Glossary

Agent–  Agents are independent contractors but are required to work under real estate Brokers. Agents assist consumers with their specific real estate needs.

Acceptance Date– The date that all parties agreed to the terms and conditions in the contract. Also know as binding agreement date.

Active Adult Community– Age restricted Community usually geared toward 55 years and older.

Amendment– A form used to change something specific in the original contract.

Amortization– Paying down your mortgage each month using a prescheduled payment plan.  Your mortgage payments include principal and interest.

Appraisal– Written estimate of fair market value.

APR– The annual percentage rate is the amount of interest charges for borrowing. Average over the full term of the loan.

Asbestos  A mineral fiber that is found in rock and soil. Due to its sturdy qualities it has been used in a variety of building materials. Asbestos exposure increases your chances of lung disease and mesothelioma.

Assessed Value– Estimated property value determined by the State in order to issue property taxes.

Assignment– In a contract an assignment is the right to transfer your interest in the transaction to another person.

Auction– A sale where properties are sold to the highest bidder.

Backup Offer– When an offer to purchase is held in secondary position to the primary contract

Bankrupt– When your debt far exceeds your net worth and you’re unable to your creditors

Binding– A legal agreement to fulfill a promise. For Example; a binding contract is a legal agreement to follow through on the terms listed in the contract

BPO– Broker’s Price Opinion; valuation of a property (not to be confused with an appraisal)

Broker– A manager of real estate agents, and facilitator between the parties in a real estate transaction. The company your real estate agent is affiliated with.

Builder’s Contract– The contract used in the purchase of a newly constructed home. Most builders have their own contract which is different from the approved Georgia Association of REALTORS purchase and sale agreement.  

Certificate if Occupancy– A document that certifies that certain guidelines were followed and adhered to in regarding to standardized building codes and associated laws. It is issued by the local city government agency and certifies that the property is in livable condition.

Closing Attorney– The attorney and/or company that is listed on the purchase and sale contract. The attorney facilitates the transfer of ownership from the seller to the buyer and legally closes the transaction on the date specified in the contract. In Georgia closing attorneys also performs the title search.

Closing– The final step to complete your real estate transaction. It is the official transfer of new ownership from the seller to the buyer.

Closing Disclosure (CD)– A document that shows a breakdown of the money involved in the transaction. The buyer’s monthly mortgage payment, including a breakdown of the individual fees associated with getting the mortgage.  It also lists other fees such as the buyer’s and seller’s closing costs, along with associated applicable credits to either party. Basically; it lists who is responsible for paying what is the transaction. This form replaced the HUD-1 Settlement Statement and the final Truth in Lending Disclosure in 2015. Borrowers must receive this form from their lender no later than three days before closing. If the form is not received as specified then closing must be extended by law in order to accommodate the required time.

Cloud– A blemish against the title. Anything that prevents a title from being transferred from one person to another. For example, a lien or money owed against a property or an incorrect address etc.

Commitment Letter– Once you are fully approved for a home loan; your lender may issue a formal letter valid your.

Contingency– Any condition that must happen in order for the buyer to complete the purchase of the home. Contracts are usually contingent on the buyer having an inspection/due diligence period, as well as a finance and appraisal contingency.

Contract– The purchase & sale agreement.

Conventional Loan– A loan that is not insured by any government agency.

Credit Score– A score used to determine the creditworthiness of an individual.

CTC– Clear to close; this means that the underwriter has completed scrutinized your loan documents & you have been given clearance for the property to be funded.

Days per Diem– ‘for each day;’ this term is usually used in foreclosure and auction contracts and it lists the cost the buyer pays per day if the buyer does not close as scheduled in the purchase and sale agreement. This is in addition to whatever costs is already deemed necessary to close. Consider it a penalty.

Deed in Lieu (of foreclosure)- In order to avoid going through the foreclosure process a homeowner may agree to transfer the title to the lender. This releases the homeowner from the loan obligation as well as saves the lender from going through the foreclosure process which adds a blemish to their records. This can be a favorable situation for both the homeowner and the lender especially if the lender rents the property to the homeowner, and in turn don’t have to worry about moving expenses and finding a new place to live.

Debt to Income Ratio– (DTI)…a formula used by lenders to determine a borrower’s ability to manage monthly bills and repay debt.

Down Payment Assistance (DPA)- A program that provides eligible home buyers with funds to help in the purchase of a home.

Down Payment (DP)- A sum of money you put down on the initial purchase of a home.

Due Diligence- A given period in a contract when inspections are completed, and further investigation of the property is preformed.

