In a week, how many hours do you consume for responding the seller or buyers questions when they ask about real estate terminology and concepts? Possibly it takes a lot of them. When the buyers are at the stage where they make what is likely the biggest purchase of their lives, it is the major responsibility of a realtor’s job to guide their clients through this confusing legal process.
What if you give them easy and fast access to the answers they need and make it more easier for yourself as well? Possibly, I can help you in this case.
So, here I have collaborated a comprehensive dictionary of real estate definitions and conditions. Through which your clients will figure out all the information that they might need. As you brush up on a team or two, maybe you will find it helpful for yourself as well.
Real Estate Terms and Definitions
The contract that requires the borrower to repay all of their outstanding loan to a lender if certain requirements are outlined by them –aren’t met, is known as acceleration Claus. It is also known as an Acceleration Covenant.
The offer that is contingent upon the buyer’s ability to meet different conditions when a seller accepts an offer from a buyer, before finalizing the sale. The buyer receiving mortgage approval, selling their home or reaching an agreement with the seller at the house examination, is included in Contingencies.
Active under contract
When the seller has accepted an offer with contingencies, but still wants the house to be listed, then this contract would be known as active under contract”. Basically, the seller also wants to accept backup offers in case their current fails to meet its contingencies in this situation.
A seller or a buyer may add an addendum outlining the specific part of the contract that they would like to adjust and the parameters of that change if they want to change an existing contract. Irrespective of the addendum, the rest of the contract remains the same.
Adjustable-rate mortgage (ARM)
The fluctuating interest rates will likely make monthly payments in the future even if you may start with a low amount of monthly payments than you would with a fixed-rate mortgage. The interest rate of an ARM changes periodically.
Though you may not have made a mortgage payment yet, the adjustment date is the date your mortgage begins to accrue interest. Right after mortgage funds are advanced or dispersed to the borrower, it commonly tumbles on the beginning days of the month.
The schedule of your mortgage payments spread out over the time is considered as Amortization. A purchasers amortization schedule is commonly one monthly payment scheduled over a 15 or 30 year period of time in Real Estate Business.
Annual percentage rate (APR)
The amount of interest that is charged on the loan every year is known as Annual percentage rate.
An unbiased estimate of how much a house is worth. By a third party, a lender requires an appraisal to make sure that if the loan amount requested is accurate. The lender may request the buyer to pay the difference in cost if the house appraised value is below what the buyer has offered.
The amount a house increases in value over time is known as Appreciation. Add one to the annual appreciation rate and raise this to a power equal to the number of years you would like to guess and then multiply that by the current value of the property to calculate a house’s appreciation rate.
It is concerned with figuring out how much the owner of the property will pay in taxes. By looking at comparable houses in your area and reviewing an inspection of the home in question it calculates the assessment of a house’s value.
It is when the seller of a concerned property sign over rights and before the official closings the obligations to that property to the buyer.
In this case, all of the terms and conditions of a mortgage is transferred from a seller to a buyer. Instead of taking out a new mortgage of own, the buyer takes on the seller’s remaining debt.
A balloon mortgage is paid in one lump sum instead of a traditional fixed-rate mortgage in which the owner pays on the loan in installments.
When a homeowner pays their monthly mortgage payments in two monthly installments then this is known as a bi-weekly mortgage payment. Instead of 12, you can make 26 payments per year with a bi-weekly mortgage.
To finance the purchase of any other property, when a homeowner takes out against their property then it would be short-termed as Bridge Loan. And usually up to 3 years, it is taken out for a period of some weeks.
Beyond what the state demands of real estate agents, a broker has passed a broker’s license exam and has already received an education. Property management and real estate law constructions are totally understood by them. They are demanded to be supervised under the supervision of a broker.
From a few years to the lifetime of the loan, this financing technique mortgage lowers the buyer interest rate from anywhere. The contractor makes payments to the mortgage lender that directly lowers the purchaser’s monthly interest rates and it lowers there monthly income.
A contract giving one party the right to sell and another party right to buy a property at a specific price for the future time.
