Your Guide to Key Terms in Real Estate…

Key Terms used in Real Estate…

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Written by: Andy Jansky & Maribel Maldonado

The process of buying or selling a home can be overwhelming or just plain confusing here are a few common terms used in the Real Estate Industry to help get you started.

Foreclosure: Legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. Foreclosure laws are based on the statutes of each state.

Short Sale:  Sale of real estate in which the sale proceeds fall short of the balance owed on the property’s loan.

FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.

Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers. Also known as a Government Sponsored Enterprise (GSE).

Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers. Also known as a Government Sponsored Enterprise (GSE).

VA Home Mortgage:  Mortgage loan in the United States guaranteed by the U.S. Department of Veterans Affairs (VA). The loan may be issued by qualified lenders.

The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry). The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.

Conventional Home Mortgage: Private sector loan, one that is not guaranteed or insured by the U.S. government

ARM Home Mortgage: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the change in monthly payment amount, however, is usually subject to a cap.

The VA Loan is a special benefit offered to active military service members and veterans. Backed by the Department of Veterans Affairs, VA mortgage lenders are able to offer low rate home loans with the most flexible financing options in the industry. Qualified borrowers are not required to make a down payment or pay private mortgage insurance, making the VA home loan the most cost-effective and money-saving option when it comes to moving your family into a new home. The VA Loan is a special benefit offered to active military service members and veterans. Backed by the Department of Veterans Affairs, VA mortgage lenders are able to offer low rate home loans with the most flexible financing options in the industry. Qualified borrowers are not required to make a down payment or pay private mortgage insurance, making the VA home loan the most cost-effective and money-saving option when it comes to moving your family into a new home. The VA Loan is a special benefit offered to active military service members and veterans. Backed by the Department of Veterans Affairs, VA mortgage lenders are able to offer low rate home loans with the most flexible financing options in the industry. Qualified borrowers are not required to make a down payment or pay private mortgage insurance, making the VA home loan the most cost-effective and money-saving option when it comes to moving your family into a new home. The VA Loan is a special benefit offered to active military service members and veterans. Backed by the Department of Veterans Affairs, VA mortgage lenders are able to offer low rate home loans with the most flexible financing options in the industry. Qualified borrowers are not required to make a down payment or pay private mortgage insurance, making the VA home loan the most cost-effective and money-saving option when it comes to moving your family into a new home.

Fixed-Rate Home Mortgage: Mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.

POF (Proof of Funds): Document that demonstrates that a person has the ability and funds available to use for a transaction. It usually comes in the form of a bank, security or custody statement. The purpose of the document is to ensure that the funds required for the transaction are obtainable and legitimate.

Mortgage Pre-Approval: Lender commits to lend to a potential borrower a fixed loan amount based on a completed loan application, credit reports, debt, savings and has been reviewed by an underwriter. The commitment remains as long as the borrower still meets the qualification requirements at the time of purchase. This does not guaranty a loan until the property has passed inspections & underwriting guidelines.

Obtaining a pre approval prior to shopping for a home will provide you with the confidence and information you will need in order to purchase your new home. The Pre approval allows you to present an offer when you find the right Home.

REALTOR: Real Estate Agent or Broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.

This information was obtained through the U.S. Department of Government and Housing.   May be Subject to errors and omission.

These are just some of the most common terms used every day in Real Estate transactions, and only the beginning of one of the most important decisions you will make.  Consulting with a Real Estate Professional is recommended to assist you and answer your Real Estate questions.

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Check out these other related articles:

“Home buying lingo for first-time home buyers”

“3 ways to lose a home 10 days before closing”

“5 tips to save for your home down payment”

“10 questions to ask your lender”

“Mortgage Quick Tip: Understanding PITI”


Team Vero Beach of Dale Sorensen Real Estate Inc. can be reached directly at: Andy Jansky (772) 584-3390 or Maribel Maldonado (321) 693-7398

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