Many people, especially first time buyers, often have questions about terms used by bankers and real estate professionals. In my first column for The Voice of Batesville I thought it might be helpful to the readers to explain some commonly used real estate terms.
Amortization is a payment plan in which a borrower reduces debt gradually, usually through monthly payments of principal and interest, but the payments could be semi-annual or annual payments.
Annual Percentage Rate(APR) is the annual cost of credit over the life of a loan, including interest, service charges, points, loan fees, mortgage insurance and other such items.
An appraisal is an evaluation to determine what a piece of property would sell for in the current market.
A balloon loan is a loan with payments that are based on a longer amortization than the actual maturity date. The balance of these loans is due at the end of the loan period. These loans are often for 3, 5, or 7 years. The reason for this type of loan is that it gives the borrower smaller payments while not locking the lender into an interest rate for the full amortization.
Closing is the term given to the meeting at which buyers and sellers sign the documents to transfer property from one owner to the other.
Earnest money is a sum paid to show the buyer is serious about his intentions to purchase property. At the closing the earnest money goes toward the purchase price of the property as a credit to the buyer.
Escrow is the handling of funds or documents by a third party on behalf of the buyer and/or the seller.
If there are other real estate questions you have you may contact me through this paper or my office.
Sharon Black, Realtor
Ennis Realty
October 17, 2008
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