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Real Estate Terminology Glossary
ADJUSTABLE RATE MORTGAGE (ARM): A loan that allows the interest rate to be changed periodically.
ANNUAL PERCENTAGE RATE (APR): The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.
AMORITIZATION SCHEDULE: A schedule showing the principle and interest payments throughout the life of the loan.
APPRAISED VALUE: The opinion of the value of the property at a given time, based on the facts regarding the location, improvements, etc. of the property and surroundings.
ASSESSED VALUE: The valuation placed on a property by a public tax assessor as the basis of property taxes.
BALLOON LOAN: A mortgage that has a substantial amount of the principle due at the maturity of the note.
BROKER: A person licensed by a state real estate commission to act independently in conducting a real estate brokerage business. Although the requirements for a broker's license vary from state to state, an individual usually must have one or more years of experience in the industry and pass an examination.
BUYDOWN: A payment to the lender from the seller, buyer or third party, causing the lender to reduce the interest rate during the early years of the loan.
CAP: A maximum amount of interest that can be charged.
CLOSING: The final steps in transferring ownership of a property from seller to buyer.
CLOSING COSTS: Fees and expenses, not including the price of the home, payable by the seller and the buyer at the time of closing.
CONTINGENCY: A condition that must be satisfied before a contract is binding.
CONVENTIONAL LOAN: A fixed rate, fixed term loan that is made without government insurance.
CONVERTIBLE ARM: Loans that give you the opportunity to convert to a fixed-rate mortgage, usually between the 13th to 60th month of the loan.
COOPERATIVES (CO-OPS): A buyer purchases shares in a co-op corporation, made up of the residents of the co-op property. The buyer owns the shares rather than owning the real property. In exchange, the buyer has the right to occupy the co-op unit.
CREDIT REPORT: A report on the past ability of a loan applicant to pay installment payments.
DEED: A legal document conveying title to a property.
DEPRECIATION: Refers to when a property's value decreases.
DOCUMENT PREPARATION: A fee charged by an attorney for preparation of legal documents for the transaction.
EARNEST MONEY: A payment given to the seller by a potential buyer indicating the buyer's intent to complete the purchase of the property.
ESCROW FEE: A fee charged by the title company to service the transaction, to escrow monies, and to cover documents. This amount varies with company. This fee is usually split between the buyer and seller.
ESCROW/IMPOUND ACCOUNT: Funds held by the lender for payment of taxes and insurance when due. This usually does not include any maintenance fees.
EQUITY: The owner's value or interest in a property.
ESCROW: The placement of money or documents with a third party for safekeeping pending the fulfillment or performance of a specific act or condition.
FHA MORTGAGE: A mortgage loan insured by the Federal Housing Administration, permitting lenders to offer better terms.
FIXED RATE MORTGAGE: A loan that has only one stated interest rate.
HOMEOWNERS INSURANCE: This protects the property and contents in case of loss. It must be for at least the loan amount or 80% of the improved property value, whichever is greater.
HUD (Department of Housing & Urban Development): A US government agency established to implement certain federal housing and community development programs.
HYBRID LOANS: Loans that combine features of fixed-rate and adjustable-rate mortgages.
INSPECTIONS: An examination of property for various reasons such as, termite inspections, whole home inspections etc.
INTEREST: Rate charged for the use of loan funds. It is always paid in arrears.
LIEN: A legal claim against a property that must be paid when property is sold.
LOAN APPLICATION FEE: Paid to the lender at the time of application. Fees vary by company.
LOAN DISCOUNT: The points a lender charges. Points may be paid by either the buyer or seller on a conventional loan and the number of points will fluctuate with the money market.
LOAN ORIGINATION FEE: The charge you must pay to the lender for processing your mortgage.
MAINTAINENCE FEE: Charged by the homeowner’s association as called for in subdivision covenants and restrictions.
MLS: Multiple Listing Service
MORTGAGE: A lien on real estate given by the buyer as security for money borrowed from a lender.
MORTGAGEE’S TITLE POLICY: This is required by the lender to insure that the lender has a valid lien and does not protect the buyer.
ORIGINATION FEE: The fee paid by the buyer to the lender to originate a new loan.
OWNER’S TITLE POLICY: Insures that the buyer has title to the property.
P&I: Principle & Interest payment. A monthly payment that includes the interest charges for the period plus an amount applied to amortization of the principle balance.
PITI: Principle, Interest, Taxes, and Insurance Payment. The periodic payment that includes the principle and interest payment plus a contribution to the escrow account set up by the lender to pay insurance premiums and property taxes on the mortgage property.
POINT: 1% of the loan amount.
PREPAYMENT PENALTY: An amount charged by the lender for premature payment of the loan balance.
PRIVATE MORTGAGE INSURANCE (PMI): Insurance against a loss by a lender in the event of default by the borrower.
REALTOR: Real estate professionals who are members of the National Association of REALTORS and subscribe to its code of ethics.
REALTOR FEES: An amount paid to the Realtor as compensation for services.
RECORDING FEES: Fee charged by the county clerk to record documents in the public record.
RESTRICTIONS: Certified copy of deed restrictions required by the lender.
SURVEY: Confirms the lot size and will show any encroachments or restriction violations.
TAX PRORATION: Seller pays buyer’s taxes from January 1 through date of closing.
TAX CERTIFICATES: Certificates issued by taxing authorities showing the current year’s taxes, that the last year’s taxes were paid, and any delinquencies to be collected from seller at closing.
TITLE: A document that is evidence of ownership
TITLE INSURANCE: Protection for lenders and homeowners against financial loss resulting from legal defects to the title.
TITLE SEARCH: A check of title records to identify liens, encumbrances and ownership rights to the property.
VA MORTGAGE: A mortgage loan guaranteed by the Veterans Administration, an agency of the federal government that provides services for eligible veterans.
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