If you're just getting in the market for real estate, chances are you're hearing a lot of unfamiliar terms these days, especially on the mortgage side of things. Real estate introduces you to entirely new language. One filled with lots of words that are thrown around by your mortgage lender, REALTOR, and even your friends and family, who may sometimes make the assumption that you know what they are discussing.
Don't be afraid to pull back for a second and say "Hey, I have no idea what you are talking about." Just as George Washington coming back to the present day would need many things to be explained to him, when you start your home search you'll be encountering uncharted territory and can make use of a glossary.
Never is this more true than with all the abbreviations and acronyms used in the real estate lingo.
It sometimes reminds me of that famous scene in the movie Good Morning, Vietnam when Robin Williams, fed up with all the military jargon, jokingly asks:
“Excuse me, sir. Seeing as how the VP is such a VIP,
shouldn't we keep the PC on the QT? 'Cause if it leaks
to the VC he could end up MIA, and then we'd all be put
out in KP."
I remember a real estate sale I had several years ago. A Navy Admiral was purchasing a home from an Army General. During the final walkthrough of the home, the two of them got to talking military and the acronyms and abbreviations were flying left and right, but mainly they were flying right over my head. That's when I spent the rest of the time talking with their wives and looking through the kitchen and bathrooms to make sure all the appliances were working.
Wondering about all these real estate abbreviations? Here's clarification of a few of them:
APR: Stands for Annual Percentage Rate -- shows the cost of a loan expressed as a yearly interest rate, including the interest, points, mortgage insurance, and other associated fees.
ARM: Adjustable Rate Mortgage -- a mortgage loan that can be subject to changes in interest rate
EMD: Earnest Money Deposit. Money put down by a buyer to show that they are serious about purchasing the home. Learn more here: Bring Your Checkbook With You on Your Househunt
FHA: Federal Housing Administration. Assists home buyers by providing mortgage insurance encouraging lenders to make loans to borrowers who might not qualify for conventional mortgages.
GFE: Good Faith Estimate. This estimate of all closing fees must be given to the borrower within 3 days after submission of a loan application.
HUD: U.S. Department of Housing and Urban Development
HUD-1: The settlement statement provided at closing that itemizes all the closing costs for both seller and buyer.
LTV: Loan-to-Value ration. This is a percentage calculated by dividing the amount borrowed by the sales price or appraised value of the home to be purchased.
MIP: Mortgage Insurance Premium
PITI: Principal, Interest, Taxes, and Insurance. These are the four elements of your mortgage payment.
PMI: Private Mortgage Insurance -- can be required for borrowers with down payments of less than 20% of a purchase price.
VA: Department of Veteran Affairs. Guarantees loans made to veterans.
VHDA: Virginia Housing Development Authority. Virginia's state mortgage finance agency.
Now, when someone asks:
"Did you get the GFE for your ARM? What's the APR and PITI and will you need PMI according to the HUD-1? How about your EMD?"
You'll know what they're talking about.
When deciding on a Northern Virginia REALTOR to help you learn the language of real estate, why not work with one with lots of abbreviations and acronyms after their name?
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