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Rate Mortgage (ARM)--A
mortgage in which the Interest rate is adjustable, meaning that
the rate can go up or down according to prevailing financial market
Agent--An individual who represents a seller or a buyer, but
not both, in the purchase or sale of real estate. (See Associate.)
Amortization--The schedule of loan payments that establishes
the amount of payment to be applied to the principal
and the amount to be applied to interest,
usually on a monthly basis, for the full term of the loan.
Annual Percentage Rate (APR)--The TOTAL interest rate of
a mortgage, including the stated loan interest as well as any
upfront interest paid in securing the loan. The APR will invariably
differ from the mortgage rate quoted due to the inclusion of these
Appraisal--An estimate of value of a Real Estate property
by a professional third party. Virtually all non-owner financed
mortgages will require an appraisal and is generally paid for
by the buyer.
Assessment--The value of a property as determined by the
local tax jurisdiction which is used to determine the amount of
your property taxes.
Associate--An individual who facilitates a seller,
a buyer, or both in the purchase or sale of real estate.(See Agent.)
Buyer's Agent--A Real Estate Agent that has entered into
an agreement to represent the buyer exclusively, rather than the
CMA (Comparable Market Analysis)--A comparison of the prices
of similar houses in the same general geographic area. A CMA is
used to help determine the value of a property, either for a seller
or a buyer.
Closing--The process that effects
the final transfer of the deed from the seller to the buyer, as
well as finalize all aspects of the mortgage of the property.
Closing Costs--Funds needed at the time of closing (separate
from and in addition to the down payment). Loan origination fees,
discount points, Attorney fees, recording fees and pre-paids are
some items that may be included. They often will total from 3%
to 5% of the price of the home, payable in cash.
Condominium--Housing where the owner owns only the unit
in which the live--from the interior walls inward, generally--as
well as a portion of the common area.
Contingencies--These are conditions--or "safety valves"
written into Real Estate offers and contracts to prevent a buyer
from being forced to buy a house that is unsatisfactory--either
structurally or financially. Examples of contingencies are "This
contract is subject to the buyer obtaining a satisfactory whole
house inspection." or "Subject to the buyer being able
to obtain a mortgage."
Debt to Income Ratio--The ratio of a borrowers total of
debt as a percentage of their total gross income.
Deed--The document that, when recorded with your local
government, determines ownership of a property. Transferred from
seller to buyer at closing.
Earnest Money--Money that is submitted with an offer to
purchase which indicates a buyer's seriousness and good faith.
In virtually all cases, earnest money will need to be submitted
at the time of the offer and remains in escrow until the time
of closing, at which time it becomes part of the downpayment.
Equity--The difference between the value of a property
and the total of any outstanding mortgages or loans against it.
Escrow--Funds held in reserve both prior to closing (for
example the earnest money and deposit) by a third party and after
closing by the mortgage company to pay future taxes and homeowners
insurance. In some areas, "escrow" also refers to the
Fixed Rate Mortgage--A mortgage loan where the interest
rate is established at its origination and continues unchanged
through the life of the loan. More...
Foreclosure--The process through which a lender takes back
property from a defaulting owner and re-sells it.
FSBO (For Sale By Owner)--pronounced "Fiz-Bo"
--Real Estate that is sold without the assistance of an Agent.
FSBO can refer to both the individual selling the property "They
are a FSBO," or the property itself "that house is a
Homeowner's Association--An owners group,
whether in a condominium, townhouse or single family subdivision
that establishes general guidelines for the operation of the community,
as well as its standards.
Inspection--A whole house inspection of a home being considered
for purchase which looks for defects in the property.
Interest--That portion of a mortgage
payment that is the "charge" for using the lender's
LTV (Loan to Value)--The ratio of the amount of the mortgage
as a percentage of the value of the property.
Lien-- A legal claim against a piece of property that can
prevent it from being sold unless the lien is satisfied (paid
off). Liens can be filed by unpaid contractors or other debtors
in a legal process so that they will be paid when a property is
Listing--A property for sale by a Real Estate Brokerage
Loan Origination Fee--A charge imposed
by the lender, payable at closing, for processing the loan. See
Lock-in--An agreement by the lender at the time of mortgage
application or shortly thereafter, to write the mortgage at a
specific interest rate, whether rates rise or fall up to the date
of closing. Obviously a good move if rates are rising, not so
good if they are falling. Lock-ins have specific expiration dates,
such as 30, 60 or 90 days in the future.
MLS (Multiple Listing Service)--A listing
(almost always computerized) of all the properties for sale by
Real Estate Brokerages in a given geographical area.
PMI (Private Mortgage Insurance)--Required on virtually
all conventional loans with less than 20% downpayment. Although
the payments for PMI are included in your mortgage payment, it
protects the lender should you default on the loan. On FHA loans,
you will pay a MIP (Mortgage Insurance Premium) which accomplishes
the same purpose.
Points--1 point is equal to 1% of
the loan value, paid at closing. Points can be loan
origination fees or "discount points" which reduce
the interest rate of the loan (you are actually paying a finance
charge up front). When a lender, for example, quotes a rate of
8 1/2% with 1 + 1 points, 1 point is for the origination fee and
1 point is for the discount fee.
Pre-approval--The second stage of a mortgage application.
A formal discussion between a borrower and lender. The lender
determines the amount that you can borrow based on verifiable
documentation, such as bank statements, pay stubs, IRS tax returns,
credit check, and verification of rent or mortgage. This is much
better than a pre-qualification and is frequently requested by
the Seller in today's fast-paced market.
Pre-paids--Paid for (in cash) at closing for such items
as homeowners insurance for one year and real estate taxes for
Pre-qualification--The first stage of a mortgage application.
An informal discussion between borrower and lender.
The lender estimates the amount that you can borrow based solely
on what you tell them about your income and assets. The lender
does not verify the information and is not obligated to make the
loan when you are ready to buy.
Principal--The amount borrowed
for a mortgage loan. Your monthly mortgage payment will be applied
to both the interest and the principal (be assured, though, that
the lions share will go to the interest portion in the first years
of the loan).
Property Tax--An annual or semi-annual
tax paid to one or more governmental jurisdictions based on the
amount of the property assessment. Generally paid as part of the
Recording--The act of entering deed and/or mortgage information
into public record with your local government jurisdiction.
Sub-Agent--A Real Estate Agent who is
working with a buyer but who represents the seller in the transaction.
Title Insurance--Protects your title--your ownership rights--from
claims against it. Paid at closing, title insurance may be the
responsibility of the buyer, the seller, or both, depending on
what is traditional in your locality.
Warranty--Covers either most of the house in a new home,
or selected items (for example the heating and air conditioning
system or the water heater) in a used home. Warranties can vary
widely and are optional in used homes (paid for by either the
buyer or the seller).
Zoning--Laws that govern specifically how a zoned area
can be used. For example, an area may be zoned for single family
residential, condominiums, commerical or retail, or a mix of two
or more uses.