Understanding the Lingo

Buying (or selling!) a home can honestly be one of the most overwhelming and confusing experiences in your life. There’s just so much work to be done, papers to sign, and documents to read. You may feel bogged down by everything you’re “supposed” to know and understand. That’s where we come in! Here’s a handy cheat-sheet explaining the most commonly confused words and phrases used in mortgage documents.

Amortization: Just a fancy word for paying off the principal. In a typical mortgage loan, the principal is scheduled to be paid off, or fully ‘amortized,’ over the life of the loan.

Basis Point: One one-hundredth of a percentage point. For example, if mortgage rates fall from 7.50% to 7.47%, then they’ve declined three basis points. One hundred basis points equals a full percentage point.

Conventional Mortgage Loan: Any mortgage loan not guaranteed or insured by the government (typically through FHA or VA programs).

Fixed-Rate Mortgage (FRM): A mortgage loan with an interest rate that does not change over the term of the loan.

Home Equity: The difference between the value of the home in the current market, and the amount of money still owed on the loan.

Interest Rate: A measure of the cost of borrowing anything; similar to a mortgage rate. 

Mortgage Quote: An interest rate offered on a home loan.

Mortgage Rate: The amount of interest charged on money lent for the purchase of a home.

Underwriting: The multi-step process of determining whether a lender will take the risk of approving your particular mortgage loan application. 

Of course, the best way to navigate confusing real estate transactions is to work with a licensed real estate professional, like the agents at Southern Charm Realty. Contact us today!