Do you know what debt to income ratio, contingency or due diligence even means? Real estate has a language all its own that includes some strange, confusing and intimidating words. It's already scary making one of your largest purchases you will ever make, but couple that with terms and lingo that you just don’t understand and the process becomes even more daunting. COListings is here to help you understand important real estate terms to give you peace of mind.
A professional determination of value. Mortgage companies usually require an appraisal of the property by a licensed, disinterested party before agreeing to loan money on the property. Methods of determining value may be based on many things, such as comparable sales in the area, the cost approach, the income approach, or the highest and best use of the property.
A contract or offer that is in a secondary position to an already existing contract. This contract shall be elevated to the first position if some condition in the first contract is not met. If the first position contract is consummated, then the second contract is no longer in effect.
A real estate agent, broker, or salesperson, who represents a buyer’s best interests. The commission paid to this buyer’s agent may come from either the seller or the buyer.
A statement verifying who has the rights and responsibilities of ownership in a property. This may be ascertained by a public record search but does not guarantee that any other parties may not stake a claim to the property. Title insurance protects against claims that may arise against the title.
The expenses incurred in obtaining the property and transferring title to the new owner. This may include, but is not limited to attorney’s fees, points, title charges, credit report fee, document preparation fee, mortgage insurance premium, inspections, survey, appraisals, prepayments for property taxes, deed recording fee, and homeowners insurance.
A condition that must be met before a contract is legally binding, or before a sale is to be completed. The contingency provides an out or an escape from performing if the condition is not met. A common contingency is one must sell a current property before they can purchase a new property.
In order to qualify for a loan, monthly debt obligations cannot a certain amount. A common debt to income ratio is 43% of the buyer’s monthly income.
The act of best effort of ensuring that all statements about the real property are true.
Funds (also called a deposit) given by the buyer and held in an escrow account until the real estate closing. In some cases, these funds are refundable if the loan fails to close, but if the loan does close, the purchaser is given credit at closing for the earnest money.
A neutral third party holds other people’s funds in a secure account for future use. An earnest money deposit is held in a real estate broker’s escrow account. It is the broker’s account, but he is holding the buyer’s funds in the account for safekeeping until closing. In the case of a mortgage, the total monthly mortgage payment may include funds to pay for future taxes and insurance paid in addition to the principal and interest. The escrow is held by the lender until taxes and insurance are due, at which time the mortgage company pays the taxes and insurance on the borrower’s behalf. After the taxes and insurance are paid, the lender may re-adjust the total monthly payment to insure sufficient funds for future escrowed items.
Federal National Mortgage Association (FNMA - also known as Fannie Mae) A federal agency established to purchase mortgage loans from lenders as an investor. FNMA originally bought FHA loans, but now is a conventional, FHA and VA investor. FNMA is now a private company operating with private capital.
Federal Home Loan Mortgage Corporation (FHLMC - also known as Freddie Mac) A publicly held corporation that buys mortgages and thereby creates a flow of funds to mortgage lenders.
Homeowners’ Association is an association with annual dues collected from residents to insure enforcement of any covenants or restrictions that apply to the properties covered. For example, the Homeowner’s Association could legally cause a homeowner to take care of their yard as required by a legal covenant signed as a part of closing. Homeowner’s Association fees also cover maintaining common areas, and in some cases may be either voluntary or mandatory.
Prior to 1978 paint that was used in construction often had concentrations of lead. These materials have since been taken off the market as they can be harmful. When selling or leasing a property that was built prior to 1978, the owner should take care to provide the buyer or tenant with a lead based paint disclosure.
The ratio of the amount of the loan divided by the value or sales price of the home.
Insurance paid by the borrower to insure the lender against default in case of non payment of the mortgage loan. The mortgage insurance company may buy the property or just cover part of the losses to the lender. Many government loans and some conventional loans require mortgage insurance with loans to value over 80%.
Having a mortgage lender advise that debt ratios and credit report plus other factors show a borrower qualifies for a particular loan amount before signing a contract.
A natural gas found in the environment. If present inside a home, it can be harmful in sufficient concentrations. Radon gas testing is available and mitigation systems can be installed.
A real estate agent who represents the seller in a transaction.
A deed warranting that the grantor has clear title and promises he has the right to convey the property to the buyer.
When you sell or a buy a home, you should know you have an agent that will take the time to explain anything that seems unknown, nerve-racking or frightening. You shouldn't ever feel pressured or pushed along in the process to sign paperwork that doesn't make sense or enter into a contract without knowing what each line item means for you. The agents at COListings rid you of those fears with agents that are always available to talk, that use their expert market knowledge and custom technology to help you. Since agents are not all just one in the same, make sure to choose one that will help you feel comfortable. Contact COListings today!