REAL ESTATE GLOSSARY

Here's Some Of The Real Estate Terminology You'll Be Hearing

Adjustable Mortgage Loans: Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with current rates. The amounts and times of adjustment are agreed to at the inception of the loan. Also called: Adjustable Rate Loans, Adjustable Rate Mortgages (ARMs), Flexible Rate Loans, Variable Rate Loans.

Amortization: Repayment of a debt through monthly installments of principal and interest. The monthly payment is based on a schedule that will allow you to own your home at the end of a specific period (e.g., 15 or 30 years)

Annual Percentage Rate (A.P.R.): The A.P.R. shows the cost of the loan expressed as a yearly interest rate. It includes the interest, points, mortgage insurance, and other fees associated with the loan. The A.P.R. is disclosed as a requirement of the federal Truth in Lending statutes.

Assessed Value: The valuation placed on property by a public tax assessor for purposes of taxation.

PMI: Mortgage insurance - Mortgage lenders make many borrowers purchase mortgage insurance to protect the lender if the borrower is unable to pay the mortgage. In other words, mortgage insurance guarantees your lender will get paid if you default. For the borrower, it has a benefit, too: Getting mortgage insurance allows you to purchase a home before you have the full 20 percent down payment saved up.

Buy Down: A payment to the lender from the seller, buyer, or third party, or some combination of these, which causes the lender to reduce the interest rate during the early years of the loan.

Buyer's Agent: The licensed real estate salesperson that represents the interests of, and negotiates on behalf of, the buyer of a home or property.

Cap: In adjustable rate mortgages, the limit on how much the interest rate or monthly payment can change.

Certificate of Eligibility: A document issued by the Veterans Administration that certifies a veteran's eligibility for a VA loan.

Certificate of Reasonable Value (CRV): Once the appraisal has been performed on a property being bought with a VA loan, the Veterans Administration issues a CRV. of property over the years.

Clear Title: Title that is free of liens or legal questions as to ownership of the property.

Closing: The final procedure in which documents are executed and/or recorded, and the sale (or loan) is completed.

Common Area Assessments: In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas

Closing Statement: The statement, which lists the financial settlement between buyer and seller, and also the costs each must pay.

Comparable Sales: Recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as "comps."

Construction Loan: A short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

CMA: CMA, or Competitive Market Analysis, is a comparison of homes similar to a seller's home in terms of size, style, features, and location that have sold recently or are on the market. A CMA is prepared by a real estate agent to help set a home's listing price; it is not an appraisal.

Contingency: Commonly, a stated event which must occur before a contract is binding. For example, a home sale may be contingent upon the buyer obtaining financing.

Conventional Mortgage: Refers to home loans other than government loans (VA and FHA).

Deposit: A portion of the down payment given by the buyer to the seller or escrow agent with a written offer to purchase. Shows good faith.

Depreciation: A decline in the value of property; the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

Down Payment: Cash portion of the purchase price paid by a buyer from his own funds as opposed to that portion which is financed.

Transaction Broker: A licensed real estate salesperson who represents both the buyer and the seller in a transaction at the same time. Also applies to a buyer's agent (see above) when the seller's agent works for the same company. In either case, both parties must provide written informed consent to transaction brokerage.

Easement: A right of way giving persons other than the owner access to or over a property.

Encroachment: An improvement that intrudes illegally on another's property.

Escrow: A procedure in which a third (neutral) party holds all funds, documents, etc. necessary to the sale, with instructions from both buyer and seller as to their use and disposition.

Equity: A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

Fair Market Value: The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

FHA Loan: A loan insured by the Federal Housing Administration, a part of the Department of Housing and Urban Development. FHA insurance enables lenders to make loans to borrowers who might not qualify for conventional mortgages.

Graduated Payment Mortgage: A mortgage initially offering low monthly payments that increases at fixed intervals and at a predetermined rate.

Wet Closing: Many banks and mortgage companies wire funds the day of a closing. Depending on your part of the country, escrow companies or attorneys manage mortgage closings. If the closing agent has the loan proceeds in their bank account, they can fund and record the mortgage almost immediately. In wet closings, the mortgage lender trusts the closing entity to complete all proper documentation and get all necessary signatures from buyers and sellers. Florida is a wet State.

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