Tuesday, December 04, 2007

Common Real Estate Terms

Adjustable rate mortgage: An ARM is a mortgage rate that changes over time as the interest rate changes.

Escrow: A third party wills act as a stakeholder for both buyer and seller according to both parties' instructions. The third party will hold responsibility for handling all paperwork and distribution of funds.

Fixed-Rate Mortgage: Often made for 15 or 30 years, this type of mortgage is based on payments that stay them same throughout the entire term of the loan.

Inspection: A third-party report on the property's overall condition prior to a sale. A buyer may attend the inspection, and demand repairs for any problems reported.

LTV: A loan to value ratio is a figure that tells the lender what percentage of the purchase price the loan will be.

PITI: Stands for principal, interest, taxes and insurance. This is an owner's typical monthly payment.

Point: An amount that is equal to 1 percent of the principal amount of the investment or loan You can either pay points to get your lender to offer you a lower interest rate, or you can refuse to pay and keep the initial interest rate

Purchase Contract: A document wherein the homebuyer will set the price and conditions under which he or she will buy the property and the seller agrees. This is also called a sales contract or agreement for sale.

Title Insurance: Guarantees a return if your investment if a title problem arises after you've taken possession. There are two types of title insurance: 1) Fee title policy — insures owner's title. 2) Mortgage title policy insures the lender for the mortgaged amount. These policies will fluctuate depending on the mortgage amount.

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