|
 Real Estate has a language all
its own. Here's some of the terminology you'll be hearing:
Adjustable Mortgage Loans: Mortgage
loans under which the interest rate is periodically adjusted to more
closely coincide with current rates. The amounts and times of
adjustment are agreed to at the inception of the loan. Also called:
Adjustable Rate Loans, Adjustable Rate Mortgages (ARMs),
Flexible Rate Loans, Variable Rate Loans.
Amortization: Payment of a debt
in equal installments of principal and interest, rather than
interest-only payments.
Annual Percentage Rate (A.P.R.):
The yearly interest percentage of a loan, as expressed by the total
finance charge actually paid (interest, loan fees, points). The
A.P.R. is disclosed as a requirement of federal truth in lending
statutes.
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.
Buydown: A payment to the lender
from the seller, buyer, or third party, or some combination of these,
that causes the lender to reduce the interest rate during the early
years of the loan.
Cap: In adjustable rate
mortgages, the limit on how much the interest rate or monthly payment
can change.
Closing: The final procedure in
which documents are executed and/or recorded, and the sale (or loan)
is completed. Closing Statement: The statement which lists the
financial settlement between buyer and seller, and also the costs each
must pay.
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.
CMA: CMA, or Competitive Market
Analysis, is a comparison of homes similar to a seller’s home in
terms of size, style, features, and location that have sold recently
or are on the market. A CMA is prepared by a real estate agent
to help set a home’s listing price.
Common area: An area inside a community which is owned in
common by everyone who lives in the community. Good examples include
tennis court, recreation room, pool, etc.
Common-area assessments:
Fees paid by the owners of a condominium project or planned-unit
development to maintain, repair, improve, or operate common areas.
Condominium: Housing where the
owner owns only the unit in which they live - from the interior walls
inward, generally - as well as a portion of the common area.
Contingency: Commonly, a stated
event which must occur before a contract is binding. For example, a
home sale may be contingent upon the buyer obtaining financing.
Debt to Income Ratio: The
ratio of a borrower's total 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.
Deposit: A portion of the down
payment given by the buyer to the seller or escrow agent with a
written offer to purchase. Shows good faith.
Down payment: Cash portion of
the purchase price paid by a buyer from his own funds as opposed to
that portion which is financed.
Escrow: A procedure in which a third
(neutral) party holds all funds, documents, etc. necessary to the
sale, with instructions from both buyer and seller as to their use and
disposition.
FHA Loan: A loan insured by the
Federal Housing Administration, a part of the Department of Housing
and Urban Development. FHA insurance enables lenders to loan a very
high percentage of the sale price.
Graduated Payment Mortgage: A
mortgage initially offering low monthly payments that increase at
fixed intervals and at a predetermined rate.
Hazard Insurance: Otherwise
known as homeowners’ insurance. This is a usual requirement of a
mortgage lender and an advisable safeguard for any homeowner to
protect against loss.
Index or Rate Index: A measure
of interest rate changes used to adjust the interest rate of an
Adjustable Mortgage Loan. Example: the change in U.S. Treasury
securities (T-bills) with a 1-year maturity, based upon their weekly
average yield.
Lien: A legal claim or charge on
property as security for payment of a debt or for the discharge of an
obligation.
Loan-to-Value Ratio: The ratio
– expressed as a percentage – of the amount of a mortgage loan to
the appraised value or selling price of the property.
Lock box: A key storage
system placed on a home entrance that is accessible only by active,
licensed real estate agents who must abide by a strict set of
guidelines when showing a seller’s home.
Margin: In Adjustable Mortgage
Loans, the number of percentage points the lender adds to the index
rate to determine the new interest rate at each adjustment.
MLS: MLS stands for
multiple listing service, by which member brokers cooperate in the
sale of each other’s listings. Sellers may choose not to allow their
property into multiple listing, if they wish.
PITI (Principal, Interest,
Taxes, and Insurance): Used to indicate the four major items included
in a monthly mortgage payment.
Points: A fee charged by a
lender as a service charge or as an amount needed to make the yield on
a mortgage competitive with other types of investments. Each point
represents 1% of the loan amount.
Principal: Amount of debt, not
including interest; the face value of a loan.
Private Mortgage Insurance:
Insurance issued by a private company against a loss by a lender in
the event of default. Private mortgage insurance is generally required
for conventional financing whenever less than 20% is put down.
Second Mortgage: A mortgage
which ranks after the first mortgage lien in priority.
Settlement: Same definition as
closing.
Title Insurance: Insurance
against loss resulting from defects of title of public record.
VA Loans: Loans partially
guaranteed by the Veteran’s Administration, enabling veterans to buy
a home with little or no down payment.
|
