- Adjustable Rate Mortgage (ARM): Interest rates on this type of mortgage are periodically adjusted up or down, depending on a specified financial index.
- Annual Percentage rate (APR): The actual finance charge for a loan, including points and loan fees in addition to the stated interest rate.
- Appraisal: An expert evaluation of the value or worth of a property (paid for by the buyer).
- Assessed Value: The value placed on a property by a city/county for tax purposes. It may differ from appraised or market value.
- Closing Costs: The buyer must pay lender fees in order to purchase a home.
- Earnest Money: A deposit paid when the sales contract is signed. The deposit is placed in an escrow account until settlement where it will appear in your column on the HUD-1.
- Escrow: An account held by a third party custodian until conditions of a contract are met.
- Hazard Insurance: Also called Homeowner’s Insurance. It covers property damage from specified hazards such as fire, wind or water. Required by lenders when purchasing a property. You must obtain homeowner’s insurance within 7 days after ratification of the contract.
- Home Inspection & Report: Prepared by a qualified inspector who evaluates a property’s structure and mechanical systems (paid for by the buyer). The results will help you in budgeting for future expenses as well.
- HUD-1: A precise breakdown of closing costs for both sellers and buyers required by the Real Estate Settlement Procedures Act (RESPA).
- Market Value: The price of a property that is established by present economic conditions, locations and general trends.
- Market Price: The actual price at which a property sold.
- PITI: Principal, Interest, Taxes and Insurance. Forms the basis for monthly mortgage payments.
- Point: One percent of the loan amount. It’s charged in addition to interest and other fees on the loan. If interest rates creep up, paying points allows the purchaser to buy down the rate.
- Pre-qualification: Informal estimate of how much financing a potential borrower might expect to obtain, done before paying substantial loan application fees.
- Pre-Approval: This is a letter from the lender to use in presenting offers. It shows the seller that the purchaser is approved for their loan, subject to an appraisal and termite inspection and underwriting guidelines.
- Promissory Note: A written promise to repay a loan under specific terms.
- Ratified Contract: When a real estate purchase agreement or contract is executed and the terms are accepted and signed off in writing by both parties, it is a complete and binding document.
- Title & Title Insurance: A document that indicates ownership of a property. The insurance protects against loss from defects in the title (a one-time fee paid at settlement.)
- Seller Subsidy: Sometimes the seller will provide the buyer assistance with closing costs in order to get a deal through.
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