Saturday, October 29, 2016

The ABCs of Real Estate: Common Homebuying Terms and Definitions from A to Z

Buying or selling a home comes with a whole lot of terminology, enough to fill its own special Real Estate Dictionary. So we sat down to see if we could find at least one common definition from the world of real estate for every letter of the alphabet!

Appraised value:
An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. An appraisal is based primarily on comparable sales.

Backup offer:
When a home seller accepts an offer from a buyer but still takes offers from other buyers, just in case the front-running offer falls through.

A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

Down payment:
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

Earnest money deposit:
A deposit made by the potential homebuyer to show that he or she is serious about buying the house.

Federal Housing Agency:
An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.

Good Faith Estimate (GFE):
An estimate of the fees and costs due at closing for a mortgage loan. A good faith estimate is required by the Real Estate Settlement Procedures Act (RESPA).

Home inspection:
A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

Interest rate:
The interest rate is the cost of borrowing money from a lender. 

Jumbo mortgage:
A mortgage amount above the threshold stipulated under Fannie Mae (FNMA) regulations for a conforming loan. The jumbo loan limit is $417,000 in most of the United States, or $625,500 in high-cost areas.

The best part of the entire real estate process is handing the buyers the keys to their new home when the transaction closes!

Loan-to-Value (LTV):
The percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower).

Multiple Listing Service (MLS):
A MLS is a central service for real estate listings available to member brokers. Most home searches online begin with looking at houses for sale on the MLS.

Notice of default:
A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Open house:
A pre-scheduled period of time when a house for sale is opened to the public and potential buyers for marketing purposes.

PITI (principal, interest, taxes, and insurance)
This stands for principal, interest, taxes and insurance.

Real Estate Settlement Procedures Act (RESPA)
A consumer protection law that requires lenders to give borrowers advance notice of closing costs.

Quitclaim Deed:
A deed that transfers interest or title without warranty.

Sweat equity:
Investing in the construction or rehabilitation of a property in the form of labor or services rather than cash.

A legal document evidencing a person's right to or ownership of a property.

In mortgage lending, underwriting is the decision-making process used to determine whether the loan risk is acceptable to the lender, based on reviewing the property appraisal and buyer financials.

VA Loan:
A mortgage that is guaranteed by the Department of Veterans Affairs (VA).

The walk-through inspection of a property occurs right before a closing to ensure that the property is being delivered as stipulated in the contract of sale.

Every real estate deal definitely has an abundance of paperwork, and all of those copies need to be xeroxed. Hey – it was hard finding a word that started with “X”!

The yield refers to the return on an investment.

Zoning laws regulate land use as well as what kinds of improvements and alterations can be made to a property.

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