A cash-out refinance is when a landowner refinances their mortgage for more than it’s value. It withdraws the difference in cash and is also known as a cash-out refi. A borrower commonly needs at least 20% in equity to be eligible for this kind of financing.
Certificate of eligibility
Lenders demand veterans to show proof about they have met the minimum service needs to qualify for a VA loan during the VA loan process.
Reasonable value Certificate
This certificate is a need for the veterans and is issued by the Department of Veterans Affairs. It establishes the maximum size of the loan with the maximum value of the property.
Chain of Title
The chain of title is the documentation like a Blue Book for homes that includes all past ownership of a property. It runs to the very first owner of the property from the present owner of the property.
A clear title does not have any kind of levy or lien from creditors. It is also known as a good title, free and clear title, or a just title. There is no question of legal ownership of the property. For instance; bad surveys or building code violations.
When both the seller and buyer go under contract on the home, then the date is been agreed upon. It is basically the final stage of the real estate transaction. The piece of property is legally transferred from seller to buyer on the closing date.
These are generally comprised of between 2-5% of the total buying price of the house. The average housebuyer pays almost around 3,700$ in closing costs according to a recent research survey by Zillow. These fees are paid by the closing date.
The buyer can elicit the help of a co-borrower if they are finding difficulty in getting approved for the loan. The person is added to the mortgage and guarantees the loan, and this person is generally a friend or a family member. They have ownership and are listed on the title, they even sign loan and are obligated to pay monthly mortgage payments.
The home sales price of the real estate commission is usually 5-6%. Then this commission is paid by the seller at the time of the closing by splitting up between the seller and buyer.
This refers to the property that is a married couple acquires. The property is owned by both spouses equally.
It is used by an appraiser to establish what other similar homes in the area have sold out recently and how much is it worth based. Most insurance providers and lenders need appraisers to use at least three closed sales only with the homes that are legally closed count as a comp.
Certain events must transpire or the contract can be considered null if a property is contingent or if a contract includes contingencies. The house must have that appraisal or receive a clean inspection in contingency.
A loan that is not insured or guaranteed by the federal government. These borrowers don’t require mortgage insurance and usually make larger down payments and mostly are at a lower risk of defaulting on their home loan payment.
By receiving a loan at a “teaser” loan interest rate, Convertible Adjustable Rate Mortgage allows the purchasers to take benefit of low-interest rates. Their interest rates fluctuate whereas their monthly mortgage stays the same.
Cost of funds index (COFI)
Acquired by financial institutions, a COFI is an average of the regional interest expenses. Variable-rate loans are used to calculate through COFI.
A document that transfers a title from the seller to the buyer. It commonly refers to as the vehicle of the property interest transfer as it must be in the form of a written document.
Deed-in-lieu of foreclosure
A document that transfers the title of a property. It transfers the title from a homeowner to the bank that holds the mortgage. If the bank has denied them a loan modification or short-sale then a homeowner might submit a deed-in-lieu of foreclosure.
However, the bank often denies the request of the deed-in-lieu.
A homeowner has not paid the sum they agreed to if they default on their loan. So, it clearly sums up that in 90 days or more the homeowner has not made a home loan payment.
It is when the scheduled payment is not made then the mortgage is considered as delinquent. A lender might begin foreclosure proceedings or collection if a payment is more than 30 days late.
At the time of closing in exchange for reduced interest rates, Discount Points are the fees that housebuyers pay directly to the lender, which can lower monthly mortgage payments. These points are also known as mortgage points.
At the time of closing, the amount of cash a housebuyer pays is down payment. 20% down payment is required for a typical home. FHA loans will accept a 3.5% down payment
Against below-market interest rates, a due-on-sale clause protects lenders. To repay the mortgage in full, it is a contract provision requiring the seller of the property when the property is next sold.
Earnest money deposit
Deposit that a homebuyer makes at the time they enter into the contract with a seller (generally 1-2% of the home’s total purchase price).
The legal right to use another person’s property or land is granted to someone while leaving the title in the owner’s name.
