Real Estate Vocabulary Flashcards
What is Acceleration Clause
The borrower will have to repay all outstanding loans to the lender if the specific requirements are not met
Active Contingent
The offer is contingent upon the buyer being able to meet certain conditions before the sale be finalized
e.g approval of mortgage, buyer being able to sell
Active under Contract
Sometimes seller will accept an offer for the home with. contingencies but at the same time would like the house to be active
Addendum
If the buyer wants to change the contract, they can add an addendum outlining the
Regardless of what is added on the major feature of the contract should not be altered. Help from an Estate lawyer is highly recommended
ARM
The interest rate changes frequently. Monthly payment on ARM usually increase with time
Adjustment Date
The date your mortgage starts to accrue interest, even though you have not made single payment. It falls first day of month after the lender has advanced the mortgage funds
Amortization
Schedule and duration of your mortgage payments that are spread over time. It is usually 15-30 years
APR
The total amount of interest charged on the loan annually
Appraisal
Independent estimate of the value of home
Appreciation
Amount of house value increases over time.
future home value= Present home value x (1+interest rate) time in years?
Assessed Value
When an owner decides to sell a home, an assessment is usually done to determine how much tax he or she will owe on the property. The assessment is done by assessor who calculates the value of the house by comparing prices with other similar homes
Assignment
When a seller of a real estate property signs over the obligations and rights of a home to buyer before official closing
assumable mortgage
buyer has no need to take out a new personal mortgage
Blind offer
buyer may make an offer on a property that has not been seen. it is risky does work
Bridge Loan
owner will take short term loans against his property to finance the purchase of other real estate property
buydown
property seller will make payments to lender it will reduce monthly payments and
call option
This is legal contract that gives one party the right to sell and the other to buy property sometime in the future
Cash out refinance
Also referred to as cash-out refi. is when a homeowner refinances the mortgage for more than it’s value. Buyer needs to have 20% equity
Certificate of eligibility
When applying for a VA load, the lender will ask the veteran for proof that he or she has met the minimum service requirements for a VA loan.
Certificate of reasonable value
This certificate is issued by dept of VA. Any veteran who applies for a loan needs to have this certificate. The CRV helps establish the maximum value of the property so that the size of the loan can be determined
Chain of titles
It documents the past owners of the property, starting with the very first owner
Clear Title
Good Title or Free title. Only reveals that there is no question of legal ownership of the property, including bad surveys or building code violations.
Closing
End stage of a real estate deal. On the closing date, the property and title are then legally transferred to the buyer.
Closing Cost
Usually 2% to 5% of the total price of the home. Fees charged by the lawyer, lender, insurance, title, HOA, real estate agent and other related companies. Average buyer pays $3700 in closing costs. This fee is paid on the day of closing
Commission
Real estate agents receives 5 to 6% bases on the home sale price. This is usually divided between buyer and seller agents. Money is paid at closing
Contingent vs pending
A contingent offer can still be seen under active listings, whereas a pending offer will no longer be on the listings
covenants, conditions and restrictions (CC&Rs)
These are the rules on property that are run by the HOA, developer etc
Conventional Mortgage
A loan that is usually not insured or guaranteed by the federal government. Borrowers make large payments and not required to have mortgage insurance
Conventional sale
In general, a conventional sale is when the property has no mortgage remaining, or the owner owes very little mortgage.
Convertible ARM
Convertible adjustable rate mortgagees permit the buyer to take advantage of low interest rates by obtaining a loan at a “teasers’ interest rates. While the monthly mortgage payments remain the same, the interest rates, the interest rates do fluctuate every six months. However, the borrower does have the choice of converting the ARM to a fixed rate mortgage, but this switch also comes with fees.
Cost of funds Index (COFI)
This is the average of all the regional interest expenses acquired by the lender or the financial institution. The COFI is then utilized to determine the variable rate loans
DTI
Debt to Income ratio is a number utilized by the lenders and financial institutions to determine affordability by the buyer. DTI is calculated by total debt expenses plus the monthly housing payment divided by the gross monthly income times 100.
Lenders prefer to have buyers spend less than 28% of total income on housing and less than 36% on debt payments.
Deed
It is a legally written document that transfers the title from the seller to the buyer. The deed also goes by another name: “Vehicle of the property interest transder”
Deed in lieu of foreclosure
This is a document that transfers the title from homeowner to the lender/bank.
