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Home Buying, Home Improvement, Home Selling, San Antonio, Sellers

Real Estate Terms-Defined!

Buying or selling a home can be complicated enough on its own, but throw in some real estate abbreviations and lingo and it can really get confusing! Below are some common ones that I get asked about regularly. Do you have some that aren’t on this list that are throwing you for a loop? Just ask me! I’d be happy to help.

MLS Terms

NEW: This home has just come onto the market

ACT: Active Listing, this home is still available

PCH: Price Change, the seller has recently changed the list price on the home

BOM: Back on the Market, this home was taken off the market and is now back on. Usually occurs after a contract has fallen through.

AO: Active Option, this home is under an option period. This means that the buyer has purchased a period of time in which they can back out of the contract for a minimal fee. Typically these last 7-10 days.

PND: Pending, this home is past the option period and headed to closing. It will likely close.

SLD: Sold, my favorite word! This home has closed and is off the market

Lender Terms

Appraisal: This is the processing of determining the market value of a home. A lender will require an appraisal to ensure their investment in your mortgage. An appraiser will look at recent sales near the home and the condition of the home to determine if it is worth what you are paying for it.

Fixed Rate Mortgage: A mortgage in which the interest rate does not change during the entire term of the loan.

Adjustable Rate Mortgage (ARM): A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.

Ammortization: Your loan payment consists of a portion to be applied to the accruing interest on a loan, with the remainder being applied to the principal. Over time, the interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time

Annual Percentage Rate (APR): This is not the note rate on your loan. It is a value created according to a government formula intended to reflect the true annual cost of borrowing, expressed as a percentage. It works sort of like this- deduct the closing costs from your loan amount, then using your actual loan payment, calculate what the interest rate would be on this amount instead of your actual loan amount. You will come up with a number close to the APR. Because you are using the same payment on a smaller amount, the APR is always higher than the actual note rate on your loan.

Buydown: Usually refers to a fixed rate mortgage where the interest rate is “bought down” for a temporary period, usually one to three years. After that time and for the remainder of the term, the borrower’s payment is calculated at the note rate. In order to buy down the initial rate for the temporary payment, a lump sum is paid and held in an account used to supplement the borrower’s monthly payment.

FHA Loan: A loan insured by the Federal Housing Administration and made by an approved lender. Generally you only need to put down 3.5% as a downpayment. This loan is accompanied by mortgage insurance because of the small downpayment

Private Mortgage Insurance (PMI): Lenders require PMI when the LTV (loan to value) exceeds 80%.  PMI insurance as a rule of thumb costs approximately 1% of the loan amount per year.  The cost is generally added to the monthly payment.

Property Terms

Encroachment: An improvement (something like a driveway, fence, etc.) that intrudes illegally on another’s property

Fair Market Value: The highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Foreclosure: The legal process by which a borrower in default (cannot make their payments) under a mortgage is striped of histheir interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Short Sale: A sale in which the proceeds from selling the property will fall short of the balance of the mortgage against the property and the property owner cannot afford to repay the full amount, whereby the mortgage company agrees to release their lien on the real estate and accept less than the amount owed on the debt. This type of sale will still be listed in a similar manner to a typical home sale.

Survey: A drawing or map showing the legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.

Title Company Terms

Title: A legal document evidencing a person’s right to or ownership of a property

Title Insurance: Provided by the title company, insurance that protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.

Hud-1 Settlement Statement: A closing statement that outlines all costs associated with a real estate transaction.

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