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Adjusted Basis – Adjustments
(increases or decreases) made to the basis of a home. (The
basis is the amount paid if the home was bought or built.)
Adjustable Rate Mortgage (ARM) – A
loan for which the interest rate is subject to change on a
periodic basis (i.e. every 1, 3, or 5 years).
Agent – A
licensed salesperson working for a real estate broker. If the agent
sells a house successfully, then he/she receives a portion of the
sale price as a commission. In the U.S., all real estate agents
have to be licensed by the state they work for.
Amortization – A
payment plan by which a loan is reduced through monthly payments
of principal and interest.
Annual Percentage Rate (APR) – The
annual cost of credit over the life of a loan including interest,
service charges, points, loan fees, mortgage insurance and
other items.
Appraisal – An
evaluation to determine the price for which a property would
sell in the current marketplace.
Appreciation – An
increase in the value of a property.
Assessment – A
tax levied on a property or a value placed on the worth of
a property by a taxing authority.
Assumable Mortgage – When
a home is sold, a mortgage than can be taken over by the buyer
at the same
interest rate.
Assumption – A
transaction allowing the buyer to assume responsibility for
an existing loan instead of originating a new loan.
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Balloon – A loan that has
a series of monthly payments with the remaining balance due
in a large lump sum payment at the end.
Bridge Loan – A
loan obtained by a homeowner who has not yet sold an existing
property, yet is closing on a new property. Often becomes the source
of the down payment.
Broker – A
real estate professional who has a higher level of training
than an agent. A broker is the legal representative and/or manager
of the office. The term may also refer to the brokerage under which
an agent is licensed.
Buyer-agency – A
relationship between an agency and a buyer in which the agent represents
the interests of the buyer, not the seller. The primary duty of
a buyer’s agent is to obtain the best deal for his/her
client.
Buy Down – A
subsidy (usually paid buy a builder or developer) to reduce
the monthly payments on a mortgage loan.
Buyer Representation – Historically,
an agent represented only the seller in a real estate transaction
(agents working with buyers were actually "sub-agents" of
the seller’s listing agent). Buyers today have the opportunity
to be fully represented by an agent and brokerage firm.
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Cap – 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
over the life of the loan.
Closing – The completion of
documents that transfer property from a seller to a buyer (also
referred to as a settlement). Also used loosely to mean "reaching
final agreement."
Closing Costs – Charges
paid at closing for obtaining a mortgage loan and transferring
a real estate title.
Commission – The fee paid to
a real estate agent/broker for services rendered during the sale
or purchase of a home. Usually a percentage of the property’s
sale price, averaging 6 to 7 percent on home sales.
Comparative Market
Analysis (CMA) – A
survey of attributes and selling prices of comparable houses
listed for sale, recently sold or expired from the market;
used to help determine correct pricing strategy for a seller's
property.
Conditions, Covenants
and Restrictions – 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.
Condominium (Condo) – Type
of real estate ownership where the owner has title to a specific
unit and shared interest in common areas.
Condo Board – (Also
condominium board.) A small group (usually three to seven) of resident-owners
elected by a condominium community to serve as a governing
board. Responsible for enforcing bylaws and maintaining common
property.
Contingency – A
condition in a contract that must be met for the contract to be
binding.
Contract – An
agreement for the sale of property.
Conventional
Loan – A mortgage
loan made by a lender to a borrower that requires no insurance
or guarantee.
Conversion Option – The
ability to change a loan from an adjustable rate to a fixed rate.
Cooperate – A
standard of practice in real estate in which brokers/agents agree
to work together with other brokers/agents, but only in their client's
best interest. Under a cooperative arrangement, there is no obligation
to share commissions or fees.
Counter Offer – An
offer made in response to an offer received. Essentially it rejects
the original offer.
Credit – A person’s
reputation for solvency and integrity, allowing a borrower to receive
something of value in exchange for a promise of repayment.
Credit History – A
record of an individual's current and past debt obligations. Lenders
use it when determining a potential borrower's ability to repay
debt in a timely manner. Also see Credit Report.
Credit Report – A
report ordered from a credit bureau that indicates if a borrower
is a good credit risk.
Credit Score – A
statistical methodology for determining a potential borrower's
ability repay a loan. The higher the Credit Score, the more likely
a borrower can qualify for a loan with a good interest rate.
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Debt – Something owed.
An obligation to pay something.
Debt-To-Income
Ratio – A comparison
of gross income to expenses (both housing and non-housing).
Deed – Legal
document that formally conveys ownership of property from seller
to buyer.
Deed Restrictions – Legally
binding rules for the building and maintenance of homes and
properties.
Default – A
breach of a mortgage contract (i.e., not making the required payments).
