I got an IM from Patrick Beeson this morning with a link to a NY Times article about how the current housing drama has some prospective home sellers wanting to list their houses for more than the market will bear right now. There is reference to how this is some odd human trait in times of market downturn. Well, I m here to tell you, ain’t nothing new about it at all.

Home sellers very often want more for their homes than they re worth. They also think their houses have more square footage than they actually do, forgetting that the 1850 square place they bought cannot become 2100 square feet without a bunch of construction people hanging out at their home for weeks and weeks. Only our waist lines increase in size over time without us knowing. Our houses do not.

This brings up a common question: How much is a house worth if I paid “X” to purchase it, spent “Y” on remodeling the kitchen and “Z” on a state of the art irrigation system?

The quick answer is, it’s worth what someone will pay for it. Your total money invested is your issue, not the buyer’s.

Likewise, if you inherited the house and paid nothing for it, you wouldn’t expect to give it away.

So, pricing a house properly is key to having a happy outcome. This is the same whether the market is hot, ice-cold, or nicely temperate, as it is in the Greensboro area.

And when buying, remember that one day you’ll most likely be selling. Make a mental note of the square footage. It won’t be changing unless you make it happen. (But keep an eye on your waist line!)

Many of us prefer to live in blissful ignorance of certain facts of life: the effects of gravity on the human form, how many calories are really in three slices of deep dish pizza with the works, what our parents did with each other to bring us into this world.

A really easy thing to avoid thinking about is our credit score. It can seem really scary to find out what some faceless entity has determined our credit worthiness is. Even worse, it can be frightening to own up to the fact that we pretty much create our own credit score. Who needs to face that bit of reality?

We all do.

And there is nothing to fear, really. Really. If the news is better than you expect - say, FICO score of 730 - hazzah, hazzah. Pat yourself on the back and keep doing whatever it is you’ve been doing.

If the news is more sobering - a score that looks more like a batting average - then swallow hard, look at how you got there and make some changes.

What can be done? First of all, don’t think you’re the only one. Managing your relationship with money is like any other in your life. It takes work. Lots of it. And diligence. And compromise. And sacrifice. And a sense of humor for when things are rough. Many, MANY people don’t have the credit scores that they want. Folks with plenty of money as well as those who have less disposable income. Medical doctors, bricklayers, financial planners, restaurant owners and even Realtors (yikes!) can struggle to manage their money.

So, take heart. It isn’t a badge of shame. It’s just where you are right now. And a few changes over a few months can make a big change in your scores.

Here are some suggestions:

These are just a very few suggestions. If you’re finding that you must use credit each month to cover your expenses, scale back on your lifestyle. Obviously, there are circumstances that can make this very difficult - health issues, for one. But many of us have come to see luxuries as necessities. Again, successful relationships require sacrifice at times. And if you can make your relationship with money and your finances work, you’ll find that so much of the rest of your life seems easier.

[I've created a permanent page with real estate terms that I add to as the mood hits]

Like most industries, there’s a lot of jargon in real estate. It’s easy for those of us who use the terms every day to forget that most people rarely use these words, or haven’t heard them at all.

What follows is a simple and not nearly complete list of some words and phrases across which you may come in the process of looking for and buying a house. Feel free to request others or for clarification:

FICO Score

This stands for Fair Isaac & Company. They compile data about consumers and assign a “score” to each person based on calculations regarding debt/credit ratios, payment history and other factors.Lenders use a person’s FICO score to determine whether or not to extend credit.

What is considered a good score? That varies from lender to lender, product to product and can change depending on market conditions. The maximum score one can have is 850. Generally a score above 700 is considered quite good. A score below about 600 might be considered “sub prime”. (I hate to even use the word now).A FICO score is not the only factor a lender uses to make a decision about a borrower. It is a strong indication of how one manages money so will be looked at closely. Talk with a good lender to find out where you stand.

Escrow

Technically, escrow means when something of value is help in trust during a transaction by a third party. In parts of the country a property is said to be “in escrow” when there’s a purchase contract. In my area of Greensboro, NC, that same situation is called being “under contract”.

There is also the case when the your lender holds funds in an escrow account in order to pay property taxes and home owners insurance premiums when due on your house. Typically these funds are collected with your mortgage payment each month and when the bills for property taxes and insurance go out, they’re delivered to the lender who then pays them. There will also usually be funds collected at the time of closing in order to start funding the the escrow account.

PITI

Stands for “Principal, Interest, Taxes & Insurance”or what is usually one’s mortgage payment. When you are looking to buy, you need to clarify with your lender what your total monthly payments will be. There are calculators online that will tell you what the principal and interest payment would be if you financed ‘x’ number of dollars at an interest rate of ‘y’. But that would only be part of the story if you’re not putting down at least 20% down payment. If you put down less than that, you’ll most likely be required to pay monthly installments into an escrow account held by your lender. These funds will be used to pay your annual property tax and home owners insurance premium. So, the “TI” part of PITI will vary and must be taken into consideration when looking at what you can afford.

PMI (or MIP for FHA)

Mortgage insurance that is paid by the borrower when they have less than about 20% equity in their property. Most lenders require PMI to help cover any loss that may be incurred if the borrower defaults on their loan. PMI is not the same as home owner’s insurance, which covers that actual structure. PMI covers the loan.

If it seems that the borrower pays an insurance premium to cover someone else - the lender - you’re right. Clever how the lenders worked that out, eh? But it is what it is. Unless you’re willing to put more money in the transaction, thereby reducing the chances you’ll let it get away from you, you’ll need to pony up the PMI. The premiums for this vary. Check with your lender.

Equity

The difference between what your property is worth and what you owe on any mortgages you have on that property. The more you have, the better. And once you have about 20% equity (usually determined by a certified appraisal) you may be able to drop any PMI premiums and may be able to stop escrowing your tax and home owner’s insurance.

(ex: Your house has a certified appraisal that says it’s worth $200,000. You owe $150,000 on your first mortgage and $10,000 on an equity line. You’re total property debt is $160,000, meaning you have 20% equity. Call your mortgage lender and see about removing that PMI!!)

Per Diem Interest

Daily interest paid on your mortgage. You don’t usually need to think about per diem interest except in regards to your closing day. Lenders charge the interest on mortgages in advance. So, at closing time, you’ll be charged interest for each day from the date of closing through the last day of that month. If you close on the 10th, you’ll pay 20 days interest at closing. If you close on the 20th, you’ll pay 10 days. If you close on the last day of the month - yippee! - you only pay 1 day’s interest. This money can mean a great deal if you’re watching your up front costs.

Debt/Credit Ratio

How much you owe on your open lines of credit in relation to the maximum amount of credit available to you. It’s a good thing to have plenty of lines of credit. It’s not a good thing to “max out” those lines. It looks like you’re living on credit rather than managing your finances. A good rule of thumb is to keep your debt/credit ratio below about 30%. That means, if you have a credit line of $1000, try to stay below $300 on your balance.