REAL ESTATE TERMS
- MORTGAGE TERMS
Real Estate Terms, Mortgage terms
Agent - An individual who represents a seller, a buyer
or both in the purchase or sale of real estate.
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 items.
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.
Adjustable 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
Assessment - The value of a property as determined
by the local tax jurisdiction which is used to determine
the amount of your property taxes.
Buyer's Agent - A Real Estate Agent that has made
an agreement to represent the buyer exclusively, rather
than the seller.
Comparable Market Analysis (CMA) - 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.
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."
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.
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
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 closing process.
Fixed Rate Mortgage - A mortgage loan where the
interest rate is established at its origination and continues
unchanged through the life of the loan.
FSBO (For Sale By Owner) - 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 FSBO."
Foreclosure - The process through which a lender
takes back property from a defaulting owner and re-sells
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
Interest - That portion of a mortgage payment that
is the "charge" for using the lender's funds.
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 sold.
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.
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.
LTV (Loan to Value) - The ratio of the amount of
the mortgage as a percentage of the value of the property.
MLS (Multiple Listing Service) - A listing (almost
always computerized) of all the properties for sale by
Real Estate Brokerages in a given geographical area.
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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.
Prequalification - The first stage of a mortgage
application where the lender will run a basic credit report
and determine your debt to income ratio in order to see
how much mortgage you qualify for.
Pre-paids - Paid for (in cash) at closing for such
items as homeowners insurance for one year and real estate
taxes for several months.
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 mortgage payment.
Recording - The act of entering deed and/or mortgage
information into public record with your local government
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.