Buying a Home Step 1: Terminology

Before You Go Making Those BIG Purchases

I don’t often like to just throw information at you.  As the Young & Free Spokesperson, I think it is a crucial part of my job to break down information and present it in a way that is easy to understand and apply.  However, much like life, not everything in the financial world can be solved or understood through a funny video or clever blog post.  Every once in a while, a healthy dose of hard facts and reality is necessary.  I'm sorry guys...not every post can be about movies and 90's nostalgia.  

Today I give you guys a list of NEED to know terms when it comes to you finances!  I’m talking about those terms that they don’t necessarily teach in high school and college, but have a funny way of sneaking up on you when it comes to buying a car, applying for a loan or when looking to buy a home for the first time!  While I can’t break them all down into clever videos, here is great list provided by the Living Young & Free Guide put together by Young & Free HQ!

Check it out!

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  • Adjustable rate  An interest rate that rises and falls due to financial market conditions.
  • Amortization  The amount of time over which a debt is repaid in full by regular payments.
  • Equity  The value of a thing you own, after you subtract the money still owing on it. For example, it’s the value of your car after you subtract your loan, or the difference between the market value of your home and the amount of your mortgage (money you owe to your lender).
  • Escrow  Money, property or a legal document held in the possession of a third party until a specific condition has been fulfilled.
  • Fixed rate  An interest rate that doesn’t change, usually for a specific term.
  • Insurance (homeowners)  An amount you pay (usually monthly) to protect your home, property and belongings against fire, theft and other damage.
  • Insurance (mortgage)  A safeguard against you defaulting on your mortgage payments. Paid monthly. Usually assessed if you are unable to put 20% or more as a down payment on the cost of your home. 
  • Interest  Amount paid to your credit union for the use of the money loaned to you by your credit union.
  • Mortgage  An agreement by which money is lent for buying property.
  • Prime rate  The best rate a financial institution will offer its best members. The prime rate is indexed 300 basis points above the federal funds rate, which is the rate that banks charge each other for overnight loans.
  • Principal  An amount invested or lent, excluding interest, taxes or other fees. 
  • Term  A set amount of time for which an interest rate and payments are assessed (a smaller amount of time within the overall amortization of a mortgage).
  • Title  Right to ownership of a property, whether in your possession or not.

Until next time,

Austin