| 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 o 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
it.
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 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 and Agent.
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.
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 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, commercial or retail, or
a mix of two or more uses.
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