Terms:
Interest Rate
The monthly effective rate paid (or received if you are a creditor) on borrowed money. Expressed as a percentage of the sum borrowed.
MLS- IDX
IDX, or broker reciprocity, is a listing sharing arrangement between brokers within a Mulitple Listing Service.
Market Value
An asset's market value is the price it would fetch in the market, if it were sold in the current marketplace.
Title Insurance
A type of insurance which guarantees the ownership and quality of title to land.
Appraisal
An educated estimate of the value of a property on a certain date given by a person, usually after an inspection of the property.
As is
Implied in most Agreements of Purchase and Sale, suggests the buyer is accepting the property in it present state and relinquishes and responsibility from the buyer.
Assumption
An agreement between buyer and seller in which the buyer assumes responsibility for the sellers existing mortgage. This agreement could potentially save the buyer money because closing costs and the current interest rates, possibly higher, do not apply. In most residential mortgage transactions, this is not an option because the seller's existing mortgage normally has a "due on sale" clause that requires the seller to pay off the mortgage if the house is sold or if the ownership is transferred. This issue often comes into play with real estate investment strategies.
Annual Percentage Rat (APR)
An interest reate that reflects the cost of a mortgage as a yearly rate. This rate takes into account any points and fees (closing costs) and is based on the loan going to its full-term.
Bankruptcy
a) A person who has done any of the acts that by law entitle his creditors to have his estate administered for their benefit; b) a person judicially declared subject to having his estate administered under the bankrupt laws for the benefit of his creditors; c) a person who becomes insolvent.
Bid
To offer (a price) whether for payment or acceptance.
Buy-Down
A method of lowering the buyer's monthly payment for a short period of time. The lender or homebuilder subsidizes the mortgage by lowering the interest rate for the first few years of a loan. This strategy can be very effective in today's market.
Property Tax
A tax levied on real or personal property
Interest Rate
The percentage usually on an annual basis that is paid for the use of money borrowed from another
Home Loan
a) Money lent at interest; b) something lent usually for the borrower's temporary use.
Credit Risk
An estimate of the amount of credit that can be extended to a company or person without undue risk.
Credit Union
A cooperative organization that makes loans to its members at low interest rates.
Closing
Also referred to as a settlement. The meeting at the conclusion of a real estate sale in which the property and funds are exchanged between the parties involved.
Closing Costs
The total points and fees that are associated with completing a mortgage transaction or a house purchase or sale. Often, a good negotiation strategy for both the buyer and seller is for the seller to pay closing costs on behalf of the buyer.
Prime Rate
The lowest rate of interest on bank loans at a given time and place, offered to preferred borrowers.
ARM
A mortgage whose interest rate is raised or lowered at periodic intervals according to the prevailing interest rates in the market.
Home Equity Loan
A loan or credit line that is secured by the equity the borrower has in a home.
Mortgage
A temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.
Debt-To-Income Ratio
The ratio, expressed as a percentatge, which results from dividing a borrower's monthly payment obligation on long-term debts by the borrower's gross monthly income.
Down Payment
Cash paid by the buyer at closing that makes up the difference between purchase price and the mortgage amount. Vetrans have VA benefits that require no money down. FHA currently requires 3.5% down and conventional loans require 5 plus percent down. Contact Kim Koller "The Super Girl of Real Estate" for help finding ways to get into a with little to no money down.
Earnest Money
Money given by the buyer to a seller as a deposit to commit the buyer to the future transaction. Earnest money can be subtracted from the closing costs or given back to the buyer by the lender. Earnest money checks are typically cashed within 3 business days from the sellers receipt.
Equity
The value an owner has in real estate over and above the obligation against the property. Equity is fair market value minus the current mortgage and other liens. Real estate equity should be managed just like any other investment.
Loan-To-Value Ratio
The ratio between the amount of the mortgage loan and the appraised value of the property.
Origination Fee
A fee charged by a lender for processing a loan application. This is usually computed as a percentage of the loan and is used by some lenders as another name for "points"
PITI
Refers to Principal, Interest, Taxes, and insurance.
Private Mortgage Insurance (PMI)
Insurance that protects lenders against loss if a borrower defaults. This is required when the loan-to-value ratio is greater than 80 percent. The PMI payment may not be tax deductible and is usually added to the monthly mortgage payment.
Underwriting
The decison-making process of granting a loan to a potential homebuyer.
