borrowers to buy a more expensive house. However, many borrowers choose
shorter terms to save money by paying less interest over the term of the loan. For example, let's consider a
$150,000 mortgage. A 15 year mortgage will save you $138,206.80 in interest over a 30 year mortgage. It is
important to remember that any additional payment made comes directly off the principle owed!!
Points on a Loan - Borrowers can pay the lender 'points' to buy a lower interest rate. A Point is equal to 1
percent of the loan amount. Should you pay points? Answer....It depends on the length of time you plan to
stay in the house. To determine, calculate the mortgage payment before and after. Then divide the amount of
the points payed by the difference in the mortgage payment. This number determines the number of months
you must stay in the house to realize a savings on points paid.