My Initial Jump Into Real Estate - 1490 Words

There are many terms involved with the real estate closing process; so many that books are available just to cover the wide array of vocabulary. In this report I will be covering three pieces of terminology that I personally find important for me to thoroughly understand during my initial jump into real estate. The first piece of terminology I will be covering is the mortgage. In my opinion the mortgage is one of the biggest pieces of the home closing process that needs to be understood by all parties. Secondly, I will be covering closing costs. Closing costs is a very broad term assigned to a large group of smaller costs involved during the closing process and it can be important to know where that money is going. Finally, I will be†¦show more content†¦The first of these three, fixed rate mortgages, are arguably the simplest and easiest to understand. The idea of the fixed rate mortgage is simple, you are given a set interest rate for a set amount of time. The mort gage payment for a fixed rate mortgage is calculated at the time of mortgage origination and stays that rate for the life of the mortgage (minus tax and insurance fluctuations if included in the mortgage payment). The length of a fixed rate mortgage (as well as other mortgages) can vary widely, from 10 years all the way up to 40. According to the book â€Å"Mortgage Confidential†, â€Å"a typical ‘spread’ between a 30-year and a 15-year fixed rate is normally about  ½ percent†, meaning â€Å"if you can find a 30-year rate at 7.00 percent, then a similarly priced 15-year mortgage at most places will be in the 6.50 percent range.† (Reed, 2011, p.157). Adjustable-rate mortgages, like fixed rate mortgages, have a set length, but do not have a fixed interest rate. Adjustable-rate mortgages â€Å"can be based on a variety of indexes† and â€Å"are set using an index and a margin.† (Reed, 2011, p.149). Simply stated, the interest rate of adjustable-rate mortgages fluctuates with the financial market. The interest rate of an adjustable-rate mortgage will change depending on the type of mortgage. â€Å"A one-year adjustable will typically adjust once per year, a six-month ARM will adjust every six months, and monthly ARMs will