GLOSSARY
Appraisal – the estimation of a home’s current market value. A licensed appraiser completes this estimation, which is calculated by comparing the recent sales of homes in the area as to the property that is being appraised. This is required by mortgage lenders to be sure that the money they are lending to a new homeowner or a current homeowner is a fair amount for the home. The lenders want to be sure that the buyers are not overpaying for the property. This is to protect the lender. The appraisal cost is typically paid for by the buyer.
Cashier’s Check – a type of official check that banks issue and sign. A check whose payment is guaranteed by a bank.
Conventional Loan – a mortgage loan not backed by a government agency. Down payment requirements are as low as 3%, and some lenders have special programs that offer up to 100% financing. However, if you don’t put down 20% or more, the lender typically requires you to pay Private Mortgage Insurance (PMI). Most lenders require a 5% down payment for conventional loans.
Closing Costs – Closing costs are fees and expenses you pay when you close on your house, beyond the down payment. These costs can run 3 to 5 percent of the loan amount and may include title insurance, attorney fees, appraisals, taxes and more.
Deed – the physical document that conveys the title to the new owner when you sell your home. The property deed will include a description of the property and identify the grantor (seller) and grantee (buyer) for a particular transaction. Both the seller and the buyer will need to sign the deed to seal the real estate deal.
Earnest Deposit – a deposit made to a seller that represents a buyer’s good faith to buy a home. The earnest money will be reimbursed to you at settlement in the form of a deduction of your total closing costs; so you aren’t paying anything “extra” when you deposit earnest money. If your closing was not to occur due to you missing a specific deadline, then you can lose your earnest money.
Thus, your earnest money is refundable; however, there are a few instances where your earnest money could be lost if a buyer does meet certain contractual obligations.
If your closing was not to occur due to you missing a specific deadline, then you can lose your earnest money. However, certain contingencies allow you to withdraw from your contract without losing your refund, and those are:
• A home inspection contingency – If there are serious structural or repair issues.
• Financing contingency – Your mortgage financing falls through.
• Appraisal contingency – The home does not appraise for the purchase price.
• Title contingency – A title search reveals problems with the property’s title.
• Home sale contingency – If you can’t find a buyer for your current home.
Equity – the difference between the market value of your home and the amount you owe the lender who holds the mortgage.
Escrow – when a neutral third party holds on to funds during a transaction.
FHA Loan – a mortgage that’s insured by the Federal Housing Administration (FHA), which requires a minimum of 3.5% down.
Homeowner’s Association (HOA) – an organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and its residents. Those who purchase property within an HOA’s jurisdiction automatically become members and are required to pay dues, known as HOA fees.
Homeowner’s Insurance – a form of property insurance that covers losses and damages to an individual’s residence, along with furnishings and other assets in the home.
Home Inspection – a report on the overall condition of a home. A thorough home inspection gives the buyer details about a home’s structure, foundation, electrical, plumbing, and more. A home inspector checks the areas of a home beyond what a buyer can see on the surface.
Home Warranty – an annual service contract that covers the cost to repair or replace parts of home appliances and systems that break down over time.
Private Mortgage Insurance (PMI) – what borrowers have to pay when they take out a mortgage from a commercial lender and pay a down payment of 20 percent or less. PMI insures the mortgage for the lender in the event that the borrower defaults.
Seller Assist (Seller Concession) – it is an optional, negotiated, buyer requested contribution from the seller toward the buyer settlement (closing) costs.
For Conventional Loans:
• If the down payment is less than 10 percent, the seller may contribute up to 3 percent of the purchase price.
• If the down payment is 10 percent or greater the seller may contribute up to 6 percent of the purchase price.
For Federal Housing Administration (FHA) Loans:
• Sellers can contribute up to 6 percent of the sale price. Buyers must put down at least 3.5 percent to qualify for an FHA backed loan.
Seller Disclosure – a document provided by a home seller to a home buyer that outlines known issues within a property and other historical details of the property.
Title – legal ownership rights to a home.
Title Insurance – a policy designed to protect an owner from covered title defects that existed prior to the issue date of your policy. If a valid claim is filed, your Title Insurance Owner’s Policy, subject to its terms and conditions, will cover financial loss up to the face amount of your policy.
Title Search – an examination of public records to determine and confirm a property’s legal ownership, and find out what claims or liens are on the property.
USDA Loan – a zero down payment mortgage loan for eligible rural and suburban homebuyers. This eligibility of this loan is based on the location of the property of interest.