REAL ESTATE TERMS

Understanding common real estate terms makes it easier to understand the ins and outs of your real estate transaction.
When you start shopping for a new home, you may encounter some words and terms that are unfamiliar to you. Use the following glossary to help you and, as always, if you have any questions, just ask!

Interest that has been earned but not paid.   Example:  If 6% interest is earned on a $100 deposit, then $6 of interest has accrued to the depositor.

loan with an interest rate that is adjusted according to movements in the financial market.

A tax based on the value of the thing being taxed. 

Example:  If the ad valorem tax rate is 1%, the tax would be $1 per $100 of the assessed value.

A payment plan by which a loan is reduced through monthly payments of principal and interest.

The annual cost of credit over the life of a loan, including interest service charges, points, loan fees, mortgage insurance and other items.

An evaluation to determine the value of property in the current marketplace.

The increase in the value of a property.

A transaction allowing the buyer to assume responsibility for an existing loan instead of getting a new loan.

A loan that has a series of monthly payments with the remaining balance due in a large lump sum payment at the end of a specific period of time.

A receipt for a deposit paid to secure the right to purchase a home at terms agreed upon by the buyer and seller.

A single mortgage that covers more than one parcel of real estate.

Mortgage financing between the termination of one loan and the beginning of another loan

1. The action to pay additional discount points to a lender in exchange for a reduced rate of interest on a mortgage.

2. A loan that has been bought down by the seller of a property for the benefit of the buyer

A buyer’s agent works solely on behalf of the buyer and owes duties to the buyer, which include the utmost good faith, loyalty and fidelity.  The agent will negotiate on behalf of and act as an advocate for the buyer.  The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency.  The agent must disclose to potential sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property.  A separate written buyer listing agreement is required which sets forth the duties and obligations of the parties.

A limit to the amount an interest rate or a monthly payment can increase for an adjustable-rate loan either during an adjustment period or during the life of the loan.

A document from an official agency stating that the property meets the requirements of local codes, ordinances, and regulations.

Some lenders provide a document to a buyer identifying the buyer as a “certified” or “cash buyer.”  This is a form of pre-approval, with the intent to provide assurance to the seller that, subject to appraisal and title work being acceptable, the buyer has a loan ready to close.

A meeting to sign documents that transfer property from a seller to a buyer (also referred to as a settlement).

Charges paid at settlement for obtaining a mortgage loan and transferring a real estate title.

The standards that define how a property may be used and the protections the developer makes for the benefit of all owners in a subdivision.   

A mortgage loan not insured by a government agency (such as FHA or VA).

The ability to change a loan from an adjustable-rate to a fixe-rate schedule.

A report ordered by a lender from a credit agency to determine if the borrower is a good credit risk.

A breach of a mortgage contract or Real Estate Contract.

The number of homes built on a particular acre of land.  Allowable densities are determined by local jurisdictions.

Amounts paid to the lender (usually by the seller) at the time of origination of a loan, to account for the difference between the market interest rate and the lower face rate of the note (often required when VA loans are used).

The difference between the sales price and the mortgage amount of the property.  A down payment is usually paid at closing.

 A clause in a mortgage contract requiring the borrower to pay the entire outstanding balance upon sale or transfer of the property.

A sum paid to the seller to show that a potential purchaser is serious about buying.  The money is applied to the down payment at closing.

The right-of-way granted to a person or company authorizing access to the owner’s land; for example, a utility company may be granted an easement to install pipes or wires.  An owner may voluntarily grant an easement or can be ordered to grant one by a local jurisdiction.

The difference of the value of the home and what is owned on it.

The handling of funds or documents by a third party on behalf of the buyer and/or seller.

A federal agency that insures mortgages with lower down payment requirements than conventional loans.   

A mortgage with an interest rate that remains constant over the life of the loan.

A mortgage with a payment schedule that is established at closing for the life of the loan.  The payment and interest rate are not necessarily level.