Default
Is said to occur when an owner defaults on the loan, meaning the loan agreed to be in the contract is not paid. Default is said to occur when the homeowner has not made a loan payment in 90 days or more
Delinquency
Is said to occur when the owner has not made a scheduled payment. If the payment is delayed for more than 30 days, the lender may initiate collections or even foreclosure proceedings.
Discount Points
Mortgage points, these are the feeds that home buyers may sometimes pay to the bank during closing. In return, the owner gets low-interest rates which can significantly reduce the monthly mortgage payments.
Down payment
Sum of money that a homebuyer pays at the time of closing. Most mortgages required a 20% down payment. A confirming loan may accept a 5% and FHA loan will accept a 3.5% down payments
Due Diligence
This is the time period available for the buyer to examine the property.
Due on sale
Acceleration Clause It is a clause in the contract that protects lenders against below market interest rates. This provision in the contract requires the seller of real estate to repay the full mortgage when the property is sold in the future.
Earnest money deposit
Small deposit that a homebuyer makes when entering into a contract with the seller. The deposit is 1-5%
Deposit is deducted from the closing and total down payment costs. This money is held in ian escrow
Easement
Givers a person the legal right to use another individuals’ property or land while still retaining the title in the sam owner
Eminent domain
It gives a person the legal right to use another individual’s property or land while still retaining title in the name of the owner
Encroachment
Permits the govt the right to use or occupy a private property for public purposes. It is legal only when the govt compensates the property owner for the land or the property
Encumbrance
In real estate it refers any claim against the property that limits its transfers or use, including an easement or property tax lien
Equal Credit Opportunity ACT (ECOA)
Enacted in 1974. Unlawful for lenders and creditors to discriminate against applicants based on color, religion, sex, martial status, national origin or age just because they were recipients of public assistance.
Equity
Equity=current market value - mortgage balance
Escrow
Involves third party that will hold the funds during transaction. When the transaction is complete, thr third party will release the funds to the seller
Examination of title
Allows one to review all the public records linked to the property.
Exclusive Listing
This is a tactic sometimes utilized to encourage the agent to sell the property fast usually within a specified time.
Fair Credit Reporting Act (FCRA)
Passed in 1970 to ensure accuracy, fairness and privacy of personal data contained in the data bank by the credit reporting agencies
Fair Market Value
Property’s value in an open and free market under the condition that the seller and buyer are aware of the value
Fee Simple
In simple terms, it means that the owner has indefinite rights to the property and that the rights may inherited or transferred when the owner wants. The fee simple is most frequently associated with condominiums, single family homes and town homes that are purchased under some conditions, covenants and restrictions.
FHA Mortgage
FHA not only insures the loans but offers several benefits, including a low down payment (3.5% of the total home value), Easy credit qualifying, and low closing costs. Lenders feel confident about giving FHA loands
Fixed rate mortgage
This is common type of loan that comes with fixed rate
Foreclosure
When homeowner does not make the regular monthly payments for more than 3 months.
Hard Money Loan
These loans financially based on property and not on the credit score. Large downpayments and high interest rates and have short schedule. These loans are often small
HECM home equity conversion mortgage
it assists homeowners in with drawing equity on their home via a line of credit, a fixed monthly
HELOC HOME EQUITY LINE OF CREDIT
it provides owners with a revolving credit line that cab used to pay for large expenses
inspection contingency
allows the buyer to do inspectio
Judicial Foreclosure
It requires that all foreclosed home first go through the legal system to confirm owner has defaulted before the home can be placed before auction
Jumbo loan
loan amt that exceeds the cap limit set by govt agencies like fannie mae and freddie mac
loan is manually written
Lease option
offers people who rent an option to own real estate.
Lien
A lien can prevent the owner selling the property until debt is resolved
Life Cap
When a buyer obtains a mortgage on an adjustable rate, there is cap on the maximum amount of interest rate over the lifetime of the loan. Absolute Interest rate, or interest rate ceiling
Loan Contingency
An Addendum or a clause in the contract that permits the buyer to back out of the deal and get the deposit back in case he or she is unable to secure the loan. There is usually a time period for the loan contingency clause to be valid
Loan Origination
Buyer submits an application for a loan from a private lender or financial institution
Fee is 0.5 to 1%
Loan Servicing
Describes the admin aspects of maintaining the loan from time the loan was given to the time when it is fully paid. The loan servicing program includes the keeping records of all payments, and balances. Sending monthly borrower statements, paying taxes and insurance
LTV
Loan Balance divided by the value of the home * 100
It reflects how much the owner has borrowed from a lender as a percentage of the appraised value of the home. The higher the LTV ratio, the greater the risk
Lock in period
The time period during which the borrower is unable to repay the loan in full without facing monetary penalty by the lender
Mortgage Broker
An individual who often acts as middleman between the borrower and the lending institutions. The broker compares mortgages from different lenders and tries to give the borrower the best deal in town
Mortgage Insurance
When a borrower purchases a home with value less than 20% of the down payment or is the recipient of a USDA and FHA loan, the individual will have to purchase mortgage insurance.