Discount Points – A
fee paid to a mortgage lender by a borrower to get a lower interest
rate on the mortgage loan. One point equals one percent of the
loan amount.
Down Payment – The
difference between the sale price and the mortgage amount. A down
payment is usually paid at closing.
Due–On–Sale – A
clause in a mortgage contract requiring the borrower to pay
the entire outstanding balance upon sale or transfer of the property.
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Earnest Money – A sum deposited with the broker
at the time an offer is presented to show that a potential
purchaser is serious about buying.
Easement – 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.
Equity – The
difference between the value of a home and what is owed on it.
Escrow – The
handling of funds or documents by a third party on behalf of the
buyer and/or seller.
Exclusive Agency
Agreement – A
contract that gives a real estate agency the right to market
and sell a home.
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Fair Market Value – The
price of a home based on the highest price a buyer would
pay as well as the lowest price a seller would accept.
FHA – The
Federal Housing Administration. It insures loans made by an approved
lender, as long as the loan is in accordance with FHA regulations.
Fiduciary Duties – Obligations
owed by an agent/broker to a client (buyer or seller). In real
estate, these include loyalty, obedience, full disclosure,
skill, care, diligence, and accounting of all monies.
Finance Charge – The
total cost, including all fees, points, and interest payments a
borrower pays to obtain credit.
Fixed–Rate Mortgage – A
mortgage with an interest rate that remains constant over the
life of a loan.
Fixture – A
recognizable object (such as a chandelier, kitchen cabinet, or
light unit) that is permanently attached to property and belongs
to the property when it is sold, unless otherwise specified in
the sale agreement.
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Grace Period – A specified
amount of time during which a loan payment may be made after
its due date without incurring a late penalty. Each mortgage
lender sets its own Grace Period policies.
Gross Income – A
tax term meaning all income earned before expenses are deducted.
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Hazard Insurance – Protection
against damage cause by fire, wind or other common hazards.
Most lenders require borrowers to carry it in an amount at
least equal to the mortgage.
Home Equity Loan – A
loan secured by the equity built up in a home. Such a loan is often
used to pay for repairs and home improvements. May be a fixed or
variable loan rate.
Housing Finance
Agency – A state
agency that offers below-market-rate home financing for low-
and moderate-income households.
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In Contract – A condition
when a buyer and a seller have agreed on price, terms and
conditions for the sale of the home and have signed a Purchase
Agreement.
Income – An
amount of money received for something such as labor, services
rendered, or sale of property or possessions.
Index – The
interest rate or adjustment standard that determines the changes
in monthly payments for an adjustable rate loan.
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Joint Tenancy – A form
of ownership in which the tenants own a property equally.
If one dies, the other would inherit the entire property.
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Level Payment Mortgage – A
mortgage with identical monthly payments over the life of
the loan.
Lien – Security
claim on property until a debt is satisfied.
List Price – Also
called the asking price. The price of the home as determined by
the seller and his/her agent. The list price is often negotiable.
Listing Contract – Agreement
whereby an owner engages a real estate company for a specified
period to market a property for which (upon sale) the broker
receives a commission.
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Market Value – The price
that is established by present economic conditions, location
and general trends.
Mortgage Broker – A
broker who represents numerous lenders and helps consumers find
affordable mortgages, the broker charges a fee only if the consumer
finds a loan.
Mortgage Commitment – 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.
Mortgage Company – A
company that borrows money from a bank, lends it to consumers to
buy homes, then sells the loans to investors.
Mortgage Lien – A
legal claim against a mortgaged property that must be paid when
the property is sold.
Mortgage Loan – A
contract in which the borrower's property is pledged as collateral.
It is repaid in installments. The mortgagor (buyer) promises to
repay principal and interest, keep the home insured, pay all taxes
and keep the property in good condition.
Multiple Listing
Service (MLS) – A
system that provides to its members detailed information about
properties for sale.
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National Association of Realtors (NAR) – A national trade organization
of more than one million real estate agents and brokers. Members may
call themselves Realtors®.
Negative Amortization – An
increase in the outstanding amount when a monthly payment does
not cover the monthly interest due.
Nehemiah Loan – A
California-based, private downpayment assistance program that allows
potential homeowners to purchase a home with no down payment when
combined with an FHA Loan.
Non-conforming
Loan – A loan
that doesn't comply with Federal National Mortgage Association
(Fannie Mae) or Federal Home Loan Mortgage Corporation (Freddie
Mac) underwriting guidelines. Usually incur a rate and origination
fee premium.
Note – A
formal document showing the existence of a debt and stating the
terms of repayment.
