Before the home buying and selling season begins this spring, it’s important to be armed and educated with all of the language terms and details, related to home buying and selling. We’ve put together a list of common mortgage terms and definitions you may encounter to help guide you through the process.

Adjustable Rate Mortgage (ARM)–An Adjustable Rate Mortgage, or ARM, is just that – a mortgage based on a rate that can fluctuate over the life of the loan, based on the market rate. This can benefit the borrower if the rate decreases over the life of the loan; conversely, it can also impact your payment should the rate rise. Most ARM loans include a cap on how high the interest is permitted to rise for the best interest of the borrower.

Fixed Rate Mortgage Loan–If a homebuyer wants a home loan product that will offer a consistent, steady payment over the life of the loan, then a Fixed Rate Mortgage Loan is the best option. Offering varying lengths of payback timeframes, a Fixed Rate Mortgage Loan will provide a steady principal and interest payment for the life of the loan.

FSBO (For Sale By Owner)–This is a term often used in the industry for homes that are listed, advertised, and sold by the homeowners without the use of a real estate agent. It’s always recommended to use a lawyer specializing in real estate contracts when purchasing a FSBO home.

Loan Pre-Approval–Having loan pre-approval is really an asset to most buyers. Why? It tells realtors and sellers that you are a serious buyer since you’ve gone through the process of loan pre-approval. What’s more, your lender will determine what home loan amount you are qualified for based on your credit rating, income, and current expenses. It’s helpful to know how much of a loan amount you are pre-approved to obtain before you start house hunting.

Sales Contract–A sales contract is a legally-binding agreement between the buyer and seller. The sales contract will contain all pertinent details of the sale of a home, including the purchase price of the home. Once all of the components of a sales contract are accepted by both parties, both parties sign and date the document. Before signing a sales contract, it’s critical you agree with all of the terms of the document. It is often recommended to ask a lawyer to review the sales contract before signing.

As always, contact a First Bank home mortgage consultant for any questions you may have regarding these terms, their meanings, and anything else related to home buying or selling that you may encounter. Happy house hunting!