The ability to use private property for public purposes, this is the right that is given to the government and it is only exercisable if the government fairly compensates the owner of the land.
When the rights of a neighbor are violated by the buyer by adding or building on to a structure that extends onto a neighbors land then this is call encroachment.
Including an easement or property tax lien, any claim against a property that restricts its transfer or use is a real estate encumbrance.
Equal Credit Opportunity Act
To discriminate against applications, It rules its unlawful for creditors because of religion, color, race, sex, national origin, age, marital status, or because they receive public assistance. It was enacted on October 28, 1947.
The part of your land that you actually own is known as Equity. Your mortgage lender has an interest in the property until it’s paid off while you do “own” your home.
Subtract the outstanding loan balance from the current market value of your land to calculate your house’s equity.
When a third party holds something of worth during the transaction Escrow happens, basically, it is the part of the home buying process. Most often, usually at closing, the buyer’s earnest money holds onto the third party value and the third party releases those funds to the seller.
Examination of title
It generally reviews all previous wills, deeds, and trusts to ensure the title has passed cleanly and legally to every new owner and examines all public records that are tied to a property.
To sell a property quickly, an exclusive listing is used to motivate an agent within a specific number of months. Regardless of how a buyer is found, an agent gains a commission if they meet that goal.
Fair Credit Reporting Act
The personal information contained in files maintained by credit reporting agencies, FCRA ensures accuracy, fairness, and privacy. It was enacted in 1970. Its main focus is to protect consumers from having misinformation used against them.
Fair market value
Under the condition, the buyer and seller are knowledgeable about the asset is its accurate valuation in a free and open market, acting in their best interests to complete the transaction.
It is concerned with the most common kind of property. The owner’s right can be freely transferred or inherited when the owner chooses and these rights are definite. As condominiums and townhomes are purchased with covenants, conditions, and restrictions it is most often associated with single-family homes.
Federal Housing Administration loan is meant to help home buyers and has been around since 1934. Making the loan easier for the lenders to suggest them a better deal including to ensure low costing cost and easier credit qualifying.
This type of loan comes with an interest rate and is one of the most coming kinds of loans that stays the same for the lifetime of the loan. It generally provides the borrower with some predictability over the lifetime of their loan.
Many consumers prefer the fixed-rate mortgage for its long-term reliability while mortgage payments can fluctuate as home owner’s insurance change and property taxes.
For sale by Owner
With the help of a real estate agent, the houses listed as For Sale By Owners (FSBO) are being sold. There are some of the benefits to the buyers but for the biggest advantage for the seller is that they won’t be paying any commission fee.
It is a legal process in which the owner forfeits all property rights if he does not make any mortgage payment and the property enters a foreclosure auction if they are unable to sell it via short sale or pay off outstanding debt on the property.
Home Equity Conversion Mortgage
It allows property owners to withdraw equity on their house through either a line of credit, a fixed monthly payment or a combination of both and is a reverse mortgage program.
To establish the condition of a property during a real estate transaction, a home inspection is carried out by an objective third party. The stability of the foundation, house’s heating system and the condition of the roof are some of the things that an inspector will talk about.
When you purchase a townhome, condominium or any other property development you might need a homeowner’s association. You must pay monthly or yearly HOA fees when you join HOA to purchase the home. Repairs, common area recovers, and general upkeep can be easily covered by these fees.
To cover any damages or losses you might incur, it is necessary to purchase a homeowner’s insurance when you buy a home. (damages like theft, natural disasters, etc). Against any accidents in the home, it protects the homeowner from liability. These insurance payments are most often included in your monthly mortgage payment.
It is mandatory in some states. Before putting the property up for auction, this confirms the debt is in default so they requi8re all foreclosure go through the court system. Its main focus is to protect property owners from corrupt lenders.
Conforming loans limit can be backed by government-sponsored programs and caps the dollar value, so this mortgage exceeds this conforming loans that are generally tied with the local median home values.
It is like a rent-to-own for real estate. With the option to buy, it gives the lessee the ability to lease property. It involves an offer to buy the property for a predetermined price at any time during the length of the agreement and with a monthly rental amount due it also provides a legal agreement.
