| Appraisal |
An estimate of the fair market value
of a property; required by lenders before approving a loan. |
| ARM |
Adjustable Rate Mortgage; a loan in which
the interest rate changes over time, as market interest rates go up (or
down), your loan payment goes up or down. Normally set to an index rate. |
| Assessment |
An estimate of the market value of a
property by a taxing authority; this value determines the taxes due to
the city or town the property is located in. |
| Building Codes |
Safety standards set by Federal, State, or
municipal agencies; from initial construction to all housing. |
| Closing |
A
meeting with the buyer & seller (with lender or title company
representatives) to
sign all legal documents related to a property sale.
Title of the property is transferred when the deed from the closing is
recorded at the government registry of deeds. |
| Commission |
A percent of a real estate sale that goes to a real
estate broker for their services in the transaction. |
| Condominium |
A form of real estate ownership; condo
associations are self-governing
entities regulated by the State. |
| Credit Report |
A person's credit history as reported to
credit bureaus by lenders. |
| Credit Score |
A statistical ranking of your credit history
to evaluate risk by a lender, determined by
credit bureaus. |
| Deed |
Document representing legal transfer of ownership of a property,
recorded at the local government registry of deeds. |
| Easement |
A legal right associated with a property
that is recorded on a deed or at the
government registry of deeds, that grants access to a property (the
right of an electric company to have telephone poles on a property for
example). |
| Equity |
The owner's financial interest in a piece of
property; that is, the fair market value minus loans and/or liens. |
| Escrow |
A separate account that lenders put
non-loan funds, such as property taxes (often required to be paid from
an escrow, which changes your total payment amount once per year), or
homeowners insurance. |
| Fair Market Value |
The theoretical market price of a property;
often measured by comparing recent sales of nearby properties. |
| Fannie Mae |
A company that creates a market in mortgages
by buying and selling them, and also provides funds to other lenders to
grant mortgages. |
| Fixed Rate Mortgage |
A mortgage loan in which the interest rate
is fixed (non-adjustable) for the life of the loan. This is
generally the most desirable type of loan, especially if interest rates
are rising. |
| Home Inspection |
Contractually
with a seller, a potential home buyer hires a person to physically
inspect the condition of a building (electrical, plumbing, mechanical,
roof, etc.) to determine any potential repairs before buying. |
| Index Rate |
For Adjustable Rate Mortgages, when the
interest rates changes, it is set to a public interest rate such as the
current 2 Year U.S. Treasury Note + 1.5%. |
| Interest Rate |
The amount of money paid to a lender in
addition to the original amount borrowed, expressed as a percentage. |
| Judgment |
A legal decision; when a person's property
is attached (lien placed) until they pay off an unrelated debt; lenders
will check for liens before granting a mortgage. |
| Lien |
A financial claim against a property that
must be cleared before the property is sold. |
| Loan Fraud |
Deliberately lying on a mortgage
application; it is illegal. |
| Lock |
Interest rates change frequently; a lender
will lock-in an interest rate near the start of the mortgage process,
attempting to get the most favorable rate. |
| Mortgage Insurance |
Often required by lenders if a buyer of a
property does not make a 20% down payment. |
| PITI |
Principal + Interest + Taxes + Insurance =
Monthly Mortgage Payment [usually] |
| PMI |
Private Mortgage Insurance, see Mortgage
Insurance. |
| Points |
A fee sometimes paid to mortgage lenders at
closing (usually 1% or 1 point of principle); it buys a lower interest
rate for that loan (in theory). The best thing to do is shop
around with different lenders to get the best interest rate in the
first place. |
| Pre-Approve |
A lender commits, in writing, to lend a
buyer an amount of money if certain conditions are met. |
| Pre-Qualify |
A lender calculates how much potential money
a buyer can qualify for; it is non-binding, and is subject to a mortgage
application / evaluation process. |
| Principal |
The total amount of money borrowed
(sometimes with fees added to total) for a mortgage loan; you pay
interest on this principle amount. |
| Radon |
A radioactive gas that can cause health
problems; many potential home buyers test for it before buying. |
| Refinance |
To pay off a loan with the funds from
another; often done when interest rates drop after you buy a home. |
| Settlement |
Another name for "closing." |
| Survey |
A property diagram that indicates legal
boundaries, easements, encroachments, rights of way, improvement
locations, etc." |
| Title |
"A certificate provided by a qualified
source (such as a title company) that shows the property legally belongs
to the current owner; before the title is transferred at closing, it
should be clear and free of all liens or other claims." |
| Title Insurance |
"Insurance that protects the lender against
any claims that arise from arguments about ownership of a property; also
available for homebuyers." |
| Title Search |
"A check of public records to be sure that
the seller is the recognized owner of the real estate and that there are
no unsettled liens or other claims against the property." A
property needs to be free and clear before a lender grants a loan. |
