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Understanding Real Estate Terminology

Sometimes when it comes to buying a home, you feel like you are in the middle of alphabet soup!

There are multiple acronyms in the real estate industry that are beneficial to help communicate the matters at hand. But what if you don’t know what the acronym means? Don’t worry, we are here to help.

First of all, before starting my list, I would like to stress that it is entirely acceptable and good practice to speak up and ask if you don’t understand the terminology. As realtors, we are in the business of helping you with your home buying or selling process. Our job is to make a smooth transaction and ensure you fully understand the industry jargon.

Below are some of the typical real estate acronyms and their meaning.

APR – Annual Percentage Rate: Annual cost of borrowing money based on the loan amount, interest rate, and certain other fees.

ABR – Accredited Buyer Representative: A certificate of National Association of Realtors for buyer representation

CD – Closing Disclosure:  Buyers receive this three days before closing. This five-page document spells out all the terms of the loan:

    • The amount
    • The interest rate
    • The monthly payment
    • Mortgage insurance
    • The monthly escrow amount
    • All closing costs

CMA – Comparative Market Analysis:  A comparative market analysis is a process of determining an investment property’s value by comparing it to other properties similar in size, amenities, etc. Comparative market analysis takes both the property itself into consideration, as well as the market in general.

DTI – Debt-to-Income:  Percentage of your monthly income that goes toward your monthly debt payments.

FHA – Federal Housing Administration:  A government agency created by the National Housing Act of 1934 that insures loans made by private lenders.

FRM – Fixed-Rate Mortgage:  Interest rate that does not change during the entire term of your loan.

FSBO – For Sale by Owner:  Properties not listed on the MLS.

HOA – Homeowners Association:  The governing body of a housing development, condo or townhome complex that sets rules and regulations and charges dues and special assessments used to maintain common areas and cover unexpected expenses respectively.

LTV – Loan-to-Value Ratio:  The amount of the loan divided by the price of the house. Lenders reward lower LTV ratios.

MLS – Multiple Listing Service:  A database where real estate agents list properties for sale.

PMI – Private Mortgage Insurance:  Insurance protects lenders from losses if a homeowner cannot pay their mortgage.  It is required for homebuyers who make down payments of less than 20% of the home purchase price.

P & I – Principal and Interest:  Principal and interest are the portions of your monthly mortgage payment that go toward paying off the money you borrowed to buy your home.

If you have questions about the terminology of the real estate industry, the USA real estate team can help!!  (928) 775-0400

Prescott Valley real estate