Easement– Right to use another person’s property for a specific purpose- such as accessing part of your neighbors property to get to your house. Or if City employees have to walk on your property in order to gain access county sewer lines.

EM (Earnest Money)- Monetary deposit, that is usually required as a down payment to show good faith once you contract on a home you’re interested in buying.  This amount is credited to the buyer at closing. This is different and separate from the down payment required in order to obtain a home loan.

Eminent Domain– Governmental rights to take private property for public use….usually compensation is given, however not necessarily the full fair market value.

Encroachment– To build or contruct beyond the boundaries of your property lines. An example of this is installing a fence that is partially on a neighbor’s property.

Encumbrance– Some sort of restriction against a property. For example; a lien, an easement, or even a claim to interest in the property by someone that is not the owner.

Escrow– Earnest money can be held in escrow..usually a 3rd party holds this deposit in good faith until the completion of certain conditions are met in a contract. Once you close; your lender may hold an escrow account on your behalf to pay future taxes, insurance & association fees.

Estate Sale– Similar to a garage sale, this is usually a way to liquidate the belongings of a deceased person. However; estate sales can be the result of down-sizing, bankruptcy, divorce and similar life events.

Estoppel Letter– These are used in various scenarios; however in regard to buying and selling real estate an estoppel letter is requested by the closing attorney, and presented to the HOA in reference to the property that is under contract.  In turn, the HOA must confirm in writing any outstanding fees owed against the property or if the fees are current then it is verified in the letter.

Exhibits– Forms added to the contract. Can consists of hoa disclosures, sellers disclosures, and a survey of the property.

FHA Loan– A type of government insured loan.

203k– A type of government insured loan, used for renovations.

Fair Market Value– The price a home would sell for in current market conditions.

Foreclosure– the process by which a lender is forced to take possession of a home that the borrower has stopped making mortgage payments on

Fannie Mae– Officially known as the Federal National Mortgage Association, they provide funds to banks and mortgage companies that make home loans possible.

Fico Score– A score used by lenders as part of the requirement to determine whether a borrower qualifies for a home loan.

Flip– To buy and improve a property then sell it for a profit.

FSBO– For sale by owner; unrepresented seller.

GFE– ‘good faith estimate’; this is prepared by a lender to give you a breakdown estimation of what the real costs of obtaining a mortgage will cost you with that particular lender. Borrowers also use this form to compare loan offers from other lenders since it includes the interest rate that the lender is offering as well as how long the rate is valid, along with an estimation of the borrowers closing costs. As of October 2015 this form and TILA was replaced by a form called a ‘loan estimate’.

Gift Letter– Money given to you by a friend or family member to help with the purchase of your home. Your lender will require a written letter from the person as proof of where the funds came from. They may also be required to show a paper trail of where they got the money from.

Hard Money Loans– Similar to private money loans; in that you don’t need perfect credit to qualify for a hard money loan since the money is loaned based on the premise that the property being financed will be sold for a profit. There is typically a certain criteria attached to the loan such as interest rates that are disclosed upfront, and when the loan must be repaid which is a much shorter term than traditional loans.

HELOC– A home equity line of credit is when a home owner borrows money against the equity in their home.

HOA– Home owners association.

Homestead Exemption– A property tax deduction eligible to homeowners that reside in their home & claim it as their primary residence.

Home inspection– An examination of a property to determine its condition. Recommended once you enter into a binding purchase and sale contract.

Homeowners Insurance– A policy that covers the value of a property and its contents. Can also include coverage for possible liability against accidents in the home involving the homeowner or guests and visitors to the property.

Home Warranty– A service agreement that provides coverage for the repair or replacement of appliances in the home such as HVAC, water heater, refrigerator, etc.

HUD-1– A form previously used by the Housing of Urban Development to show an itemized list of the fees and costs associated with buying a home. Replaced by the Closing Disclosure Form.

Interest Only Loan– A loan where the borrower makes a monthly payment only against the interest of the loan for a set period. After such time; payment against the principal begins or the loan is refinanced.

Interest- A fee charged for borrowing money

Junior Lien– A secondary judgment against a property. Junior liens range from lines of credit to outstanding HOA fees.

Lead Based Paint– A toxin that was commonly found in paint before 1978. If you’re buying a home built before this time you’re required to sign a disclosure that addresses this issue. You’re also recommended to have the appropriate inspection to ensure that lead based paint is not present in the home.

Lender– The company/institution that is financing the loan.

Loan Officer– Person that reviews your loan application & supporting documents.

Manual Underwriting– Low or no credit score loan processing.

MLS– Multiple listing service- a website used by real estate agents where local property is advertised for sale.

Offer– To express your interest in buying a property ‘in writing’ to the seller.

