A separate document form describing a change or addition to the initial purchase agreement. Addendums can be used for many items, for example changing the closing date.
A mortgage that has a fluctuating interest rate. ARMs may have lower initial interest rates for a set time and then start to adjust according to an index.
The appraisal is the process of determining the value of a home. This is required by the lender and organized by a third party professional appraiser that is not chosen by either the buyer or seller. The results may not be the same amount as the selling price. If the value comes back lower, it could result in additional negotiations between the buyer and seller.
An appraisal gap only comes into play if the property being sold appraisal is lower then the purchase price. A buyer may strengthen their offer with an appraisal gap contingency. A buyer would define the amount of money put towards the low appraisal to close gap between the purchase price and the low appraisal price.
Is the value placed on the property by the public or county tax assessor for tax purposes. In general this value is different from the appraised value.
An agent is a person who has taken the necessary state courses and exams to be a real estate agent. They work for a Brokerage. A broker is a person who has taken education beyond the agent level as required by state laws and has passed a broker’s license exam. Brokers can work alone or they can hire agents to work for them.
The real estate company is known as the brokerage. All REALTORS® work for a broker. The fees and commissions are paid to the broker and the broker pays the REALTOR®.
This proves that the property is legally owned by the seller and no other institution or party has any claims against it.
These costs are broken down into two categories, Non-Recurring Closing Costs and Prepaid Items. The Non-Recurring Closing Costs are that are paid just once as the result of buying the buying the property or obtaining a loan. An example of this would be mortgage points on a loan. Prepaid Items are that are likely to continue for a specified about of time or continue the entire time the borrower owns the property. These are like property taxes and homeowners insurance. A lender will give a borrower a Good Faith Estimate that attempts to estimate what these closing costs will be.
The term for properties that are comparable (in size, amenities, location, and more) to the property being analyzed.
This is the responsibility of the buyer to take all necessary care before closing on the purchase. For example, it would include confirming the seller’s broker and attorney are legitimate and confirming there are no issues that have yet to be disclosed that would prevent the buyer from wanting to proceed with the purchase.
This is the sum of money the buyer gives in advance as good faith that they will complete the terms of the agreed upon contract. If the buyer defaults on the terms of the contract they run the risk of losing the deposit.
Used by real estate appraisers, it is the estimate of the physical condition of a building. The actual age of a building may be shorter or longer than its effective age.
Is a clause states that you are willing to outbid any other offers on the home by a certain amount, up to a ceiling price. The ceiling is also referred to as a “cap price” or the most you are willing to pay.
Anything of value that is permanently attached to or a part of the property. This can include lighting, carpet, or landscaping. These items can be a source of dispute between buyer and seller and can be leverage for negotiations. It is always best practice to get everything in writing so there is no confusion.
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
Is a description of real estate that is sufficient to identify it for legal purposes. When preparing a deed, it is important to use the correct legal description.
Also known as a Property Lien. This is a legal claim against property granting the lien holder a specified amount of money upon the sale of the property. These liens are used to ensure the payment of a debt, with the property acting as collateral. A good example of this would be a mortgage lien.
This is a term used a lot in the mortgage world. It is the percentage ration between your loan amount and the appraised value of your home. So if you loan amount was $150,000 and the appraised value is $200,000 the LTV would be 75%.
A document that pledges the property to the lender as security for the loan needed to purchase the home.
Also known as Private Mortgage Insurance. This is insurance that the lender requires a borrower to purchase. It covers the lender against some of the losses that could occur if the borrower defaults on the loan. Mortgage insurance is generally required for all loans with more than an 80% LTV. Over time when the LTV improves to less than 80% the mortgage insurance terminates.
Is an insurance policy used in FHA loans if your down payment is less than 20%. The FHA assesses either an “upfront” MIP (UFMIP) at the time of closing, or an annual MIP that is calculated every year and paid in 12 installments.
This is another way of describing your monthly mortgage payment. Principal is the portion of the payment that goes toward paying down the loan and interest is the portion that pays the lender for loaning the money to purchase the property.
The amount of interest due on the loan during the
time period between closing of escrow and the first
mortgage payment, due at the time of closing.
The process the loaner goes through to confirm if a borrower qualifies for a loan based on their credit history and current financial status as well as the amount of money a recipient qualifies to receive.
Land and any items that go with it that include items like structures, trees, minerals, and the interest, benefits, and inherent rights thereof.
A real estate agent, real estate broker or broker associate who holds active membership in a local real estate board that is affiliated with the NATIONAL ASSOCIATIONS of REALTORS®
This is when the buyer (or seller) and the escrow agent (more on that later) meet to finalize the purchase by signing final documents. This will incur fees known as closing costs which include attorney’s fees, a loan origination fee, and other charges totaling around six percent of the house. (Closing & Signing appointments are not the same thing. You will sign documents on one day and “Closing” will happen on another day)
This is a company that specializes in examining and insuring titles to real estate. They also will perform real estate closings and hold EMD’s.
Lenders employ underwriters they work like real estate detectives. Their job is to make sure you have represented yourself and your finances truthfully, and that you haven’t made any false or misleading claims on your loan application.