Thursday, September 12, 2013

Real Estate Talk

If you are planning on buying home, you may want to brush up on some basic terms that are often used by real estate agents, attorneys, and mortgage brokers. 

Here's a brief glossary of some commonly used terms you should know before jumping into the game:

Appraisal: An appraiser's assessment of a property's value. A home sale is contingent upon an appraisal for at least the amount of the loan the buyer wants to secure.

Closing costs: One-time costs associated with buying a home, disclosed before closing, but due at closing. The costs can include fees for an attorney, recording, inspections, appraisals, title service costs, even pre-paid homeowner's insurance and taxes.

Contingency:Contractual conditions that must be met before a home sale closes. They can protect the buyer or the seller and can include a satisfactory home inspection, secured financing, adequate appraisal, etc.

Earnest Money: A deposit of good faith money, typically included with the offer to buy a house. Earnest money can become part of the down payment.

Points:Sometimes referred to as "discount points" these costs reduce the interest rate and are paid at closing or up front when used. One point is one percent of the mortgage amount.

Pre-approval: An official document and the process by which a homebuyer obtains proof he or she has been approved for a mortgage, pending the home appraisal and other financial contingencies. During the process, the lender verifies the buyer's credit score, income, debts, employment and other factors that go into a mortgage applications. A pre-approval letter says the buyer has been approved for a certain mortgage, again pending contingencies.

 Title:A public records document that proves ownership of the property. A title also includes any claims against that ownership. During a home purchase, the buyer conducts a title search to verify the seller is the owner and if the title contains any judgments or liens against it.

HUD (Settlement Statement): The HUD-1 is a form used by the settlement agent (also called the closing agent) to itemize all charges imposed upon a borrower and seller for a real estate transaction. It gives each party a complete list of their incoming and outgoing funds.
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