Elite Orlando Homes - Real Estate Glossary
Understanding Real Estate and Mortgage Terminology
Appraisal - An estimate of the value of a home, made by a professional appraiser.
Appraised Value - The dollar figure for a property's estimated fair market value.
Cash For Transaction - Enter the amount your want to use toward closing costs (discount points and fees).
Clear Title - A title that is marketable and is free of liens or disputed legal questions as to ownership.
Closing - The conclusion of a transaction. In real estate, closing includes the delivery of a deed, the signing of notes and security instruments, and the disbursement of funds necessary to the sale or loan transaction.
Closing Costs - Various expenses (over and above the price of the property) incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include items such as broker's commissions, discount points, origination fees, attorney's fees, taxes, title insurance premiums, escrow agent fees, and charges for obtaining appraisals, inspections and surveys.
Closing Statement - An accounting of funds given to both buyer and seller before real estate is sold. See HUD-1 settlement statement.
Commitment Letter - A formal notification from a lender stating that the borrower's loan has been conditionally approved and specifying the terms under which lender agrees make the loan.
Contingency - A condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.
Contract - An oral or written agreement to do or not do something.
Deed - The legal document conveying title to a property.
Down Payment - The part of the purchase price of a property that the buyer pays in cash.
Earnest Money Deposit (Earnest Money) - A deposit made by the potential home buyer to show that he or she is serious about buying the house.
Escrow - Can serve two purposes. 1)As a special third-party account set up by the lender in which a portion of your monthly payment funds are held to pay for taxes and insurance and other items. 2)Escrow is most commonly known as a third party who carries out the instructions of both the buyer and seller to handle the paperwork at the settlement of a real estate purchase.
Escrow (or Impound) Account - The account in which a loan servicer holds the borrower's escrow payments prior to paying property expenses, such as property taxes or homeowners insurance.
Escrow Disbursements - The use of escrow funds to pay real estate taxes, homeowners insurance, mortgage insurance, and other property expenses as they become due.
Escrow Payment - The portion of a borrower's monthly payment that is held by the loan servicer to pay for taxes, hazard homeowners insurance, mortgage insurance, lease payments, and other items as they become due. Known as "impounds" or "reserves" in some states.
Federal Housing Administration (FHA) - An agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and loan underwriting but does not lend money or plan or construct housing.
Homeowner's Insurance (Hazard Insurance) - Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
Home Inspection - A thorough inspection that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser. Contrast with appraisal.
Homeowners' Association - A nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements. See also master association.
Homeowner's Insurance - Insurance coverage that compensates for physical damage to a property from fire, wind, vandalism, or other hazards.
HUD-1 Settlement Statement - A document that provides an itemized listing of the funds that are payable at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. Each item on the statement is represented by a separate number within a standardized numbering system. The totals at the bottom of the HUD-1 statement define the seller's net proceeds and the buyer's net payment at closing. The blank form for the statement is published by the Department of Housing and Urban Development (HUD). The HUD-1 statement is also known as the "closing statement" or "settlement sheet."
Points (Loan Discount Points) - Points are prepaid interest on your mortgage. A one-time fee charged by the lender at the time of closing for originating a loan. Each point is 1% of the loan amount - that is, 2 points on a $100,000 mortgage would be $2,000.
Pre-Approval - A lender's conditional agreement to lend a specific amount on specific terms to a homebuyer. (subject to satisfactory appraisal and no change in financial condition). You can shop with assurance, because you'll know up-front how large a loan you could qualify for.
Pre-Paid Items (Prepaids) - Items required by lender to be paid at closing prior to the period they cover such as prorated property taxes, homeowners insurance and pre-paid interest.
Pre-Qualification - A preliminary analysis of a borrower's ability to afford the purchase of a home. An affordability analysis takes into consideration factors such as income, liabilities, and available funds, along with the type of home loan, the likely taxes and insurance for the home, and the estimated closing costs.
PUD (Planned Unit Development) - A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the individual PUD unit owners.
Purchase Agreement - A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
Right Of First Refusal - A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase.
Settlement - See closing.
Settlement Sheet - See HUD-1 settlement statement.
Survey - A drawing or map showing the precise legal boundaries of a property.
Title - A legal document evidencing a person's right to or ownership of a property.
Title Company - A company that specializes in examining and insuring titles to real estate.
Title Insurance - Insurance that protects the lender (lender's policy) or the buyer (owner's policy) against loss arising from disputes over ownership of a property.
Transaction Fee - A fee charged each time the borrower draws on the credit line.
Truth-in-Lending - A federal law that requires lenders to fully disclose, in writing, the terms and conditions of credit, such as a mortgage, including the annual percentage rate (APR) and other charges.