Your Guide to Common Home Buying Terminology

Unless you work in the housing market, purchasing a house means encountering many unfamiliar terms in your mortgage documents and other financial paperwork. Even though realtors and homebuilders will help guide you through the home buying process, it can help to research real estate and mortgage terms ahead of time. The following is a list of a few of the basic terms you will encounter when you begin the process of buying a new home.

Debt ratios

Also referred to as the debt-to-income ratio, this is the percentage of your monthly earnings that are used to pay off debt obligations. When applying for a home mortgage, your lender will look at the ratio of your monthly housing expenses compared to your pretax monthly income. Next, he or she will consider the ratio with your other debts, including your auto loans and credit cards.


This term refers to your debt-free interest in real estate. This is calculated by subtracting the unpaid balance on your mortgage as well as any outstanding liens from your home’s fair market value. Your equity will increase as you pay down your mortgage and your property begins to appreciate in value.

Mortgage broker

A mortgage broker is an independent person or company who will bring you together with a lender. Unlike your mortgage banker, your mortgage broker does not fund your home loan. Instead, it processes the loan and places you with a funding source, like a bank.

Private Mortgage Insurance

Mortgage companies can recover costs of foreclosure in the event of default through private mortgage insurance. This is usually required if your down payment is less than 20 percent of the sale prices of the property. You can pay for this coverage in monthly installments and it should terminate when you build up 20 percent equity.

Castle & Cooke offers new homes that are more energy-efficient than homes built to the minimum code requirements. We are new home builders in Arizona that offer homes that are better for the environment and better for you. To learn about homes for sale in Sierra Vista, call (520) 378-5110.