Mortgage pre approval letter
When applying for a loan, it is important to get a pre approval letter from the lender. This letter usually reveals the type of loan, terms, loan amt the buyer has qualified for. Lender checks credit history, cash on hand, debt to income ratio.
MLS
collection of 700 regional databases
NHD
Natural hazards disclosure state required report that discloses if the property is located in a location where there is higher risk of natural hazards or disasters. Fee paid by the seller.
No cost mortgage
Type of refinancing where the lender pays the loan settlement costs for the borrower. In exchange the borrower will have a loan with higher interest rates. In turn, the mortgage lender will sell the loan to a secondary market for a much higher price due to the high interest rate.
Note rate
This is the interest rate documented on the mortgage document. It is also referred as face interest rate or nominal rate.
Original Principal Balance
This is the amount the buyer owes on the mortgage before even making the first payment
Origination Fee
The cost of processing the loan application.
Per Diem
These are the fees that are charged by the day if the loan completion is not approved on the scheduled day. On closing the lender will demand this payment.
PITI
Principal
Interest
Taxes
Insurance
PITI costs are calculated and compared to the borrower’s monthly gross income prior to approving a loan.
In general, the borrower’s PITI costs should be less than 28% of their gross monthly income
PUD
Planned Unit Development A housing complex made up of town homes, single family residences, condominiums as well as commercial units.
It may offer common areas and amenities that are owned by HOA.
Pre approval
Lender will do a credit check, verify all information, do the debt to income ration and approve the buyer for a specified amount of loan for up to 90 days.
It is more complete than a pre-qualified letter
Pre-qualification
It is slightly different from pre-approval. It just gives a rough estimate of how much the potential buyer can afford to buy a home. Getting pre-qualified is a simple matter based solely on what the buyer tells the lender. It is not based on verified information or proof
Prime Interest Rate
This is generally a favored interest rate that is given to the lender’s loyal and reliable customers. It is usually the best available loan rate that is usually three points above the federal fund rate. The rate which banks charge each other for overnight loans.
Negative Amortization
Amortization is the process of paying off the loan with regular payments so that each month the amount of the loan decreases.
Negative occurs when you pay less than the scheduled monthly payments and the amount you owe tends to increase.
Quitclaim deed
Document that transfers ownership of the home from one person to another individual.
Mortgage Banker
Who works for a financial institutions or private lender to provide funds to borrower.
The mortgage banker is only able to obtain funds from a specific institution and is also responsible for the mortgage process including overseeing the application, evaluating the property and performing credit check on the borrower
RESPA
Real estate Settlement Procedures Act. It requires lenders to provide the disclosures to borrowers of all real estate transactions, consumer protection laws and settlement services. The key goal of RESPA are to regulate the costs of settlements, limit the user of escrow accounts and ban practices that involve kick backs
Right of ingress or egress.
The right to ingress means that the person has the right to enter a property, and right to egress means that person has the legal right to exit the property. These terms are usually used in an easement or rental scenario where a tenant or individual has been granted access to a private road, shared drive way.
Right of surviorship
This is process used when there is joint ownership of tenancy or a property. It ensures that the surviving owner will automatically receive the deceased owner’s share of the property and will now become the sole property owner.
Sale-leaseback
This occurs when the buyer closes on a property and then decided to lease the tenancy back to the seller. When the seller is unable to move out of the property after the closing date. Buyer becomes a temporary landlord and will charge the seller a rental fee for every day he or she remains in the home
Transfer Tax
This is transaction fee for the transfer of a property’t title. The transfer tax is imposed by the local county and state where the transaction takes place. The fee based on the property’s classification and value. In most cases, seller will pay the real estate transfer tax unless it is stated otherwise in the contract.
