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12 Mortgage Terms You Should Probably Know About

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When I waded into the business of trying to buy an apartment, I was soon waist-deep in Things I Didn’t Know. There were so many unfamiliar words and abbreviations and clumps of jargon. But I went to the kind of hoity-toity liberal arts college that was big on literary theory — Zizek, Foucault, Derrida and Butler were scary at first too — so once I discovered that their bizarro language could be decoded, their ideas were pretty straightforward. (Most of the time.)

If I could kick my way through the murk of that and end up swimming, I figured I could do the same thing with Mortgage-ese. And so I did, with nothing to help me but sheer cussedness and my determination not to pay anyone to do anything I could conceivably do myself. Here is a glossary of what I learned are some of the most important mortgage terms. Familiarize yourself with them and soon you too can feel more confident in your home-buying adventures.

But first: watch this quick lesson that details the most important terms

Adjustable-rate mortgage (ARM) A type of home loan in which the interest rate changes according to a standard financial index. ARMs can start off lower than a fixed-rate mortgage, but that can change. I got one that is steady for seven years and then adjusts, which is an especially good deal if the odds are good that you will sell your property in the near term (rather than, you know, 30 years from now).

Appraisal How much the property is worth according to a professional appraiser.

Assessed value How much your house is worth according to the municipality, so that they can figure out how much you have to pay in real estate taxes. Taxes may be annoying, but remember: they help maintain the roads, and potholes outside your front door would make your place less attractive to future buyers.

Closing costs Expenses like attorney’s fees, taxes, escrow payments and title insurance that buyers and sellers incur while transferring ownership of a home. These will, almost inevitably, run higher than you expect, so plan to have more cash on hand than you think you will need.

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