Buying or Selling your home can be a very stressful time. Here at Coldwell Banker- The Falls Real Estate we want to give you the tools you need to make this change in your life a little bit easier. Today we will be sharing with you some common terms that are used in the real estate world so you can walk confidently into your closing.
Adjustable-rate mortgage (ARM)
The interest rate for an adjustable-rate mortgage changes periodically. You might start with lower monthly payments than you would with a fixed-rate mortgage, but fluctuating interest rates will likely make those monthly payments rise in the future.
Annual percentage rate (APR)
The annual percentage rate (APR) is the amount of interest charged on your loan every year.
Appraisal
An appraisal on your home is an unbiased estimate of how much a home is worth. When buying a home, the lender requires an appraisal by a third party (the appraiser) to make sure the loan amount requested is accurate. If the home’s appraised value is below what the buyer has offered, the lender may request the buyer pay the difference in cost.
Bridge loan
A bridge loan is a short-term loan a homeowner takes out against their property to finance the purchase of another property. It’s usually taken out for a period of a few weeks to up to three years.
Certificate of eligibility
During the VA loan process, lenders require veterans to show proof they’ve met the minimum service requirement to qualify for a VA loan.
Certificate of reasonable value
A certificate of reasonable value (CRV) is issued by the Department of Veterans Affairs and is required for veterans to receive a VA loan. It establishes the maximum value of the property and therefore the maximum size of the loan.
Contingency
If a property is contingent, or the contract contains a contingency, certain events must transpire or the contract can be considered null. A contingency might be that the home must past an appraisal or receive a clean inspection.
Convertible ARM
A convertible adjustable rate mortgage (ARM) allows buyers to take advantage of low interest rates by receiving a loan at a “teaser” loan interest rate.
Earnest money deposit
Earnest money is a deposit (usually 1-2% of the home’s total purchase price) made by a home buyer at the time they enter into a contract with a seller. Earnest money demonstrates the buyer’s interest in the property and is generally deducted from your total down payment and closing costs.
Eminent domain
The right of eminent domain gives the government the ability to use private property for public purposes. It’s only exercisable when and if the government fairly compensates the owner of the property.
Encroachment
When a property owner violates the rights of a neighbor by building or adding on to a structure that extends onto a neighbor’s land or property line, that is called encroachment.
Encumbrance
A real estate encumbrance is any claim against a property that restricts its use or transfer, including an easement or property tax lien.
Equity
Home equity is the part of your property you actually own. While you do “own” your home, your mortgage lender has interest in the property until it’s paid off.
Escrow
Escrow is part of the home buying process. It happens when a third party holds something of value during the transaction. Most often, the “value” the third party holds onto is the buyer’s earnest money check. When the transaction is complete (usually at closing), the third party will release those funds to the seller.
Fee simple
Fee simple refers to the most common type of property ownership. It means the owner’s rights to the property are indefinite and can be freely transferred or inherited when the owner chooses. It is most often associated with single-family homes, as condominiums and town homes are purchased with covenants, conditions, and restrictions.
Home inspection
A home inspection is carried out by an objective third party to establish the condition of a property during a real estate transaction. An inspector will report on such things as a home’s heating system, the stability of the foundation, and the condition of the roof. The inspection is meant to identify major issues that might affect the value of the home and the stability of your and your lender’s investment and return.
Lender
In real estate, the lender refers to the individual, financial institution, or private group lending money to a buyer to purchase property with the expectation the loan will be repaid with interest, in agreed upon increments, by a certain date.
Lien
A property lien is unpaid debt on a piece of property. It’s a legal notice and denotes legal action taken by a lender to recover the debt they are owed. It can come from unpaid taxes, a court judgement, or unpaid bills and can slow down the home buying process when unattended.
Multiple Listing Service (MLS)
An MLS is a suite of around 700 regional databases containing their own listings. Each database has its own listings, requires agents to pay dues for access, and allows agents to share listings across regions — without paying dues to each one. It is widely considered the most comprehensive listing service available.
Pending
A sales is considered “pending” if all contingencies have been met and the buyer and seller are moving toward closing. At this point, it’s unlikely the sale will fall through, and the buyer or seller risk losing the earnest money if they walk out on the deal at this point.
Pre-approval
Before submitting an offer on a home (or even engaging with a real estate agent) you’ll likely be required to get pre-approved. This means a lender has checked your credit, verified your information, and approved you for up to a specific loan amount for a period of up to 90 days.
Purchase agreement
A purchase agreement demonstrates a buyer’s intent to purchase a piece of property and a seller’s intent to sell that property. The document outlines the terms and conditions of a sale and holds each party legally accountable to meeting their agreement.
Right of survivorship
The right of survivorship is employed most often when there is joint ownership or tenancy of a property. It ensures that the surviving owner automatically receives the deceased owner’s share of the property becoming the sole owner of the property.
Short sale
A short sale occurs when a homeowner sells their property for less than what’s owed on the mortgage. A short sale allows the lender to recoup some of the loan that’s owed to them but must be approved by the lender before the seller moves forward.