Appraisal: The appraisal is the estimated property value, as determined by a qualified appraiser. If a buyer is obtaining a mortgage, lenders require an appraisal of a property before approving the loan. Cash deals don’t require appraisals.
Buyer’s Agent and Listing Agent: Typically, there are two types of real estate agents that are involved in the home buying process. If you are buying a home, then you will want to be represented by a buyer’s specialist, while the listing agent will represent the seller of the home.
Closing: The closing date is the scheduled day on which the sale of the property is officially finalized and transferred thereafter. In order to meet the closing date, the buyer must sign all the mortgage documents and pay all closing costs and the seller completes the transaction with the buyer.
Closing Costs: Closing costs are fees paid at the home closing, which is when the title of a residence is transferred from the seller to the buyer. These costs typically include real estate commissions, escrow fees, document recording fees, lawyer fees, title insurance fees, survey fees, and taxes. These costs can also include the expenses the home has incurred by buyers and sellers during any negotiations.
Comparative Market Analysis: The best method available to home sellers to learn their home's current value so they can select the best sale price is a CMA, or Comparative Market Analysis. CMA is the term real estate agents use when they conduct an in-depth analysis of a home's worth in today's market.
Contingencies: A contingency is the condition that must be met before the deal can be finalized between the buyer and the seller becomes legally binding.. If the home inspection reveals major problems, then the contingency allows the buyer to walk away from the contract without losing money. A common contingency is the home inspection. Other contingencies can include appraisal contingencies or financing contingency.
Earnest Money Deposit: The earnest money deposit is the money you provide along with your offer on a house to show good faith. This amount usually accounts for one to two percent of the home’s purchase price. If the sale goes through, the earnest money deposit goes toward the down payment. If the seller rejects the offer, the money goes back to the buyer.
Escrow: The escrow is a deposit of funds or documents, such as the earnest money deposit, that are held by an escrow agent, or other third party, until the sale goes through. The third party holds the property, cash, and the property title until all conditions of the property agreement have been met.
Equity: Your home’s equity is the difference between the home’s fair market value, and the unpaid balance of the mortgage. Equity increases over the life of the loan. For example, if your home is worth $100,000, and you owe $50,000 still, the other $50,000 is your equity.
Debt-To-Income (DTI) Ratio: The ratio of monthly debt payments to monthly gross income. Lenders use a housing DTI ratio (house payment divided by monthly income) and a total DTI ratio (total debt payments including the house payment divided by monthly income) to determine whether a buyer qualifies for a mortgage.
Down Payment: The down payment is the amount of out of pocket money you pay toward a home before your lender provides you with a loan to cover the rest of the purchase amount. Your down payment can vary depending on the type of mortgage you take out. It can be anywhere from 3 percent to 20 percent of the total cost.
Inspection: A home inspection is scheduled after you have made an offer on a home. Some municipalities require an inspection, whereas some do not. The inspector goes through every part of the home to check on the foundation, walls, heating, electricity, plumbing, and appliances to see if they are up to code or need repairs. If the inspector finds something wrong in the home during the inspection, the inspection will fail.
Lien: A lien is when a legal claim is put on a property in order to receive payment for debt. The holder of the lien can sell the property to recover the money owed.
Listings: Real estate agents will often refer to homes for sale on the market as listings. These listings include basic information about the home for sale, such as the price, number of bedrooms and square footage.
Private Mortgage Insurance: PMI allows buyers to put less than a 20 percent down payment on a home. A PMI is an insurance premium paid by the buyer to the lender to protect the lender if you are unable to pay your mortgage. Once you have 20% equity in the home, this insurance is discontinued
HUD-1 statement:A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points and initial escrow amounts. A separate number within a standardized numbering system represents each item on the statement. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing.
Home Warranty – Similar to any warranty, sellers and buyers can pay a fee to protect the home against future issues depending on how much their package covers, like plumbing, heating, or appliances.
Mortgage Pre-Approval Letter: Buyers can get approved for a home loan before they find a property they want to invest in. This lets buyers know how much they can borrow. They can then use the mortgage pre-approval letter to show sellers that they have the proper financing in place to purchase the home. This information is used as an estimate and doesn’t obligate the lender to work with the homebuyer. Most realtors require a pre-approval letter before showing homes to buyers.
Multiple Listing Service: Otherwise known as the MLS, the Multiple Listing Service is a large database that real estate agents have access to that provides detailed information about most of the properties that are currently on the market, under contract, or have sold.
Realtor®: Don’t make the mistake of thinking a Realtor is the same thing as a real estate agent. Not all real estate agents are Realtors; only those that are members of the National Association of Realtors (NAR) can call themselves Realtors.
Title and Title Insurance: Title is the legal term that identifies a piece of property that the owner is in lawful possession of that property. The title insurance protects real estate owners and lenders against any property loss or damage they might experience due to liens, encumbrances, or defects.
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