COMMON INVESTMENT TERMS EXPLAINED: Part 18

Another round of real estate terms for you! Let us know if you have any questions.

Assumable Mortgage: A mortgage that can be assumed by the buyer when the home is sold. There is usually a qualification process for the new owner before he or she can assume the mortgage.

Balloon Mortgage: A mortgage that has a large final payment due at some point. For example, a loan may be amortized over a thirty-year period, but at ten years, the remaining principle must be paid in full.

Closing: This will mean different things in different states. In many states, a real estate transaction is not “closed” until the documents are recorded at the recorder’s office. In others, the “closing” is the meeting at which the documents are signed and funds are exchanged.

Closing Costs: These are separated into either non-recurring closing costs or prepaid items. Non-recurring closing costs are items that are incurred only once as a result of buying the property or obtaining a loan. Prepaid items are those that recur over time, like homeowner’s insurance and property taxes.

• To the best of the lender’s ability, these non-recurring closing costs and prepaid items are shown on the good faith estimate (GFE) that they’re required to provide to the borrower within three days of receiving the mortgage application.

Thanks for reading! More terms coming your way next week.