Terms and Definitions
Real Estate Dictionary
Acceleration Clause – A clause in a deed or mortgage that allows the lender to request immediate full payment of debt upon a happening such as the sale of a property.
Acquisition Cost – The total cost including all fees to purchase a property.
Amortization - The repayment of a loan including accruing interest and principal over a specified period of time.
Appreciation - The increase in value of a property as a result of the shifting market conditions or economic instability.
Broker -
- An agent paid to bring two parties together for a transaction, like the sale of a property.
- A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
Closing Costs – Expenses that buyers and sellers incur when transferring ownership of property. Closing costs are separated into what are called "non-recurring closing costs" and "pre-paid items." Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan, such as recording fees, attorney fees, appraisal fees, and title insurance premiums. "Pre-paids" are items which recur over time, such as property taxes and homeowners insurance.
CMA (Comparative/Competitive Market Analysis) – A report that shows prices of homes comparable to your home that were recently sold, are currently on the market, or were previously on the market but weren’t sold. This gives you an idea of the market behavior in Sonoma County and its surrounding cities and provides a “ballpark” for a price that would be considered by your potential buyers.
Compound Interest – The interest paid on original principal amount, as well as the accrued and unpaid interest as the debt matures.
Depreciation - A decline in the value of property; the opposite of appreciation.
DOM (Days on the Market) – Used with CMA to determine period of time before date of sale or when the property is taken off the market.
Down Payment – The money due upfront for a property, paid by the buyer. It is the difference between the sale price and the possible loan amount.
Encumbrance - Anything that limits the fee simple title to a property, such as mortgages, leases, easements, or restrictions
Escrow -
- Third party account where items of value, money, or documents are deposited to be delivered upon the transaction’s completion.
- Period of time between depositing items of value, money, or documents with a neutral 3rd party and the completion of the transaction.
- Agent that works to close transaction.
Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.
Foreclosure - The process when a borrower cannot pay a loan, and in order to cover the mortgage debt, the home is put on sale to the public through a public auction.
Homeowner’s warranty – Insurance for homebuyers (usually paid for by the seller) that covers the costs of repairs to items in case they break down within the coverage period.
HUD median income – The median income for a family in a particular metropolitan statistical area, estimated by the Department of Housing and Urban Development (HUD).
Lease Option – The opportunity for the buyer to lease a home with an option to buy. Usually the rent will include an additional amount to put toward the down payment.
Lien - A form of encumbrance that makes specific property the security for the payment of a debt upon the sale of the property.
Loan - A sum of borrowed money (principal) that is generally repaid with interest.
Mortgage - A legal document that pledges a property to the lender as security for payment of a debt.
MLS (Multiple Listing Service) – An organization of realtors that collects and distributes information about homes currently on the market. This collection of listings is shared among realtors and their clients.
PITI: This stands for principal, interest, taxes and insurance. If you have an "impounded" loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.
Pre-Approval - Process where borrower completes all loan requirements by providing debt, income, and savings documentation to demonstrate to the seller that they would qualify for a certain loan amount.
Second Mortgage – A mortgage loan made for home improvements or to gain enough capital to make the down payment.
Simple Interest – Interest charged only on the principal amount of the loan
Title Insurance – A policy that insures the property owner should a claim against the property arises after the purchase is finalized.
Utilities - Services not included in monthly rent, including water, electric, gas, phone, and cable.
Valuation - the act of estimating the worth of a property by appraisal
Links to Real Estate Dictionaries:
http://www.stewart.com/section/home-buyers-and-sellers_real-estate-dictionary