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7 Home Buying Acronyms You Need to Know

By Kalista Mefford – Keller Williams Realty

For many, the idea of buying a new home can seem overwhelming; the reality is the process is rather simple once you understand the steps. Part of that understanding is learning the most common acronyms used in buying a home.

Here is a quick reference list of the 7 most often used acronyms and how they pertain to your transaction.

1. APR (Annual Percentage Rate) – APR is the total cost of borrowing money; this includes the interest rate, closing costs and other fees associated with the loan.

2. FRM (Fixed Rate Mortgage) – A fixed rate loan is one where the interest rate remains the same over the life of the loan.

3. DTI (Debt to Income) – DTI is the percentage of your income used to service all your recurring debt; this includes your mortgage, credit cards, car loans and other loans or lines of credit.

4. PMI (Private Mortgage Insurance) – Loans for more than 80% of the home’s value are subject to PMI. This is insurance which protects the lender in the event of borrower default and every loan with less than a 20% down payment will include PMI.

5. P&I (Principal and Interest) – P&I is the portion of your loan which goes to pay down the principal of the loan amount. Other monthly costs could include taxes, PMI, association fees and other costs which are included in your payment but separate from P&I.

6. HOA (Home Owners Association) – is an organization in a subdivision, planned community, or condominium building that manages and enforces the rules of the community. Those who purchase property within an HOA’s jurisdiction become members and are required to pay dues, known as HOA fees. Some associations can be very restrictive about what members can do with their properties. Including architectural review if you want to make changes to your home exterior, or whether renting is allowed.

7. ALTA Statement (American Land Title Association) – is a settlement statement that itemizes all of the fees and charges that the buyer and seller will pay during the closing portion of a real estate transaction. Everything from the sale price, loan amounts, taxes and other pertinent information is contained in this document. The statements are provided to brokers and agents on both the buying and selling ends of the transaction.

Real estate has a lot of terms, understanding the most common can take the mystery out of the home buying process and provide peace of mind as you search for your new home.

Real estate has a lot of terms, understanding the most common can take the mystery out of the home buying process and provide peace of mind as you search for your new home.

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