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Terminology
There are a lot of terms that will get tossed around while you are buying your new home. Here are some of them and what they mean.
- APR stands for Annual Percentage Interest Rate
- Term is the length of the loan. In other words, how many payments you have to make.
- Principal is the money that you owe
- Interest is what you pay (rent) on the money you owe.
- Amortization is the gradual payment of the amount you owe so that over the term of the loan the principal eventually is reduced to zero.
- Down payment is the money you pay at purchase plus any credit you may receive for a tradein.
- Regulation Z is the Federal Truth in Lending requirement for full disclosure of the loan terms to the buyer.
- Credit Score is a number calculated by the credit bureau that attempts to sum up your credit experience in a single number. The number can range between zero and 1,000. Each lender can choose the scores they are willing to work with. However, anyone with a score under 700 will not get the lowest rates.
- Sub-Prime is the description for buyers whose credit scores are to low to qualify them for the lowest interest rates and best loan terms.
- Grace Period is the time between when you loan says it is due and the time a late payment penalty is applied. Not all loans have grace periods. It is important to remember that interest contues to accrue, so repeated late payments may extent the life of your loan and the total number of payments you have to make.
- Equity is the difference between what the home is worth and what you still owe on it. If you could sell the house for $60,000 and you still owe $50,000, then you have $10,000 of equuity.
- Under water or Up Side Down are expressions used to describe buyers who owe more than the house is worth.