Agreed upon increments by a certain date, lending money to a buyer to purchase property with the expectation loan will be repaid with interest, the lender refers to the financial institution, private group or an individual in the real estate.
Lien is a legal notice and is unpaid debt on any property. To recover the debt they are owed, it denotes legal action taken by a lender. It can slow down the homebuying process when unattended and can come from a court judgment, unpaid taxes, or even unpaid bills.
Over a lifetime of a loan, it refers to the maximum amount an interest rate on an adjustable-rate loan can increase. Over the term of the loan, it keeps interested rates from ballooning too high.
They assist the homebuyer with refinancing or buying a home. They help borrowers to compile their loan application, choose the right kind of loan and communicate with appraisers.
From the dispersal of the loan to the time it’s paid in full, it is the term for the administrative aspects of maintaining your loan. Maintaining payment, sending the borrower monthly statements, paying taxes and insurance, and balancing the record are involved in Loan servicing.
It is a mortgage loan balance divided by the home value. As a percentage of your house’s appraised, it shows how much you are borrowing from a lender. A low down payment denotes less equity or ownership in your property making you more likely to default on your loan because the higher your LTv is the riskier you will appear during the loan underwriting scenario.
Without incurring a penalty fine by the lender, a borrower cannot pay their loan in full.
Giving the lender the right of the property, it is an agreement between a lender and a borrower, only if the borrower is unable to make loan payments within an agreed-upon lifetime.
To provide mortgage funds to a borrower, a mortgage banker works directly with a lending institution. Including property evaluation, overseeing the application process, and financial due diligence, these bankers are responsible for each part of the mortgage process.
Acting as a middle man between the borrower and lending institutions this broker shop several lenders. Giving the borrower a better deal, a mortgage broker can contrast mortgages from several different institutions.
It lowers the risk of a lender giving you a loan if the recipient of an FHA or USDA loan or a homebuyer makes down payment of less than 20% of the purchase price of a house they will usually need to pay mortgage insurance.
With regular payments, amortization refers to the process of paying off a loan so the amount you owe on the loan progressively decreases. Regardless of regular payments, the amount you owe continuous to rise because you are not paying enough to cover the interest.
No cash-out refinance
The type of loan that is required to improve the rate the borrower pays on the loan is considered as the no cash-out refinance. To benefit the borrower, it might also shorten the lifetime of a loan. Equal to or less than the outstanding loan balance, the borrower refinances an existing mortgage in a cash-out refinance. Its focus is to change certain terms of the mortgage or to lower interest rates.
Usually, in exchange for the borrower paying a higher interest rate, the lender pays the borrower’s loan settlement costs and extends a new loan. Then for a higher price, the mortgage lender sells the mortgage to a secondary mortgage market because of the high-interest rate.
It is stated on the mortgage note and is usually concerned with the nominal rate or face interest rate.
Original Principal Balance
Before the first payment has been made the amount owed on a mortgage is known as the original principal balance.
To cover the costs, the fee a borrower pays a lender for processing their loan application is known as an origination fee.
When a borrower finances the purchase of a home through the seller Owner Financing takes place bypassing conventional mortgage lenders and financial institutions.
If the buyer and the seller are moving toward closing and if all contingencies have been met then it is considered as “pending”. The buyer and seller risk losing the earnest money if they walk out on the deal at this point it is unlikely the sale will fall through at this point.
The date on which the loan was scheduled to be completed and is not yet approved by the date then the fees that would be charged is known as Per Diem or “per day” and are payable to the lender during closing.
PITI(principal, interest, taxes, insurance) calculated on a monthly basis. When approving a mortgage loan, the costs are calculated and contrasted to the borrower’s monthly income.
Planned Unit Development
A community made up for commercial unit, single-family, townhomes, residencies, and condominiums. Including tennis courts and outdoor playgrounds, it offers many common areas owned by the HOA beyond normal buildings offer.
You will likely to be required to get pre-approval before submitting an offer on a house. This sums up that for a period of up to 90 days, the lender has approved you for up to a specific loan amount.
