|
|
Become familiar with common
real estate terms
Buying a home can be a confusing process, but when you know
some common terms, the process can be much easier. Here are some of
the most common terms used during the purchase.
- Adjustable Rate Mortgage (ARM)
A loan whose interest rate is adjusted according to
movements in the financial market.
- Amortization
A payment 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 what a piece of property would
sell for in the current market.
- Assumption
A transaction allowing the buyer to assume responsibility
for an existing loan instead of getting a new loan.
- Balloon
A loan that has a series of monthly payments with the
remaining balance due in a large lump sum payment at the end.
- Buydown
A subsidy (usually paid by a builder or developer) to
reduce the monthly payments on a mortgage loan.
- Cap
A limit to the amount an interest rate or monthly payment
can increase for an adjustable rate loan either during an
adjustment period or over the life of the loan.
- Closing
A meeting to sign documents that transfer property from a
seller to a buyer (also referred to as settlement).
- Closing Costs
Charges paid at settlement for obtaining a mortgage loan
and transferring a real estate title.
- 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.
- Conventional Loan
A mortgage loan not insured by a government agency (such as
FHA or VA) .
- Convertibility
The ability to change a loan from an adjustable rate
schedule to a fixed rate schedule.
- Credit Rating
A report ordered by a lender from a credit bureau to
determine if the borrower is a good credit risk.
- Down Payment
The difference between the sales price and the mortgage
amount.
- Earnest Money
A sum paid to the seller to show that a potential purchaser
is serious about buying.
- Easement
The right-of-way granted to a person or company which
authorizes 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 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.
- Federal Housing Authority (FHA)
A federal agency that insures mortgages with lower down payment
requirements than conventional loans.
- Fixed Rate Mortgage
A mortgage with an interest rate that remains constant over
the life of the loan.
- Index
The interest rate or adjustment standard that determines
the changes in monthly payments for an adjustable rate loan.
- Mortgage Loan
A contract in which the borrower's property is pledged as
collateral. It is repaid in installments. The buyer promises to
repay principal and interest, keep the home insured, pay all taxes
and keep the property in good condition.
- Mortgage Origination Fee
A charge for the work involved in preparing and servicing a
mortgage application (usually one percent of the loan amount).
- Note
A formal document showing the existence of a debt and
stating the terms of repayment.
- PITI
The four major components of monthly housing payments:
principal, interest, taxes and insurance.
- Point
A one-time charge assessed by the lender at closing to
increase the interest yield on a mortgage loan.
- Principal
The amount borrowed, excluding interest and other
charges.
- Recording Fee
A charge paid to a city, county or other appropriate branch
of government for recording the transfer of a property.
- Title
Evidence (usually in the form of a certificate or deed) of
a person's legal right to ownership of a property.
- Transfer Taxes
Taxes levied on the transfer of property or on real estate
loans by state and/or local jurisdiction.
- Veteran's Administration (VA)
A federal agency that insures mortgage loans with very
liberal down payment requirements for honorably discharged veterans
and their surviving spouses.
- Walk-Through
A final inspection of a home before settlement to search
for problems that need to be corrected before ownership changes
hands.
- Warranty
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.
- Zoning
Regulations established by local governments regarding the
location, height and use for any given piece of property within a
specific area.
|