PMI– Private Mortgage Insurance.

POF– Proof of funds.

Pre approval– When a lender has checked your credit, and verified specific documents necessary to process a loan. When the lender is able to confirm the amount you can borrow for your home purchase is when you will receive a loan approval. Loan approvals are usually valid for 90 days. Keep in mind that you must go through underwriting for final approval. Underwriting is the last step before closing.

Pre qualification– Verbally supplying a lender with your overall financial situation such as your income, and current debt. In turn; they will give you an idea of how much you can possibly borrow for a loan. Holds no real weight if you are ready to buy a home.

Pre-closer– A person responsible for gathering specific information in preparation g for the closing. The pre-closer also organizes and schedules the day and time of the closing. The pre-closer works closely with the attorney, and can usually answer any questions you may have in reference to the closing itself.

Principal– The amount of money borrowed to purchase a property.

Private Money Lender– A company or individual that lends money for the purchase of real property. Usually used by investors that want to pay cash for a flip property. Interest rates are higher than that of traditional lenders, and payment of the loan is usually due within 6-18 months.

Probate– Probate is the legal process for the transfer of assets from the deceased person’s name to his or her estate so that they can be sold, or distributed to the heirs.

Promissory Note– A letter signed by the borrower promising to pay back the mortgage also known as a ‘deed of trust’ to the lender in a certain amount of time. It also includes the monthly total and how the loan is to be repaid.

Property Disclosure- Disclosure forms are completed by the seller to inform the buyer of anything regarding the house or property that may not be obvious to the buyer.

Property Manager– A person or company that is responsible for the care of a property.

Radon– Essentially radon can affect the quality of air inside your home. It’s a radioactive gas that can cause lung cancer however you can’t see or smell it. It is usually found in volcanic rocks and soil and may be present in some wells. NOTE: Granite is considered a type of volcanic rock.

REALTOR®: A real estate agent who is a member of the National Association of REALTORS®, and is required to uphold the standards of the association and its code of ethics. Not all real estate agents are considered REALTORS®.

Renovate– To restore, repair or redevelop.

REO (real estate owed)– Bank owned properties.

RESPA- Real Estate Settlement Procedures Act, a consumer protection statute that was implemented in the 70’s to provide greater transparency in the loan process and to eliminate ‘kickbacks and referral fees’ from occurring behind the scenes.

Short Sale- When a home is sold for less than the outstanding mortgage and other debts that may be against the property.

Special Stipulation– A condition that over-rides something in the contract.

Survey– An assessment to determine property lines.

Tax Lien– A claim that the government can place on a property for unpaid taxes.

Tenants in Common– When 2 or more people share specified interests in a property. Upon the death of one of the owners; that person’s interest in the property will be transferred to a beneficiary or to the deceased person’s estate.

TILA– ‘truth in lending act’; a consumer protection law that was implemented to protect borrowers by having lenders disclose the real cost of obtaining a home loan. Hence; the GFE/loan estimate forms.

Time is of the essence– specific time line in a contract to perform certain conditions

Title– Legal rights of ownership.

Title Insurance–  Protects property owners & lenders from anyone that may state a claim in the property. It also protects against any defects or liens against the property.

TRID–  Short for TILA RESPA Integrated Disclosure was implemented to simplify important details of a home loan, and to protect consumers by simplifying the verbiage used. Overall, it’s intent was to reduce the fees associated with obtaining a mortgage and provide better transparency for the consumer.

Under Contract (UC)– A binding agreement between a buyer and a seller. During this time the seller may not agree to sell the home to anyone else.

Under Water– When the outstanding mortgage on a home is more than the current fair market value.

Underwriting– The process where the actual risks of lending the borrower the amount of money they applied for to finance the purchase of a home is scrutinized. This occurs behind the scenes, and is processed by someone other than the loan officer you’ve been in communication with. This is the most important part of the process because your debt to income ratio is under a microscope in order to obtain final loan approval. In addition, your credit will be pulled again and updated bank statements and pay stubs are required as well.

VA loan– A home loan guaranteed by the United States Department of Veteran Affairs.

Warranty Deed– A document that lists the legal owner of a property.

Quit Claim Deed– A document used to transfer interest in a property from one person to another. The person transferring interest is the grantor; the person receiving the interest is the grantee.

Walk-through– Often referred to as ‘final walk through’. This is usually done 1-7 days before the closing, and in some instances the day of closing

Wholesale– The goal of wholesaling is to sell the property quickly and ‘as is’ (no repairs). The idea is to contract with a home seller and then find another buyer to purchase the property,  assign the contract to the new buyer for a profit.

 

 


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