If you’re looking for a new home to buy or investigating home mortgage loan choices, you’ve probably run into some friendly, upbeat people who want to help you achieve your home ownership dreams or maximize the value of your home buying potential. However, some of these people sure talk funny! The real estate industry does have its own lingo. Just like any industry, sometimes the pros forget that everyone doesn’t know every single specialized term or abbreviation. So, we thought we’d put together a short list of some common terms you’ll hear, and what they stand for.
- Conforming Loan: A conforming loan is a mortgage that fits Fannie Mae and Freddie Mac (see below) guidelines for the size of loan and loan underwriting criteria. In November 2019, the FHFA (Federal Housing Finance Agency) announced that the maximum 2020 conforming loan limit for a single-family house would be $510,400.
- Conventional loan: A conventional loan is a home mortgage that isn’t provided through or guaranteed by a government organization. So, a mortgage that is offered by a private lender or a bank/credit union that isn’t a VA, USDA, FHA, or other government sponsored loan is a “conventional” mortgage.
- Escrow: Escrow is an unusual word, but it just stands for the third party and time period where the money and contracts in a real estate transaction are verified and the property title is transferred.
- Fannie Mae and Freddie Mac: These two people aren’t a married couple. They’re two different home mortgage associations that are chartered by the Federal government. Freddie Mac stands for the Federal Home Loan Mortgage Corporation. Fannie Mae stands for the Federal National Mortgage Association.
- FHA: FHA stands for the Federal Housing Association, which was established as part of “New Deal” programs in the 1930s, and is part of the U.S. Department of Housing and Urban Development.
There are a lot of other specialized terms in the real estate and home mortgage industry. One of the advantages of working with an RE and mortgage professional is their ability to explain these terms to you, so you can understand what your choices are in homes to buy and loans that you can qualify for.