HOME BUYING GLOSSARY

A

Addendum

An attachment that supersedes and becomes a part of the Purchase Agreement.

Adjustable Rate Mortgage (ARM)

A mortgage loan with an interest rate that may change periodically as a pre-determined index increases or decreases.

Annual Percentage Rate (APR)

The cost of credit expressed as a yearly percentage rate, including items such as base interest rate, mortgage insurance, origination fee, etc.

Appraisal

An opinion of the value of a property provided by a certified appraiser. This is the value that lenders use to determine the amount of the mortgage or cooperative loan they are willing to make on a property.

Agency

The relationship that a real estate agent has with a client.

B

Buyer Agent

A Realtor who represents the buyer in a transaction.

C

Closing Costs

Costs to both the buyer and seller associated with the purchase, sale or refinance of a home. Examples of closing costs include survey cost, points, mortgage insurance, mortgage tax, title insurance, recording fee, attorney’s fee and escrow for insurance and taxes. It is also called Settlement Costs.

CMA

Comparable Market Analysis, or an opinion of a property’s value.

Comps

Properties used as ”comparable” on a CMA.

Condominium

A form of property ownership in which the homeowner has title to an individual unit and shares an undivided interest in the development’s common area.

Credit Report

A report on an applicant’s credit history compiled by a credit reporting bureau for the purpose of determining the overall creditworthiness of the applicant.

D

Debt-to-Income Ratio

A ratio, expressed as a percentage, comparing monthly debt to gross monthly income. Used by the lender to evaluate the applicant’s ability to repay a loan.

Disclosure

Any written and/or verbal communication regarding agency, property condition, etc.

Discount Points

A fee paid to the lender for processing a mortgage or cooperative loan.

Down payment

Initial investment on a home loan.

E

EMD

Earnest Money Deposit or escrow payment is provided as a monetary consideration when a buyer offers a contract to a seller.

F

FHA

A type of loan, government insured financing.

Fixed Rate Mortgage

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

Flood Insurance

Insurance that provides coverage for property damage caused by flooding. It is required for properties located in federally designated flood areas/zones.

H

Hazard Insurance

Insurance that provides coverage for a loss on a specific property due to damages caused by fire, vandalism, theft, storms and certain other natural disasters.

Homeowners’ Insurance

Insurance that provides personal liability and hazard insurance coverage for a dwelling and its contents.

L

Lien

A legal claim against the property or the applicant.

Lien Search

A review of public records to determine if there are any claims against the property that must be satisfied, i.e., paid-in-full, prior to transfer of ownership.

List (Listing)

When a seller signs a listing agreement with a real estate broker to market their property.

Loan-to-Value Ratio (LTV)

The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property.

Listing Agent

Agent who takes a listing on behalf of the broker.

Lockbox

MLS lockbox which allows agents access to listed properties.

Lock-in

Terms to obtain the interest rate at today’s rate, or lock-in
the rate.

M

MLS

Multiple Listing Service. An organization that distributes information on properties listed by MLS member brokers.

Mortgage

A legal document that pledges a property as security for payment of a debt. Where Mortgagee is The lender and Mortgagor is The borrower.

Mortgage Insurance

Insurance provided to lenders to protect against loss if a borrower defaults. It is generally required for loans with LTVs greater than 80%. It is also called ‘Private Mortgage Insurance (PMI).

P

PITI

This stands for Principal, Interest, Taxes and Insurance that are the parts of a monthly mortgage payment.

Point

One point is equal to 1% of the loan amount.

Principal

Amount of debt not including interest. The face value of a note or mortgage.

Property Profile

An informational fact sheet about a property on the market.

Purchase or Sale Agreement

A contract between a buyer and a seller to purchase real property. Often used to make the initial offer on a property.

S

Selling Agent

Another term used for a Realtor who represents the buyer in a transaction.

Survey

A drawing or a map, showing the legal boundaries of a property, its improvements, legal rights affecting the property and other physical features.

T

Title

The legal evidence of right to ownership of a property.

Title Insurance

Insurance to protect the lender and/or the borrower against losses arising from disputes over ownership of property.

Title Search

A review of the records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.

Truth-In-Lending Act

A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the APR and other charges

Transaction

A listing sold or the sale of real property.

V

VA

A type of loan, government-guaranteed financing available to military veterans.

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