Terminology

AGENCY
The legal relationship between a Seller and a Broker/Agent wherein the Broker/Agent has been engaged to sell a property OR the relationship between a Buyer and a Broker/Agent where the Broker/Agent has been engaged by the Buyer to act in their sole interest in purchasing a property.

AMORTIZATION
The portion of the mortgage payment which directly reduces the balance of the loan.

APPRAISAL
The estimation of a home’s market value by a licensed appraiser based on comparable recent sales of homes in the neighborhood. A loan underwriter compares this appraisal price to the agreed-upon purchase price to ensure that the value of the home is equal to or greater than the purchase price. Loan financing may fail if the home appraises at a price less than what the buyer and seller agreed upon. If this happens, the buyer may want to re-negotiate with the sellers to determine a lower purchase price.

ASSESSED VALUE
A county tax assessor’s value placed on the property, which is one of the factors in arriving at your annual real estate tax bill (the other factor is the millage rate).

CLOSING COSTS
Various expenses paid by the Buyer and/or Seller which directly pertain to the purchase or sale of real estate (i.e. commissions, title insurance, appraisals, inspections, etc.).

CONVENTIONAL MORTGAGE
A mortgage that has a fixed interest rate over the life of the loan.

EARNEST MONEY
A deposit made by the Buyer on a particular property and held by an Escrow Agent.

FHA MORTGAGE
A mortgage insured by the Federal Housing Administration.

LIEN
A legal claim against the property.

LISTING CONTRACT
A legal agreement between a Seller and Broker authorizing the Broker to market the property at a predetermined price for a specific period of time.

MARKET VALUE
The highest price that a ready, willing and able Buyer will pay for a property and the lowest price that a Seller will accept – with neither party being under duress to buy or to sell.

MORTGAGE PAYMENT
A periodic payment made by the borrower to the lender that normally includes interest for the period and a predetermined amount of amortization of the loan.

PITI
The basic components of a mortgage payment (principle, interest, taxes and insurance).

POINTS
A percentage of the loan amount paid by the Buyer to the lender.

PRIVATE MORTGAGE INSURANCE (PMI)
For conventional loans with less than 20% down – this charge purchases insurance from a private company that will protect the lender in the event of default.

REAL ESTATE SETTLEMENT ACT (RESPA)
A Federal law that requires lenders to provide borrowers with a written estimate of closing costs.

TITLE INSURANCE
Protection for lenders and Buyers against financial loss resulting from legal defects in the title of the property.

TITLE SEARCH
Research of the title records to ascertain any defects, encumbrances and ownership history of the property.

VA MORTGAGE
A mortgage for eligible veterans that is guaranteed by the Veterans Administration.