How much you can afford to spend on a home is estimated by pre-qualification.
Prime interest rate
Prime interest rate is generally three points above the federal funds rate and is typically awarded to a U.S. bank’s best clients’. For the overnight loans, the rate banks charge each other.
The amount of money on the loan is the principal of that loan, your principal goes down as you make monthly mortgage payments. How much of your monthly mortgage payment goes to paying down the principal will be affected by the amount of interest you pay on a monthly loan. That mean, you are supposed to pay more on your loan over time.
When a seller intends to sell a property and a buyer intent to buy that property then it is going to be demonstrated by the purchase agreement. The terms and conditions of each party that is legally accountable will be outlined by this document.
During the purchase transaction, a purchase-money mortgage is issued to the buyer by the seller of a home. It allows the buyer to assume the seller’s mortgage to bypass a typical mortgage broker or lending channel.
From one party to another, quitclaim deed transfers ownership of property and It only transfers what the seller already owns.
Before a real estate transaction, it enables the borrowers to lock in a benefit interest rate. Protecting them from market fluctuations, it allows the borrowers to lock in that interest.
Real Estate Agent
The one who represents the buyer or seller of real estate. With certification and additional training, real estate agents must work for the broker or realtors.
Real Estate Owned
The property owned by either a government agency or by a bank. After an unsuccessful short sale or foreclosure auction, the houses typically become real estate owned.
Real EstateSettlement Procedures Act
Offering disclosure to the borrowers by informing them of transactions, settlement services, estate transactions, and relevant consumer protection laws. Its main focus to limits the use of escrow, prohibit specific practices and regulate settlement costs.
When an existing loan is replaced with a new one then it is called refinancing. It gradually suggests enhanced terms, that involves lower monthly payments, or faster loan terms instead when debt is not eliminated when a borrower refinances.
Rights of first refusal
The right of first refusal ensures under the same terms offered by the third party the property holder is allowed a chance to buy the asset before the property owner accepts the third-party offer only if the third-party purchaser offers to buy or lease a land owner’s asset.
Right of ingress or egress
The right to enter a property it is the right of ingress, and to exit a property, the right of egress is the person’s legal right. It is helpful in the situations when a tenant needs to access to a shared driveway, to which easement has been granted
Right of survivorship
When there is tenancy of a property and is joint ownership then the right of survivorships is employed. This clarifies that the deceased owner’s share of the property becomes the sole owner of the property when the surviving owner gradually receives it.
It is when a purchase closes on a house and then leases back tenancy to the seller. This occurs when the buyer becomes a sort of landlord and receives an amount from the seller until they remain in the home in which case, the seller needs more time to vacate.
It is when a landowner borrows against the value of his house. To provide the borrower with funds to use, they usually refer to draw on the market value of the home. The line of credit can be paid back using rate choices.
Including second homes or other items that can be used as a payment to a lender, a second loan is backed by the borrower’s assets only if the borrower is unable to pay back the loan.
Including processing loan payments, tracking principal and interest paid, and responding to borrower’s inquiries, a mortgage service handles the daily administrative task around a loan.
It occurs on the mortgage when a homeowner sells their land for less than what’s owed. A short sale allows the lender to recover some of the loans before the seller moves forward but it must be approved by the landowner.
The rights of the property are represented by the Title and during a real estate transaction and give the buyer legal rights to the property these rights are shifted from the seller to the buyer.
Transfer of ownership
The title from seller to buyer at closing is known as a transfer of ownership in real estate.
The fee charged of a property title upon the transfer is known as transfer tax and the transaction that takes places on the property’s value is imposed by the state or country.
It is based on the average yield of Treasury securities and is published by the Federal Reserve Board.
When the transaction has not yet closed and a seller has accepted an offer from a buyer then the home would be “under contract”.
The home loan guarantees provided by private lenders can be received by veterans, service members, and even eligible spouses. To more favorable terms for the borrower, the Departments of VA ensures a part of the loan. It is necessary to stay up to date on current real estate trends whether you are a seller or a buyer or a realtor.