Real Estate Financing and Mortgages

Flashcards covering key concepts related to real estate analysis, mortgages, financing options (fixed-rate, variable-rate, ARM, assumable, seller financing), down payments, amortization, equity, and the role of realtors.

What is real estate analysis?

An act or process of providing information, recommendations, or conclusions on diversified problems in real estate.

What is a mortgage?

A loan by a bank or other financial institution that a person can use to finance the purchase of a home.

What differentiates a mortgage from other loans like personal or student loans?

The bank can use your house as collateral, meaning they can take possession of your home if you don't pay back on time.

What is a down payment?

The amount of money a buyer pays upfront when purchasing a home.

What is the typical percentage for a down payment, though it varies by bank?

Around 20% of the price of the home.

What is a fixed-rate mortgage?

A mortgage with an interest rate that remains constant throughout its term, normally fifteen or thirty years.

What is a variable or floating rate mortgage?

A mortgage whose interest rate goes up and down according to current interest rates.

Which type of mortgage rate is considered the safer choice, though often a little more expensive?

Fixed rates.

What is the amortization period of a mortgage?

The length of time it will take to pay off the entire loan and own the home entirely.

What are the main advantages of taking a mortgage instead of renting?

Building equity (owning more of your home with each payment) and the potential for profit if the home's value appreciates.

In the context of home ownership, what is the difference between equity and debt?

Equity is what the homeowner owns, while debt is what the bank owns. Payments convert debt into equity.

What are the three major real estate financing options discussed?

Borrowing money using a mortgage from a licensed financial institution, assuming the seller's existing mortgage, and seller financing.

What is an Adjustable Rate Mortgage (ARM)?

A mortgage that generally has a fixed interest rate for an initial period, after which the lender can adjust the interest rate according to market rates.

What is important to consider if assuming a seller's existing mortgage?

Whether the mortgage is assumable and what the terms of the existing mortgage are.

Who is recommended as the best source of information for all real estate needs?

A knowledgeable realtor.