5 Homebuying Acronyms You Need to Know

November 11, 2019
Last updated:
January 26, 2022
In This Article

When it comes to the world of homebuying in Washington, Oregon, Idaho or Colorado there’s a certain lingo that’s unique to this realm. This can make it a bit difficult for buyers who are new to the homebuying game to follow and understand.

As such, it’s worthwhile for buyers to take a little bit of time to get to know some of the acronyms that are frequently used in the industry.

For instance, do you know what these acronyms mean?

APR – Annual percentage rate – This represents the annual cost of borrowing money based on the loan amount, interest rate, and any other applicable fees.

FRM – Fixed-rate mortgage – This type of home loan comes with an interest rate that remains fixed throughout the term and never changes. If rates are really low when you buy a home, it may be best to lock in at a low rate with a fixed-rate mortgage.

DTI – Debt-to-income ratio – Your DTI represents how much of your monthly income is dedicated to paying your monthly debt bills.

PMI – Private mortgage insurance – This type of insurance is required if you make less than a 20% down payment towards the purchase of your home. PMI protects lenders from losses if you are unable to pay your mortgage.

P&I  – Principal and interest – These represent the portion of your monthly mortgage payment that will go towards paying off the loan amount you borrowed to buy a home.

While these phrases might sound foreign to you when you first hear them, knowing what they are and what they mean can help you better understand the homebuying process.

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