Home Buying Flashcards
What is credit?
Credit is borrowed money that you can use to purchase goods and services when you need them.
Revolving credit
given a maximum credit limit, you can make charges up to that limit. Each month you carry a balance and make a payment.
Charge cards
while they often look like revolving credit cards and are used in the same way, charge accounts differ in that you must pay the total balance every month.
Service Credit
agreement with service providers with the agreement that you will make a payment each month.
Installment Credit
a creditor loans you a specific amount of money and you agree to repay the money and interest in regular installments of a fixed amount over a set period of time.
How to keep good credit?
use the card regularly
pay off the amount each month
Pay on time
keep the amount you borrow low
look at your statement each month. Be on the lookout for fraudulent charges.
How to get a bad credit score?
late payments
Defaulting on payments/loans
the creditor “charges off” your debt
Your account goes to a collection agency
bankruptcy
Foreclosure
How to repair bad credit?
pay down credit card balances and refrain from making new purchases. You may want to put your card in “time out”
consider a credit-builder loan with a bank or financial institution
refrain from closing old credit card accounts once you have them under control, as this can affect your credit utilization and make it harder to build a solid credit history
consider paying outstanding collection accounts
check your credit report. “clean up” any false information
ARM
adjustable-rate mortgage - a mortgage in which the interest rate changes periodically
APR
annual percentage rate - a percentage of the amount of the home loan that represents the total annual cost of the loan
Appraisal
a report by a professional giving their opinion of the value of a property
Appreciation
an increase in the value of real estate
Credit Report
a report carried out by a credit reporting agency and used by the lender to determine whether an applicant is eligible for credit
Depreciation
the loss of value in real estate
Down Payment
the portion of the amount for the purchase of real estate that is given in advance by the borrower
Escrow
an item of value held by a third party delivered upon the fulfillment of an agreed-upon condition
First Mortgage
a mortgage having priority over all other liens
Equity
the difference between the value of a house and the outstanding balance of the lien (mortgage) on the property
Interest Rate
the percentage of an amount of money that is paid for the use of that money over a period of time
Lien
a right to keep possession of property belonging to another person until adept owed by that person is discharged
Mortgage
a legal document that transfers interest in a property and serves as a security for payment of a debt
PITI
The acronym for Principle, Interest, Taxes, and Insurance, usually the four parts of your mortgage payments
Principal
The amount of the debt.
PMI
(Private Mortgage Insurance) Insures the lender against loss caused by the borrower’s failure to make the payments.
