Helpful Real Estate Terms

Pre-approved vs Pre-qualified

(Pre-approved) - A borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount with estimates made for interest rate, property taxes, insurance and others. Once a property is chosen, it must also meet the underwriting guidelines of the lender. It is best to get a loan pre-approval!

(Pre-qualified) - A loan officer's written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

Expert

A person who has a comprehensive and authoritative knowledge of or skill in a particular area. Source: lexico.com, powered by Oxford

We are The Affordable Housing Experts.

Credit Report

A report of an individual's credit history prepared by a credit bureau and used by a lender in determining a loan applicant's creditworthiness.

Fixed Rate Mortgage (FRM)

A mortgage loan where the interest rate remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or "float".

Adjustable Rate Mortgage (ARM) AKA “Balloon Mortgage”

A mortgage in which the interest rate will change. Therefore, a person's payment amount will change.

Debt-to-Income Ratio

This is a formula used by the Lender to weigh a borrower's amount of debt against their income for a mortgage loan.

Earnest Money Deposit

A deposit made by the potential home buyer to show that he or she is serious about buying the house. This can be any amount agreed to by the seller and the buyer. Upon closing, this deposit is returned to the buyer or applied to the buyer's purchase costs.

Real Estate Appraisal

An opinion of the value of real property as of a certain date that is supported by objective evidence, usually comparable recent sales of homes in the neighborhood. Only a certified/licensed appraiser can give this opinion of value.

Comparative Market Analysis (CMA)

An estimate of the probable selling price of a property. The price is typically expressed as a range rather than a single quantity. This estimate is usually given by a real estate agent or broker.

Automated Valuation Model (AVM)

A service or software that provides property valuations, often based on a numerical model. Note: These valuations do not always include the many property and neighborhood factors that helps to determine the probable selling price of a property.

Home Inspection

An inspection by a person that evaluates the structural and mechanical condition of a property.

Note: Some states require, or are in the process of requiring, a license.

Homeowner’s Insurance

An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

Home Warranty Plan

Typically a one-year service agreement that covers the repair or replacement of many major home system components and appliances that can break down over time due to normal wear and tear. Things that may be covered include your home's electrical, plumbing, heating and air conditioning systems, as well as many other home appliances.

Note: Before you select a home warranty plan, be sure to slowly and carefully read its “Terms of Service Agreement”.

Closing Costs

Non-recurring costs are any items which are paid jut once as a result of buyer the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowner's insurance. A lender gives a Good Faith Estimate of such costs to the borrower within three days of receiving a home loan application. Often, a real estate agent can negotiate with the seller to pay these costs for the buyer.

Escrow Account/Payment

One you close your purchase transaction, you have an escrow account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if your were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner's insurance when they come due. The lender pays them with your money instead of you paying for them yourself.

Escrow Analysis

Once each year your lender will perform an “escrow analysis” to make sure they are collecting the correct amount of money for the anticipated expenditures.

Equity

This is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens. Ex: $200,000 market value – $125,000 mortgage = $75,000 equity! Strive to protect your equity by taking care of your property and staying away from additional loans.