Educating yourself about the process of buying a home includes knowing the related terms. Look up definitions
for common terms.
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Addendum » A written addition to a Purchase and Sale Agreement, or "contract," to change or clarify terms.
Adjustable-Rate Mortgage (ARM) » A mortgage in which the interest rate (and therefore the monthly payment) can fluctuate up (or down) during the life of the loan. Depending on the specific loan terms, your interest rate may change every 6 or 12 months. Because the initial interest rate is often lower for an adjustable-rate loan, the monthly payments during the first few years may be lower than a fixed rate loan. Some homebuyers prefer the adjustable mortgage if they do not expect to stay in the home for more than a few years, or if they think interest rates are heading down.
Appraisal » An opinion of the market value of a home expressed by a real estate appraiser
APR (Annual Percentage Rate) » The total cost of the mortgage, expressed as a percentage of the loan amount. Unlike the base interest rate (which only includes interest), the APR includes all costs associated with your loan, including points, origination fees, Private Mortgage Insurance, etc. Because different lenders charge different fees, the APR is a good way to compare the total cost of a loan from various lenders.
Buy-Down » A payment to the lender from the seller, buyer, third party, or some combination of these, causing the lender to reduce the interest rate during the early years of a loan. This results in lower mortgage payments during the buy-down period. The buy-down is usually for the first 1 to 5 years of the loan.