A termination of all rights of a mortgagor or the grantee in the property covered by the mortgage.  Statutory foreclosure is affected without recourse to the courts but must conform to the laws (statutes).  Strict foreclosure forever bars equity of redemption.

A fixed rate, fixed-schedule loan that starts at lower payments than a level payment loan; the payments rise annually over the first 5 to 10 years and then remain constant for the remainder of the loan. GPMs involve negative amortization.

Protection against damage caused by fire, windstorm or other common hazards.  Many lenders require borrowers to carry it in an amount at least equal to the mortgage.

A state agency that offers below-market-rate home financing for low-and-moderate-income households.

The public facilities and services needed to support residential development, including highways, bridges, schools and sewer systems.

The cost paid to a lender for borrowed money.

Not as detailed as a survey but shows the property and relative location of all items attached to the property.   

A form of ownership in which the tenants own a property equally.  If one dies, the other would automatically inherit the entire property.

 A mortgage with identical monthly payments over the life of the loan

One who represents numerous lenders and helps consumers find affordable mortgages; the broker charges a fee only if the consumer finds a loan.

A formal written communication by a lender, agreeing to make a mortgage loan on a specific property, specifying the loan amount, length of time and conditions.

Borrows money from a bank, lends it to consumers to buy homes, then sells the loans to investors.

The lender who makes a mortgage loan.

A charge for the work involved in preparing and servicing a mortgage application, usually one percent of the loan amount.

An increase in the outstanding amount when a monthly payment does not cover the monthly interest due.

A formal document showing the existence of a debt and stating the terms of repayment.

Principal, interest, taxes and insurance (the four major components of monthly housing payments).

A one-time charge assessed; by the lender at closing to increase the interest yield on a mortgage loan.  Generally, it is one percent of the mortgage amount.

This takes pre-qualification a step further.  In this case, the buyer will supply documentation to a loan originator and/or processor.  After all documentation requirements have been met, the loan goes to underwriting for approval.  When approved by underwriting, the buyer has loan approval, subject to the final home appraisal and title work completion.

Payment of a debt prior to maturity.

This term is used when a buyer has given information, usually verbal, to a loan originator.  From this information, the originator will arrive at a loan amount or purchase price that a homebuyer can afford.

 The amount borrowed, excluding interest and other charges.

Determines the boundaries of your property. The cost depends on the complexity of your survey.

A charge for recording the transfer of property, paid to a city, county or other appropriate branch of government.

A federal law requiring lenders to provide home buyers with information about known or estimated settlement costs.   

The resistance of insulation materials (including windows) to heat passing through it.  The higher the number, the greater the insulating value.

A contract between a buyer and seller that should explain, in detail, exactly what the purchase includes, what guarantees there are, when the buyers can move in, what closing costs are, and what recourse the parties have if the contract is not fulfilled or if the buyer cannot get a mortgage commitment at the agreed-upon terms.

A transaction-broker assists the buyer or seller or both throughout a real estate transaction with communication, advice, negotiation, contracting and closing without being an agent or advocate for any of the parties.  The parties to a transaction are not legally responsible for the actions of a transaction-broker and a transaction-broker does not owe those parties the duties of an agent. However, a transaction-broker does owe the parties a number of statutory obligations and responsibilities, including using reasonable skill and care in the performance of any oral or written agreement.  A transaction-broker must also make the same disclosures as agents about adverse material facts concerning a property or a buyer’s financial ability to perform the terms of a transaction and whether the buyer intends to occupy the property.  No written agreement is required. 

A final inspection of a home before settlement to search for problems that need to be corrected before ownership changes hands.

 A promise, either written or implied, that the material and workmanship of a product is defect-free or will meet a specified level of performance over a specified period of time.  Written warranties on new homes are either backed by insurance companies or by the builders themselves.

Regulations established by local governments regarding the location, height and use for any given piece of property within a specific area.
 
My goal is to provide you with world class service that allows you to make decisions with clarity and confidence.  If you have any other questions, please do not hesitate to call, email or text.  

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