I think we are all guilty of speaking in our own “jargon” when at work. For example; often times doctors will start talking to you about blood work results or medicines and it may seem as if they are speaking jibberish. This is true for all professions and real estate is no exception. I have selected a few terms that can be confusing or that I get questions about in an effort to help make the home buying process easier for you. If you have any questions about other terms, procedures, or practices in home buying don’t hesitate to ask us!
* Assumable Mortgage: A home mortgage that allows the buyer to take over the seller’s mortgage; that is, to step into the seller’s shoes, make mortgage payments, and comply with other terms of the existing loan. Most lenders require the borrower to qualify for the mortgage in order to assume the mortgage.
* Balloon Mortgage: A mortgage that is not fully paid off over the loan term (such as five, seven, or ten years), leaving a balance at the end. The borrower must either pay off the remaining mortgage or refinance the loan.
* Adjustable Rate Mortgage: A mortgage loan with an interest rate that fluctuates in accordance with a designated market indicator — such as the weekly average of one-year U.S. Treasury Bills — over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.
* Contingency: A provision in a contract stating that some or all of the terms of the contract will be altered or voided by the occurrence of a specific event, usually by specific dates leading up to the closing. For example, a contingency in your home purchase contract might state that, if the buyer does not approve the inspection report of the physical condition of the property, the buyer does not have to complete the purchase. Or the seller might include a contingency asking for proof that the buyer is financially able to close the deal or for closing to be held off until the seller successfully finds another house to buy
* Disclosure: The making known of a fact that had previously been hidden; a revelation. In many states, a home seller must disclose major physical defects in the house within his or her knowledge, such as a leaky roof or potential flooding problem; and, in all states, sellers must disclose the presence of lead-based paint hazards in buildings constructed before 1978.
* Earnest Money Deposit (EDM) : A partial payment (deposit) demonstrating commitment in a contractual relationship, and commonly made in real estate transactions at the time of making the purchase offer. The remainder of the payment is due on the closing date. The seller keeps the earnest money if the buyer fails to make timely payment in full (or if there is a similar breach of the agreement).
* Escrow: The holding of funds or documents by a neutral third party prior to closing your home sale.
* PITI: Abbreviation for the major expenses that make up a mortgage payment: principal (the amount borrowed), interest, (property) taxes, and (homeowners’) insurance.
* Common Area Assessments: In some areas they are called Homeowners Association Fees. They are charges paid to the Homeowners Association by the owners of the individual units in a condominium or planned unit development (PUD) and are generally used to maintain the property and common areas.