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Real Estate has a language all its own. Here’s some of the terminology you’ll be hearing…
Adjustable Mortgage Loans
Mortgage loans under which the interest rate is periodically adjusted to more closely coincide with the current rates. The amounts and times of the adjustment are agreed to at the inception of the loan. Also called: adjustable rate loans, adjustable rate mortgages (ARMS), flexible rate loans, variable rate loans.
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Amortization
Payment of a debt in equal installments of principal and interest, rather than interest only payments.
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Annual Percentage Rate (APR)
The yearly interest percentage of a loan, as expressed by the total finance change actually paid (interest, loan fees, points). The APR is disclosed as a requirement of federal truth in lending statutes.
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Buy Downs
A payment to the lender from the seller, buyer, or third party, or some combination of these, that causes the lender to reduce the interest rate during the early years of the loan.
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Cap
I adjustable rate mortgages, the limit on how much the interest rate or monthly payment can change.
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Closing
The final procedure in which documents are executed and/or recorded and the sale (or loan) is completed.
CMA
CMA or Comparative Market Analysis, is a comparison of homes similar to a seller’s home in terms of size, style, features, and location that have sold recently or are on the market. A CMA is prepared by a real estate agent to help set up a home’s listing price.
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Contingency
Commonly, a stated event which must occur before a contact is binding. For example, a home sale may be contingent upon the buyer obtaining financing.
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Deposit
A Portion of the down payment given by the buyer to the seller or escrow agent with a written offer to purchase. Shows good faith.
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Down Payment
Cash portion of the purchase price paid by a buyer from his own funds as opposed to that portion that is financed.
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Escrow
A procedure in which a third party holds all funds, document, etc, necessary to the sale, with instructions from both buyer and seller as to their use and disposition.
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FHA Loan
A loan insured by the Federal Housing Administration, a part of the Department of Housing and Urban Development. FHA insurance enables lenders to loan a very high percentage of the sale price.
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Gold Services
Weichert, Realtors’ expanding array of one-stop shopping services for real estate-related needs from pre- to post-move.
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Gold Services Manager
The Weichert Financial Services financial consultant serving the local Weichert office who facilitates the delivery of Gold Services. Works closely with the Gold Services Coordinator assigned to each customer and with the Weichert Sales Associate to assure a timely closing.
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Graduated Payment Mortgage
A mortgage initially offering low monthly payments that increase at fixed intervals and at the predetermined rate.
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Hazard Insurance
Otherwise known as homeowners insurance. This is a usual requirement of a mortgage lender and an advisable safeguard for any homeowner to protect against loss.
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Index or Rate Index
A measure of interest rate changes used to adjust the interest rate of an Adjustable Mortgage Loan. Example, the change in US Treasure securities (T-Bills) with a 1-year maturity, based upon their weekly average yield.
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Lien
A legal claim or charge on property as security for payment of a debt or for the discharge of an obligation.
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Loan-to-Value-Ratio
The ratio, expressed as a percentage, of the amount of a mortgage loan to the appraised value or selling price of the property.
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Lock Box
A key storage system placed on a home entrance that is accessible only by active, licensed real estate agents who must abide by a strict set of guidelines when showing a seller’s home.
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Margin
In Adjustable Mortgage Loans, the number of percentage points the lender adds to the index rate to determine the new interest rate at each adjustment.
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MLS
MLS stands for Multiple Listing Service, by which member brokers cooperate the sale of each other’s listings. Sellers may choose not to allow their property into multiple listing if they wish.
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PITI (Principal, Interest, Taxes and Insurance)
Used to indicate the four major items included in a monthly mortgage payment.
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Points
A fee charged by a lender as a service charge or amount needed to make the yield on a mortgage more competitive with other types of investments. Each point represents 1% of the loan amount.
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Price Trend Analysis
A tool developed and used exclusively by Weichert, Realtors to help set a home’s listing price by projecting market trends. Used on conjunction with a CMA. Because home values appreciate over time, a Price Trend Analysis maximizes listing prices.
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Principal
Amount of debt, not including interest; the face value of the loan.
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Private Mortgage Insurance
Insurance issued by a private company against a loss by a lender in the event of a default. Private mortgage insurance is generally required for conventional financing whenever less that 20% is put down.
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Second Mortgage
A mortgage which ranks after the first mortgage lien in priority.
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Settlement
Same definition as closing.
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Title Insurance
Insurance against loss resulting from defects of title of public record.
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VA Loans
Loans partially guaranteed by the Veteran’s Administration, enabling veterans to buy a home with little or no down payment.
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