Absolute Title
a title that is clear without any liens or judgments
Abstract of Title
a historical summary of all the recorded instruments and proceedings that affect the title of a property This is prepared by an attorney and presented to the title insurance company granting title insurance
Adjustable-rate mortgage (ARM)
the type of mortgage where your interest rate may change due to a certain economic index, with this type of mortgage your monthly payment could go up or down.
Ad Valorem Tax
tax based on the value of the property. Being taxed as primary source of tax revenue for cities, counties and schools Example: if the ad valorem rate is 1% then the tax could be $1 per $100 of assessed value
Agent
person authorized to work on another’s behalf
Example: person authorized to buy or sell a house on your behalf
Agency
describes the legal relationship between a principal and his agent. under the laws of agency, agents must be loyal to their employers. Example: a brother must submit all offers to the seller regardless of the amount
Amortization
the process of paying off a loan balance as you make payments a certain amount is applied to the principal and a certain amount is applied to the interest.
Appraisal
an estimate of the value of a certain property by a qualified independent individual
Appraised Value
an opinion of a property’s fair market value based on an appraiser’s inspection and analysis of the property
Assessed Value
the public tax assessor value of a property as determined for the purpose of taxation (this amount is usually lower than your appraised value
Assumed Mortgage
type of purchase in which the buyer assumes the responsibility of making payments on the seller’s home
Back-end Ratio
a borrower’s other debts such as auto loans and credit cards, figured into the debt-to-income ratio
Balloon Mortgage type of mortgage in which the loan amount is amortized over the full length of the loan (usually 30 years) but the loan actually comes
due after a few years (usually five or seven). first payments go mostly toward interest
Basic Policy
a homeowners insurance policy that covers certain perils
Broker
an agent who is authorized to open and run his or her own ageny
Buydown
a type of financing in which a developer or seller arranges for the buyer to get a loan at a rate below the current market. the developer or seller pays interest cost in order to lower the interest rate but usually raises the price of the house to recoup this loss
Buyer's Agent
an agent or agency working with a buyer in a real estate transaction
Closing
the process of finalizing all the dealings associated with the sale and purchase of a home
Closing costs
expenses incurred by buyers and sellers in transferring ownership of a property
Commitment Letter
a formal offer of a loan by a lender. The letter states the terms under which the
lender has agreed to the loan.
Comparables or “comps”
recently sold properties that are similar in size, location and amenities to the home for sale. these properties help an appraiser determine the fair market value of a
property
Comprehensive
the most expensive type of homeowners insurance which covers the most potential damages
Contingency
a provision included in a sales contract stating that certain conditions must be met before the contract is valid
Conventional Mortgage
a type of mortgage made by banks and other lending institutions that is not insured by the Federal Housing Administration, Farmers Home Administration or Veteran’s Administration.
Convertible ARM
an adjustable-rate mortgage that can be corrected to fixed rate mortgage under
certain conditions
Counteroffer
an offer made by one party that makes changes to the original or latest offer of the other party. can be made by the seller or the buyer
Debt-to-income ratio
percentage of a person’s monthly earnings used to pay off all debt obligations
Deed
the legal document that conveys the title to a property
Discount Points
a type of point (1% of a loan) paid by the borrower to reduce the interest rate
Earnest Money
a deposit given whena puchase offer is made on a house
Easement
a right given by the landowner to use the property. example: phone lines, utility poles and so on
Equity
the cash value of your home, minus what your currently owe on your mortgage
Escrow
a trust account created by a neutral third party to hold money for the seller or buyer
Fannie Mae
name used for the Federal National Mortgage Association, which is a government-chartered nonbank, financial services company and the nation’s largest source of financing for home mortgages.
FHA Mortgage
the government guarantees Federal Housing Authority loans. you can put down a smaller down payment on an FHA loan, but you will also be required to pay mortgage insurance.
Fixed-rate Mortgage
a type of mortgage in which the interest rate is fixed for the life of the loan
Freddie Mac
name of Federal Home Loan Mortgage Corp., which is a financial coporation chartered by the federal government to buy pools of mortgages from lenders and sell securities backed by these mortgages
Front-end Ratio
the ratio of the borrower’s monthly housing expenses, including principal, interest, property taxes, and insurance (PITI), compared to the borrower’s gross, pre-tax monthly income
Ginnie Mae
name for the Government National Mortgage Association (GNMA), which is a government-owned corporation within the U.S. Department of Housing and Urban Development (HUD)
Good Faith Estimate
a lender must give a prospective homebuyer a written estimate of closing costs within three days of submitting a mortgage loan application
Home Warranty
a guarantee for certain features of a new home. example: materials and workmanship, the main components of the house etc.
Homeowners Insurance
an insurance policy that combines personal liability insurance and hazard
insurance coverage for a residence and its contents I
Index
an economic indicator used to set the rate for adjustable-rate mortgages
Inspection
a close and thorough examination of a house and property. a licensed individual usually does the inspection
Joint Tenancy
an equal, undivided ownership in a property by two or more individuals
Lease Purchase Mortgage
a financing option that allows potential homebuyers to lease a property with
the option to buy
Lien
a clain against a property
Lifetime Rate Cap the limit that an interest can increase or decrease in an adjustable-rate mortgages
Loan Origination Fee
a fee charged by the lender (usually 1% of the loan amount)
Mortgage Banker
company that originated mortgages and then sells them to a secondary market
Mortgage Broker
an intermediary who ensures a loan between a borrower and lenders. the broker takes the loan and then packages it for the lender
Mortgage Insurance Premium (MIP)
a policy that insures the lender against loss if the homeowner defaults on mortgage. this is part of the monthly mortgage payment.
Mortgagee
the lender
Mortgagor
the borrower
Multiple Listing Service (MLS)
a computerized listing of the homes for sale in an area listed with a Realtor. agents are granted access to the MLS and can use it to find a house in a particular price range or area
Origination Fee
a fee paid to a lender for processing a loan application
Overall Debt Ratio
the percentage of your overall debt (housing payments plus and other long-term debt) to your monthly gross income. lenders use this ratio to see whether you qualify for a loan.
PITI
principal, interest, taxes, and insurance-the total monthly payment you make on a house
Point
one point is equal to one percent of a loan amount. lenders charge points in exchange for lowering the interest rate.
Preapproved
a definite commitment from a lender for a loan
Prequalify
an informal estimate of the amount you qualify for a loan. the lender does not formally commit giving you a loan in the prequalification stage.
Principal
the amount of money borrowed and still owed on a loan not including the interest
Proration
the division of certain fees. example: if the sellers have paid for taxes six months in advance, they may want a portion of that payment back for the months you are living in the house
Quit Claim Deed
a formal document that denies a claim to certain property often used to clear problems with title or as part of a divorce settlement
Realtor
an agent or agency that belongs to the local or state Board of Realtors and is affiliated with the National Association of Realtors (NAR)
Real Estate Settlement Procedures Act (RESPA)
this act requires the lender to disclose certain information about a loan, including the estimated closing costs and APR
Seller Disclosure
a form in which the seller reveals any known defects of the home. this is required by most states.
Title
the right of property ownership
Title Insurance
insurance that protects the lender and buyer against any losses incurred from disputes over the title of a property
Title Search
the process of reviewing court records and other records to ensure that there are no liens or claims against the property you are buying
VA Loan
a type of loan available to veterans and quaranteed by The Department of Veteran’s Affairs
Zoning Laws
laws that establish how a property can be used and what codes must be followed when erecting new buildings