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Open-ended – Allows you
to borrow in the future for home improvements or other purposes,
up to the amount of principal you've paid off.
Origination Fee – A
charge for the work involved in preparing and servicing a mortgage
application (usually one percent of the loan amount).
Owner-Assisted
Loan – A loan
in which the seller agrees to finance all or part of the purchase.
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P.I.T.I. – Principal, interest,
taxes, and insurance -the four major components of monthly
housing payments.
Point – A
one-time charge paid by a borrower at closing to receive a lower
rate. Each point is one percent of the mortgage amount.
Pre-Approval – A
mortgage approval obtained before negotiating a contract on a specific
home.
Pre-Paid Items – Money
to cover anticipated costs such as property taxes, interest and
mortgage and hazard insurance.
Prepayment – Payment
of a debt prior to maturity.
Pre–Qualification – An
informal estimate of how much financing a potential borrower
might expect to obtain.
Principal – The
amount borrowed, excluding interest and other charges.
Private Mortgage
Insurance (PMI) – Insurance
required on most conventional loans with less than 20 percent
down payment to protect the lender against default.
Possession Date – The
day on which a property's new owner is actually entitled to occupy
that property.
Prepayment Penalty – An
extra fee for paying off a mortgage loan before maturity. About
80 percent of all loans in the United States are paid off early.
Property Survey – A
survey to determine the boundaries of your property. The cost depends
on the complexity of
the survey.
Property Tax – A
local tax assessed on property owned, such as a home or other real
estate. Based on the estimated value of the home.
Purchase Agreement – Also
called a Sales Agreement. A contract for the sale of a home between
a buyer and a seller that outlines the price, terms and conditions
of the transaction.
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R-Value – The resistance
of insulation material (including windows) to heat passing
through it. The higher the number, the greater the insulating
value.
Realized Amount – The
selling price of a home, less selling expenses.
Realtor® – Registered trade
name which may be used only by members of state and local real
estate boards affiliated with (and subscribing to the Code of Ethics
of) the National Association of REALTORS®.
Recording Fee – A
charge for recording the transfer of a property, paid to a city,
county, or other appropriate branch of government.
Reserves – A
lender-specified amount that the borrower must have in reserve.
The funds are in addition to the downpayment and closing costs
and are usually equal to a lender-specified number of monthly mortgage
payments.
Real Estate Settlement
Procedures Act (RESPA) – A federal law requiring
lenders to provide home buyers with information about known
or estimated settlement costs.
Reverse Mortgage – A
loan that enables elderly homeowners to borrow against the equity
in their house without selling it or moving from it. Repayment
only occurs at the time of the sale of the property.
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Sales Agreement – Also
called a Purchase Agreement. A contract for the sale of a
home between a buyer and a seller that outlines the price,
terms and conditions of the transaction.
Sales Contract – An
agreement between a buyer and seller that should be explain, in
detail, exactly what the purchase includes, if there are any warranties,
when the buyer can move in, what the closing costs are, and what
recourse the parties have if the contract is not fulfilled or if
the buyer cannot obtain a mortgage commitment at the agreed-upon
terms.
Second Mortgage – A
loan that uses the equity in a home as collateral.
Secondary Mortgage
Market – The
buying or selling of an existing mortgage.
Service Guarantee – A
formal agreement, usually in writing, that a service will conform
to specified standards for a particular period of time.
Settlement Sheets – Also
called a Closing Statement. Forms provided at closing that show
the disbursements resulting from a real estate transaction.
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Tenancy in Common – A form
of ownership in which the tenants own separate but equal
parts. To inherit the property, a surviving tenant would
either have to be mentioned in the will or, in the absence
of a will, be eligible through state inheritance laws.
Terms and Conditions – The
negotiated details of the sale outlined in the purchase agreement.
May include such items as inspections, warranties, and closing
and moving dates, among other details. Terms and conditions
of all agreements should be carefully read and understood by all
parties involved prior to closing the negotiation.
Title – Evidence
(usually in the form of a certificate or deed) of a person's
legal right to ownership of a property.
Title Insurance – Provides
coverage against losses resulting from a defect in the title.
Total Representation – Real
Living’s program of representing either the buyer or
seller in a transaction.
Transfer Taxes – Taxes
levied on the transfer of property or on real estate loans
by state and/or local jurisdiction.
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VA – Veterans Administration.
A government agency that guarantees mortgage loans for eligible
veterans of the military (including National Guard and Reserves).
The guarantee protects the lender, which encourages lenders
to provide mortgages.
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Walk–Through – A
final inspection of a home before title transfer to search
for problems that need to be corrected before ownership changes.
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Zoning – Regulations established
by local governments regarding the location and use for any
given piece of property within a specific area.