When involved in real estate transactions it can sometimes feel like people are speaking a different language. Here are some definitions of key terms to help you!
PMI - Private mortgage insurance is what borrowers have to pay when they take out a mortgage from a commercial lender and pay a down payment of 20 percent or less. PMI insures the mortgage for the lender in the event that the borrower defaults.
Earnest Money - A deposit made to a seller that represents a buyer's good faith to buy a home.
Appreciation - The increase in a home's value over time.
Depreciation - The loss in value to a building over time due to age, wear and tear, and deterioration.
Appraisal - A licensed appraiser's opinion of a home's market value based on comparable recent sales of homes in the neighborhood.
LTV - Loan-To-Value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset purchased.
Home Inspection - A limited, non-invasive examination of the condition of a home.
Final Walkthrough - Ensures that the property's condition hasn't changed since your last visit and that the terms of your contract will be met.
Repair List - Involves the diagnosis and resolution of problems in a home.
Pending Sale - Means the seller has accepted an offer but the deal hasn't closed yet. (aka Under Contract.)
Settlement Statement - A document that summarizes all of the fees and charges that a borrower and lender face during the settlement process of a loan transaction.
Closing Costs - Fees paid at the closing of a real estate transaction. Common closing costs include loan application fees, points, prepaid homeowners' insurance, an appraisal fee, inspection fees, transfer taxes, escrow fees, attorney fees, recording fees, prepaid interest, prepaid private mortgage insurance, title insurance, and title search costs.
PITI - Principal, interest, taxes, insurance (PITI) is the sum of a mortgage payment that includes the principal amount, loan interest, property tax, and homeowner's property and private mortgage insurance premiums.
Flood Certificate - A document that states the flood zone status of real property.
HOA - Home Owners Association (HOA) is an organization of homeowners of a particular subdivision, condominium or planned unit development.
Deed - A written document which transfers title (ownership) or an interest in real property to another person.
Short Sale - A sale of real estate in which the net proceeds from selling the property will fall short of the debts secured by liens against the property.
REO - Real Estate Owned or REO is a term used to describe a class of property owned by a lender—typically a bank, government agency, or government loan insurer—after an unsuccessful sale at a foreclosure auction.
Title Company - A company involved in examining and insuring title claims for real estate purposes. The company verifies ownership of real property and determines the valid owner through a thorough examination of property records in a Title Search. The title company usually does an abstract of title.
Abstract of Title - A summary giving details of the title deeds and documents.
Lein - A claim on a residential property for the homeowner's unpaid bills.
Clear Title - Used to state that the owner of real property owns it free and clear of encumbrances.
Clouded Title - Any document, claim, unreleased lien, or encumbrance that might invalidate or impair a title to real property or make the title doubtful. Clouds on title are usually discovered during a title search.
Mortgage - A legal agreement by which a bank or other creditor lends money at interest in exchange for taking title of the debtor's property, with the condition that the conveyance of title becomes void upon the payment of the debt.
Property Disclosure Statements - Essentially outline any flaws that the home sellers (and their real estate agents) are aware of that could negatively affect the home's value.
Easement - A right to cross or otherwise use someone else's land for a specified purpose.
Debt to Income Ratio - The percentage of a consumer's monthly gross income that goes toward paying debts.
Origination Fee - A fee charged by a lender on entering into a loan agreement to cover the cost of processing the loan.
Points - Are fees paid directly to the lender at closing in exchange for a reduced interest rate.