Buying a home is a huge investment, and probably the most significant purchase of your life.
Between budgeting – which isn’t as easy as you’d think – to finding the best mortgage terms and broker, house hunting requires a lot of time and commitment. Before you start on the road to homeownership, make sure you are ready starting with the basics: Vocabulary. As if you thought scraping up and saving that deposit wasn’t hard enough, just wait until you’re swimming in confusing terms like LVR, equity and all sorts of finance jargon.
Century 21 Blue Marlin wants you to be as prepared as possible when it comes to buying your first home! So here is a cheat sheet to common real estate terms:
· Active– A property that is on the market and available for sale. It may have received offers, but none have been accepted
· Appraisal– An estimate of the market value of a property based on comparable recent sales of homes nearby.
· Arms-length transaction– Both parties to a transaction are acting in their own self-interest. Neither party is pressured by or acts in connection with the other to assure the fair market value of the property.
· Assessment– An estimate of the home’s value for property tax purposes
· Closing costs– The expenses and fees associated with the purchase and sale of the home, such as taxes, title insurance, appraisal fees and lender fees
· Closing Disclosure– A final statement of loan terms and closing costs. The buyer must receive it three business days before closing.
· Commission– A fee charged by a real estate agent for his/her services. In many cases, the seller pays the commission to his/her agent as well as the buyer’s agent.
· Contingency– A condition that must be met before a sale can close. Common contingencies include home inspection, financing and home appraisal.
· DTI – Debt-to-Income. The total percent of a borrower’s income that is paid toward debt each month calculated as a ratio of a borrower’s gross monthly income over their debts including car payments, student loans and credit card bills. A borrower’s DTI affects his credit rating.
· Deed– A legal document filed with the county that records homeownership.
· Down payment– The amount of money a buyer pays at closing toward a home purchase.
· Earnest money deposit– a partial payment by and buyer when submitting a contract that demonstrates the buyer’s commitment to the deal. The money, which is held in an escrow account, goes toward closing costs.
· Equity– The amount remaining after subtracting the amount of mortgage loan from the sales price of the home
· Escalation clause– A tool used by buyers to outbid competitors for a property. In the contract offer submitted by the buyer to the seller, the buyer states they will increase their offer by a certain amount if the seller receives offers higher than theirs.
· Escrow –A neutral or third party who handles the exchange of money and documents on behalf of two other parties before the closing of a sale.
· Fixed-rate mortgage– A mortgage loan with an interest rate that won’t change during the length of the loan.
· FSBO – For Sale by Owner. The owner of the property is selling without a real estate agent
· Listing – Property for sale that is listed on the multiple listing service.
· LTV – Loan-to-Value. The ration of the amount of money borrowed over the appraised value of the home. It is a key risk factor that lenders consider when evaluation a loan application.
· MLS – Multiple Listing Service. A local or reginal real estate service that complies available properties for sale submitted by real estate brokers and agents. An MLS can only be accessed by real estate brokers and agents.
· Pending –An offer has been accepted, a contract has been executed and the contingences have been met.
· Prequalified– An informal estimate of how much a buyer can afford to borrow for a mortgage. It does not include an analysis of a buyer’s credit report on an in-depth look at their ability to purchase a home.
· PITI – Principals, Interest, Taxes and Insurance. The major homeownership costs included in many monthly mortgage payments.
· PMI – Private Mortgage Insurance. Insurance that protects a lender against loss if a borrower defaults in a loan. PMI is required for conventional loans that have less than a 20 percent down payment.
· Rate Lock –An agreement between a borrower and a lender that allows the borrower to lock in an interest rate on a mortgage for a specified period of time.
· Title insurance– Compensates the buyer or lender if the title defects, liens or competing claims of ownership on a property arise after closing.
· Under contract– A seller has accepted the buyer’s offer, but any contingences have yet to be met.
We won’t sugarcoat it: Buying your first home can be scary. From the best real estate agents in the area to making sure you know and understand simple terms,
Century 21 Blue Marlin is here to help every step of the way!
