The Foundation For Your Future
Terms To Know
When getting ready to purchase a home and discussing your needs with an agent you may here terms that you may not understand or know what they can do for you. Below is a list of terms you may hear and can help you during the process of your purchase.
MLS - Multiple Listing Services. There may be several of these available in the area where you choose your agent. This is a service that Real Estate Professionals join to list and search for property. It is an organization that provides a service to it's members to provide information on properties that the members have for sell. It is not available to the general public.
CMA - Comparative Market Analysis. This is a service provided by a Real Estate Professional to their clients. A CMA is a report compiled of properties similar to the subject or property for sell that are currently listed for sell or have recently sold. This gives the client an idea of what the property should sell for or how much they should pay for a property. A CMA can be done for a seller on their listing or for a buyer on a home they plan to purchase. A CMA is not an appraisal and if comparable's can not be found that are similar to the clients home an appraisal may be a good idea to find out about the marketable value.
PITI - This acronym stands for principle, interest, taxes and insurance. Principle is This is the actual amount of your loan. A portion of the principal is usually paid off with each mortgage payment thereby gradually reducing the outstanding balance you owe and increasing your home equity (the portion of the home you own). The principal component of each payment is typically small in the first months, but increases during the life of the mortgage as the balance drops. Interest is the amount a lender charges you for borrowing the money to buy the home. It consists of a percentage of the outstanding principal. Initially, the largest part of your mortgage payment goes toward paying off the interest. As time goes by and you begin to pay off your mortgage, more of your monthly payment goes toward paying down the principal and less toward paying off the interest. Taxes are sometimes included in a homeowners mortgage payment. These are paid to the lender and the lender then distributes them to the different tax locations. Taxes can be a significant part of your total mortgage payment, and tax rates can vary significantly from area to area. Insurance is the fourth component of your payment. This is paid to your lender and distributed for your homeowners insurance to protect your home. Your lender may require you to pay PMI which is private mortgage insurance to protect the lender from default.
Earnest money - This is money that is given in good faith when an offer is accepted and goes under contract. This money is held in an escrow or trust account with a real estate firm or with an attorney until the property closes. The earnest money is credited to the purchase of the home at closing unless otherwise noted in the contract. It is typically a small percentage of the purchase price and can vary upon market conditions, type of real estate and other factors may also contribute into how much of an earnest money deposit is needed. This is negotiated by your agent with the listing or seller's agent.
POF - Proof of funds. In today's market seller's sometimes require a proof of funds or prequalification letter from your lender or bank. This gives them the reassurance that you are serious about purchasing a home and that you have taken the steps necessary to get qualified to purchase.
Prorating - This is a term used for certain items that the buyer and seller share a portion of responsibility toward the expense. These items include tax bills, some utility bills, HOA fees, occasionally special assessments , rental payments, and other fees depending on the purchase that you are making.
Closing Cost - The total of miscellaneous expenses paid by the buyer and seller when the transaction closes. These costs include the brokerage commission, mortgage-related fees, escrow or attorney's charges, recording fees, title
insurance, inspections and other fees that are associated with the purchase.
HOA - Home Owners Association. Organization that is established in some neighborhoods that may or may not require fees to be paid by the owners of property located in the neighborhood. Fees are for the maintenance ,upkeep, of common areas used by it's members and sometimes for utilities and other items.
Dual Agency - Dual agency is a term used when a Real Estate Agent is representing both buyer and seller. This happens when a buyer becomes interested in a property that is listed with the agents firm. For more information on dual agency please ask your agent to provide you with the Working With Real Estate Agents Brochure.
Contingency - Contingency is a provision in an agreement that requires a condition to be met before the contract can become legally binding. Some examples are inspection, appraisal and loan contingency.