Adjustable Rate Mortgage (ARM)- A loan that allows adjustments in the interest rate at specified times during the life of the loan based on a named index.
Appraisal- A written estimate of the fair market value of a specific property prepared by a licensed appraiser. Appraisals are typically ordered by a mortgage lender prior to approving a mortgage loan on the property to validate the value of the property.
Bridge Loan- A short-term loan to buyers who are simultaneously selling one house and trying to buy another.
Buyer’s Agent (Selling Agent)- A real estate agent or sales associate who represents only the buyer in a transaction.
Cashier’s Check- The form in which any monies due at closing from a buyer or seller is presented. It is verified funds. If the buyer must bring $10,000.00 or more to closing, the funds must be wired to the title company ahead of closing.
Closing Costs- Costs to obtain a mortgage and close the purchase transaction. The additional expenses paid at closing, which are mainly determined by the mortgage lender and the specific type of the buyer’s loan, are in addition to the purchase price of buying and selling real estate.
Closing Statement (HUD)- Itemized list of closing costs including down payment, earnest money credit, title company fees, government fees, mortgage survey, homeowner’s association dues, home warranty, real estate tax proration, special assessment proration which shows the final dollar amount to be received by buyer or that buyer owes at closing.
Contingency- A condition on which a valid contract is dependent. (i.e. financing, home to sell, appraisal, inspection)
Conventional Mortgage- A loan that is not guaranteed or insured by a government agency. Minimum down payment is typically 20%.
Counter Offer- A statement by a person to whom an offer is made, proposing a change to the previous offer stipulations.
Covenants & Restrictions- A document containing rules and regulations concerning real estate ownership established for a particular neighborhood. The document outlines pledges for the performance or nonperformance of certain acts and/or the use or nonuse of the property.
Credit Report- A detailed report of a person’s credit history which gives a specific rating in the form of a numbered “score”.
Deed- A document containing a detailed written description of the property that transfers property ownership.
Default- Failure of a person to fulfill an obligation or perform a duty outlined in a legally binding document.
Down Payment- Money that the lender requires the buyer to pay at closing toward the purchase price of the home. The amount is based on the mortgage program and the qualifications of the borrower.
Earnest money- Usually 1% of the offered price of the property paid by the buyer at the time the offer to purchase is accepted. The check is cashed and deposited in to an escrow account and kept by the listing broker until the closing. The money is credited back to the buyer at the closing.
Equity- The part of a property’s current value that is owned and on which no money is owed; the property’s value minus the liens owed against the property.
Escrow- A process in the transfer of real property in which buyers and sellers deposit money with a neutral party (the escrow holder) until a specified date.
Fixed Rate Mortgage- A loan on which the percentage of interest remains the same over the life of the loan. The payments of principal remain the same during the entire period.
Home Inspection- A voluntary inspection of the interior, exterior and mechanical structures of the property conducted by an independent home inspector prior to the purchase, paid for by the buyer at the time of the inspection.
Home Warranty- One year of coverage for the new owner of a property that provides financial protection should the home need repairs. There are specific coverages outlined in the policy. The owner will have the opportunity to extend the coverage after the first year.
Homeowner’s Association- The governing body of a neighborhood which enforces the covenants and restrictions. A member will pay dues annually, quarterly or monthly.
Homeowner’s Insurance- The policy that is required by the mortgage lender to provide the buyer coverage on the property. This must be obtained prior to closing the transaction.
Listing Agent- The real estate agent which represents the seller in a real estate transaction.
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Mortgage Interest Rate- The rate on which your principal and interest payments are calculated. The rate is determined by the mortgage program and buyer’s qualifications.
Multiple Listing Service (MLS)- An organization that publishes on the internet all homes for sale by all cooperating real estate companies.
Private Mortgage Insurance (PMI)- The specific amount of money that a buyer must pay for the cost of the loan in addition to the principal and interest payment required by the lender. This insurance is commonly required on a loan with a down payment less than 20% of the purchase price. There are mortgage loan programs available that do not require PMI.
Possession Date- The date that the buyer can legally move into the property according to the terms of the purchase agreement.
Pre-Approval- A written statement made by a lender that a buyer is in a financial position to be approved for a mortgage. The approval is based on a buyer’s interview with a loan officer and the buyer’s background documentation provided, such as bank records, pay stubs, tax returns and financial reports. A buyer should ALWAYS obtain a pre-approval letter prior to beginning the home search.
Principal and Interest- The portion of the mortgage payment which is determined by the amount of the mortgage and its rate of interest. A monthly mortgage payment consists of a contribution to the principal amount of the loan, the interest owed on the loan, real estate taxes owed and homeowner’s insurance monthly premium payment.
Purchase Agreement- The legal document that outlines the conditions of the sale of a property and the rights and responsibilities of the buyer and seller. With the signatures of both buyer and seller, this document becomes a legally binding contract on both parties.
Survey- A certified map of the purchased property, required by the mortgage lender prior to closing, which provides a legal description of the property and shows the location of any structures on the property and the location of any easements or encumbrances on the property.
Title Company- The company responsible for conducting a search for any issues with the ownership of the property to be purchased and insuring that a clear title is transferred with the property. The title company is usually the location where the closing of the transaction takes place.
Title Insurance Policy- The policy issued by the title company on completion of the final title search protecting the buyer and seller against future claims against the property based on past circumstances, i.e. liens, encumbrances, etc.
Title Work- A summary of the investigation of public records of the history of the ownership of a specific property. Purpose of the investigation is to confirm that the title to the property is free of any encumbrances or liens.