Common Terms Heard During the Buying And Sellig Process

Common Terms that you most likely will hear during the home buying and selling process are:

 

AMENITY

A nice feature of the house, but something which isn’t crucial to the house’s very existence. A roof, for instance, is not an amenity; it’s a necessity. An amenity could be a lovely view of the sunset or on a golf course, or a swimming pool or tennis court, etc.

 

AMORITIZATION

The period of time during which you will owe interest and principal to your lender.

 

APPRAISAL

An estimate of the value of the property, made by a qualified professional called an “appraiser” — An appraiser is different from an inspector.   . An appraisal is required by your bank to determine how much money it will lend you.

 

APPRAISAL FEE

The amount paid for the lender’s appraisal of the property.

 

CLOSING COSTS

This is a general term for all of the estimated charges that are associated with the transfer of ownership of the property.  For example; expenses incurred by buyers and sellers that  include an origination fee, taxes, the costs of obtaining title insurance, transfer fees, etc.

 

COMPS

The word is short for “comparable properties” — properties which have recently sold that are about the same size, in the same area, with similar amenities. These help both you and the appraiser figure out what your home ought to be worth.

 

CONVENTIONAL LOAN

A mortgage not insured by the FHA or guaranteed by the VA

 

CREDIT REPORT FEE

The fee charged by the lender to obtain a credit report on the buyer.

 

DEBT-TO-INCOME-RATIO

The ratio, expressed as a percentage, which results when a borrower’s monthly payment obligation on long-term debts is divided by his or her net effective income (FHA/VA loans) or gross monthly income (conventional loans).

 

DOWN PAYMENT

Cash that the buyer provides the lender as their portion of the purchase price.  The down payment is considered the buyer’s equity (or cash investment) in their home.

 

EARNEST MONEY

Money given by a buyer to a seller  (this money is usually held at the Escrow company which will be handling the closing)  as part of the purchase price, in order to bind a transaction or to assure payment.

 

EASEMENT

A right of way giving people other than the owner access to a property. If there is one of these on the house you’re considering, make sure you understand what it is.

 

ESCROW FEE

The amount that a buyer pays the escrow company or closing agent for preparing papers, title search, accounting for all funds and coordinating the information between all parties involved in the transaction.

 

FHA – FEDERAL HOUSING ADMINISTRATION

A division of the Department of Housing and Urban Development. Its main activity is the insuring of residential mortgage loans made by private lenders. FHA also sets standards for underwriting mortgages.

 

FHA LOAN

A loan insured by the Federal Housing Administration, open to all qualified home purchasers. While there are limits to the size of FHA loans, they are generous enough to handle moderately priced homes almost anywhere in the country

 

FORECLOSURE

A legal process by which the lender or the seller forces a sale of a mortgaged property because the borrower has not met the terms of the mortgage. Also known as a repossession of property.

 

HOME INSPECTION

A complete and thorough inspection of the physical condition of a property, including all major systems and structural elements. It’s conducted by someone who knows what to look for, and who will inform you of what he/she finds.  If something is found that you don’t like and which the seller refuses to repair, you may opt out of  the purchase of the home and have your earnest money returned.

 

HOMEOWNERS INSURANCE

An insurance policy, required by the lender before you take ownership, that combines personal liability insurance and hazard insurance for the home as well as its contents.

 

HOMEOWNERS WARRENTY

A warranty which will cover repairs to specified parts of a house for a specific period of time. It is provided by the seller (or, if the place is new, the builder) as a condition of the sale

 

HUD STATEMENT

A document which sets forth an itemized listing of whatever costs must be paid at closing, such as real estate commissions, loan fees, points, and initial escrow amounts. It’s also known as the “closing statement” or “settlement sheet.”

 

INTEREST

The amount of money, expressed as a percentage of the principal, charged for the use of the money borrowed.

 

LIEN

A claim upon a piece of property for the payment or satisfaction of a debt or obligation.

 

LISTING PRICE

The price at which the house is listed; the asking price.

 

LOAN AMOUNT

The amount of the mortgage based on the purchase price, minus the down payment.

 

MARKET VALUE

The highest price that a buyer would pay and the lowest price a seller would accept on a property. Market value may be different from the price a property could actually be sold for at a given time.

 

MORTGAGE

A legal contract that is registered against the title to a property in order to guarantee that a loan will be repaid.

 

MORTGAGE BANKER

A company or loan officer at a bank that originates mortgages for resale in the secondary mortgage market.

 

MORTGAGE BROKER

A person or company that offers loans to borrowers from numerous sources; they’re generally paid a commission for their services.

 

MORTGAGE INSURANCE

Money paid to insure the mortgage.

 

ORIGINATION FEE

The fee charged by a lender to prepare loan documents, make credit checks, inspect, etc.  Usually computed as a percentage of the face value of the loan.

PITI

The estimated house payment, including principal, interest, taxes and insurance.

 

PMI – PREMIUM OR PRIVATE MORTGAGE INSURANCE

Insurance for the lender, to cover potential losses if the borrower defaults on the loan.

 

REALTOR

A real estate broker or an associate holding active membership in a local real estate board affiliated with the National Association of Realtors

 

VA LOAN

A long-term, low-or no-down payment loan guaranteed by the Department of Veterans Affairs. Restricted to individuals qualified by military service or other entitlements.