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Terms you should know

Real estate is like learning a whole new language! Below are terms you should know as you go through the real estate process.

Adjustable-Rate Mortgage – A mortgage with an interest rate that changes based on a specific index, after a predetermined number of years.

Amortization Schedule – A timetable showing the amount of each mortgage payment applied to interest and principal and the remaining balance after payment is made.

Appraisal – A qualified appraiser’s written analysis of the estimated value of a property.

Appraisal Gap – Is when a Buyer agrees to cover any shortage between the offer price and the appraised value.

Attorney’s Fees – If the lender requires an attorney to draw up any of the settlement documents, you may be charged a fee.

Capital Gains – The profit obtained from the sale of an asset, such as real estate.

Certificate of Title – A statement provided by a title company or attorney stating that the title to real estate is legally held by the current owner.

Closing Costs – Expenses incidental to a sale of real estate, such as loan fees, title fees, appraisal fees, attorney fees, etc.

Deed – The legal document conveying title to a property.

Earnest Money – Earnest money is a deposit paid to a seller to show you are serious about buying a house. If you buy the home, the earnest money is applied to your down payment. If not, the earnest money is returned, minus expenses, provided the contract allows.

Escalation Clause – is when a prospective buyer is willing to raise their offer on a home should the seller receive a higher competing offer. The clause will state how much more the buyer is willing to pay over the highest offer up to a certain amount of money.

Escrow Fees – Escrow involves having a third party hold funds and/or documents until you and the seller complete settlement. Money in the account may be used to pay taxes, insurance, and other regular assessments as they fall due.

Good-Faith Estimate – GFE An estimate of closing costs associated with the purchase of your home.

Home Inspection – A thorough examination that evaluates the condition of a property.

Home Warranty – A guarantee for mechanical systems and appliances against repairs not covered by homeowners’ insurance.

Lock-In – A lender’s written guarantee of a specified interest rate if a mortgage is closed within a set period.

Loan Origination Fee – A lender will charge a fee for the cost of processing the loan.

Loan Discount Points – The largest of your settlement cost may be the points lenders require to make the yield on your loan more profitable. A point is one percent on your loan amount. Points are tax deductible if they are paid separately and not deducted from the loan amount.

Loan to Value – The ratio of the amount of a mortgage loan to the appraised value or sales price of the property mortgaged.

Mortgage Insurance – A contract that insures the lender against loss caused by a borrower’s default on a mortgage.

Multiple Offers – When there are multiple offers on a property.

PITI – Principal, Interest, Taxes, and Insurance: four components of a monthly payment on mortgage loans.

Prime Rate – The interest rate that banks charge to their preferred customers.

Property Survey Fee – You may have to pay to have your lot surveyed, especially if there is a question about the boundaries.

Recording Fee – Since the title is changing hands, the transaction must be recorded with your city, county, or other appropriate branch of government.

Sales Contract – Known as a purchase agreement, the legal document that details the price and terms of the property sale between a seller and a buyer.

Settlement Statement – A document prepared by a broker, escrow company, or lender detailing the complete breakdown of the costs and disbursements in a real estate transaction.

Title Search – A check of public records to ensure that the seller is the legal owner of the property being sold and that there are no liens or other claims against the property.

Title Insurance – Insurance to guard against a faulty title search as well as hazards that might not be revealed in the search.

Truth in Lending – A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage.

Underwriting – The lender’s process of evaluating a loan application to determine the risk of providing the applicant the requested funds.

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