If you are new to the Home Buying scene you may be a bit confused about the words your agent is using. Not to worry, it’s normal and we are here to help! Below is our home buying terminology 101 to help you navigate the world of real estate just like your pro!
A document that is added to a real estate contract or purchase agreement changing or adding terms to the original terms agreed upon.
The repayment schedule of a loan, including principal payments (the original amount borrowed) and interest. In a table format, an amortization schedule displays the amount of principal and interest included with each payment, along with the remaining loan balance.
Annual Percentage Rate (APR)
The interest rate along with other fees that you can expect to pay when securing a mortgage loan.
An approximation of a home’s current value based on a range of factors such as the price of similar properties in the area.
The increase in a property’s value over time
The value that the parish’s assessor determines for a property for tax purposes
In Louisiana, the Broker takes on all legal responsibility for real estate transactions done either by himself/herself or a real estate agent who works for him.
The final step of a real estate transaction when the property is transferred from the seller to the purchaser
The costs and fees that come along with the purchase of a property. These costs include attorney fees, mortgage origination fees, pre-paids (Insurance), etc.
This is the percentage your agent gets paid. The seller customarily pays the real estate commission that takes care of paying the listing and buyer agents.
This is a short-term loan that covers the cost of building a property. When the home is complete, the closing will move the construction loan to a permanent loan.
This type of loan is not backed by a governmental agency like Federal Housing Administration (FHA). The conventional loan is ideal for borrowers with solid credit.
The legal document that is used to convey ownership to the titleholders.
A cash portion of the payment for a property due at the settlement; many conventional loans require a down payment of 5 percent, 10 percent, or 20 percent, while FHA loans require 3.5 percent; some VA loans are available with zero down payment.
The amount of the property owned after all liabilities are subtracted from the market value of the property.
An account held by the lender that includes homeowner payments for taxes and homeowners’ insurance until those bills are due.
Fair Market Value
The price of an asset when both buyer and seller have practical knowledge of the asset and are willing and not pressured to trade.
Government agency that provides lenders insurance on low down payment loans so borrowers have easier access to homeownership.
A conventional loan with a pre-determined (or “locked-in”) interest rate for the duration of the loan repayment period. They are traditionally 30 years in length but can also be issued for 15 years or 10 years.
A thorough professional examination (at the buyer’s expense) that evaluates the structural and mechanical condition of a property (plumbing, foundation, roof, electrical, HVAC systems, etc.). If the inspector identifies issues that may be expensive to remedy, these can be revisited with the seller before proceeding with the sale. This highly recommended step is a common contingency clause in real estate sales contracts.
An association to which homeowners are required to belong if they own a home within the association’s boundaries; members must pay dues and follow the association’s rules.
Insurance that protects homeowners and lenders against financial loss from fire or other damages.
A program that covers plumbing, electrical and mechanical systems in the home for a limited time; often paid for by sellers to give buyers extra protection during their first year of ownership on existing homes.
A mortgage lender is a financial institution or mortgage bank that offers and underwrites home loans. Lenders have specific borrowing guidelines to verify your creditworthiness and ability to repay a loan. They set the terms, interest rate, repayment schedule, and other key aspects of your mortgage.
A legal obligation attached to a property that uses that property as collateral for a debt. The seller must pay the lien before the home can be sold unless the buyer is willing to pay the lien in order to buy the house.
Insurance that protects the lender against loss if the borrower defaults on the loan. FHA loans require both upfront and annual mortgage insurance; conventional loans require private mortgage insurance for borrowers with less than 20 percent home equity.
A lender’s written guarantee to grant a loan up to a specified amount (subject to receiving full documentation). Pre-approval for a loan can strengthen a buyer’s negotiating position with a seller.
The balance of a loan without interest.
Property Disclosure Document
Property disclosure documents inform buyers of existing defects to the home and protect sellers from liability for issues they let buyers know about before the sale is finalized.
This type of insurance is acquired to protect against any unknown liens or debts placed against the property. Before issuing title insurance, public records are searched to ensure that the current owner has legal rights to the title and the legal ability to sell the home and that no liens are held against the property.
A tax, charged by the parish government when a property is transferred. The tax is part of the closing costs paid at settlement.
When a home is active under contract, it means that a buyer has made an offer on the house and the seller has accepted, but the sale is not yet final. This is often interchanged with the word Pending.
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