An evaluation required by the lender to judge the fair market value & basic structural integrity of a home. Lenders will loan against the lower of the appraised value or the purchase price.
Annual Percentage Rate
The total cost of borrowing stated as a rate that includes the loan interest rate plus loan fees & charges.
Adjustable Rate Mortgage
A mortgage where the interest rate changes periodically in response to changes in an index.
A fee paid at closing to the lender to reduce the interest rate of the loan. There are both temporary buydowns – reduce the interest for 1-3 years, & permanent buydowns – reduce the interest rate for the length of the mortgage.
Expenses in addition to the purchase price of the house, related to the transfer of property and securing of financing.
When you see the word contingent on the purchase & sale agreement, this means that the sale of the property is dependent on certain steps being completed before the contract is locked in.
Any loan that is not insured & backed by the federal government.
The document that transfers ownership of the property.
A paid-up-front interest percentage on a borrower’s mortgage that lowers the amount of interest on all subsequent payments. Each “point” represents roughly 1% of the total loan amount.
The amount of your down payment can vary depending on the type of loan you are applying for. Typically, an FHA loan requires at least a 3.5% down payment, while a conventional loan requires 5%. Veteran's who qualify for the VA loan are exempt from providing a down payment. Remember, if you put down less than 20% as your down payment, be prepared to pay an extra Private Mortgage Insurance (PMI) percentage on your loan until you build up to 20% equity.
Earnest Money Deposit
The deposit made by a potential buyer to assure the seller that a serious offer is being made. Earnest money is held in a trust account & applied toward the down payment.
The difference between the house’s fair market value (the most probable price which a property should bring in during a competitive & open market), & the amount outstanding on the mortgage.
An escrow company is hired as a neutral third party to handle all of the funds & documents involved in the transfer of property.
Federal Housing Administration (FHA)
A federal agency that insures lenders against possible default by a borrower. The FHA was created by the government to regulate the mortgage industry, as well as standardize good quality housing practices. An FHA loan is designed to allow more borrowers with limited down payments access to homeownership. Maximum FHA loan amounts are relatively low and vary according to the cost of housing within a particular region.
The legal process by which an owner’s right to a property is terminated, usually due to default. Typically involves a forced sale of the property at a public auction, with the proceeds being applied to the mortgage debt.
It is critical that you hire a professional inspector to go through & evaluate the condition of the home before you close the deal. This can be a negotiating tool if there are major defects discovered during the inspection.
Listing Agent vs. Selling Agent
The Listing agent represents the seller in a transaction. They market the property for sale & negotiate on behalf of the seller. The Selling agent (a.k.a. Buyers’ Agent) fully represents the buyer by researching & showing homes, then negotiating on behalf of the buyer during a transaction.
Loan Origination Fee
The amount charged by the lender for making & preparing the loan.
Northwest Multiple Listing Service (NWMLS)
The NWMLS provides the most comprehensive & all-inclusive residential real estate database in our region, which gives agents the best tools to help their clients in their real estate transactions. Almost all Puget Sound real estate companies & their agents are members, which is the main reason why the NWMLS works so well. The NWMLS filters all the available listings out to local company websites. Therefore, every website offers the same information.
PITI (Principal, Interest, Taxes & Insurance)
The total monthly payment due on a mortgage.
PMI (Private Mortgage Insurance)
Insurance to protect the lender against default by the borrower. Usually only required when the down payment is less than 20% of the purchase price.
Pre-qualifying vs. Pre-approaval
Pre-qualifying: conversation with a lender about your income, job status, & expenses.
Pre-approval: verifies all the information you provided in pre-qualification through documentation, & initiates the house hunt.
Purchase & Sale Agreement
This is the document used to represent & make the written offer to the seller. Mutual acceptance between the buyer & seller occurs once the terms of the purchase & sale are agreed upon.
REO (Real Estate Owned)
Property which is in the possession of a lender as a result of foreclosure or forfeiture.
Seller Disclosure Form 17
This form allows for the seller to disclose any information about the condition of the property to any potential buyers. If a Form 17 is required, the seller must divulge any known defects in the home.
Most short sales occur when a borrower has defaulted on their loan, but has not reached the point of foreclosure. The borrower has an opportunity to sell the property for less than the mortgage amount due. In order for the sale to close, the lender must approve the sale price & forgive the deficiency. This is why these offers are “subject to lender approval.” Even though this can be very attractive for potential buyers, there are many glitches & drawbacks to offering on a short sale property. It’s very important that you talk with a real estate professional to understand the full details of a short sale property.
Protection for the buyer & the lender against any errors or encumbrances (a non-possessory interest in the property) in the property title.
A loan made to a qualified veteran of the U.S. military. It carries with it a government guarantee against default. A VA loan can be made with a zero down payment.