12 Real Estate Terms to Know
Buying or selling a home can be confusing. Knowing the definitions of the following terms
will help you better understand what’s going on.
·
Buy-Down
– A method of lowering a buyer’s monthly payments for a short period of
time. The lender subsidizes the mortgage
by lowering the interest rate for the first few years of the loan. At that
point the interest rate will go up to an agreed upon rate.
·
Caps –
a limit the interest rate or monthly payments can adjust to with and Adjustable
Rate Mortgage.
·
Debt-to-Income
Ratio – the percentage of your monthly debt versus your monthly
income. This percentage is calculated by
dividing a buyer’s monthly long-term debts by a buyer’s gross monthly income.
·
Underwriting
– The decision-making process of granting a loan to a potential homebuyer.
·
PITI
Payment – Refers to a payment that includes the Principal, Interest, Taxes,
and Insurance.
·
Origination
Fee – a fee charged by the lender for processing a loan application;
usually calculated as a percentage of the loan.
·
Market
Value – The price a property could possibly bring in the real estate
marketplace.
·
Mortgage
Insurance – insurance that protect lenders against loss if a buyer defaults
on their loan. This is required when the
loan-to-value ratio is greater than 80 percent.
·
Fixed
Rate Mortgage – a mortgage in which the interest remains the same
throughout the life of the loan.
·
Earnest
Money – money given by a buyer to a seller as a deposit to purchase a
property. Earnest money is subtracted
from closing costs.
·
Closing –
Also referred to as settlement. The meeting
in which the real estate transaction is completed and when the property and
funds are exchanged between the Buyer(s) and Seller(s).
The terms above are used in 99.99% of all real estate
transactions. Whether you’re Realtor®, Lender or closing
attorney use these terms you will now know what’s going on.
