Nearly every person who has purchased a home in the past has heard a real estate agent use terms he or she was not quite familiar with – ‘sweat equity’ and ‘cumulative interests’ are just a few that come to mind. If you’re looking to buy a home in Flower Mound, there are a few terms you’ll want to get familiar with, not only so you understand these terms if your realtor tosses them around, but so you appear to be a smart, savvy buyer.
Let’s start with the two we mentioned and go from there.
Sweat equity. This is essentially the work you’ve put into a home, for example buying a ‘money pit’ and transforming it into a nice, quality home. This isn’t painting the walls – it’s replacing boards or entire walls, projects that really require elbow grease and hard work. Instead of financial or “money” equity, this is tough work or “sweat” equity.
Cumulative interest. Before you buy a house, it’s important to know what the interest that accumulates over a period of time will be. What is the total sum that will be paid in interest alone over a specific time period, not including the principle? This can be a huge (and frightening) number, so know what it is.
Liquid assets. U.S. Treasury bills and money market accounts are examples of liquid assets, or assets that can be converted to cash quickly without compromising or reducing the assets’ value. Other examples include government bonds and savings accounts.
Escrow. Escrow could be thought of as a middleman between a buyer and seller, and is a legal arrangement in which a third party (who is neutral) collects the money until the point that a contract between the buyer and seller is satisfied. For instance, an individual may purchase several acres of land from another individual, however the payments are made to or the money is deposited through an escrow company.
Flexible payment arm. A type of mortgage, with a flexible payment arm allows the homeowner to choose how he/she wants to pay the mortgage each month – an interest-only payment, minimum payments, a 15-year, fully amortizing payment, or 30-year, fully amortizing payment. Ultimately, this type of mortgage can make it possible for homeowners who shouldn’t qualify for high-priced homes to get a loan. If paying a mortgage for the rest of your life sounds attractive, a flexible payment arm mortgage may be just for you.
Are you looking to buy a home in the Dallas area? At Team Nelson, our Flower Mound real estate agents want to help you understand the jargon, and find a home that your family loves – and you can afford. Give us a call today!