Vocabulary every home buyer/seller should know!
Like any industry, real estate has its own language. Plenty of of acronyms, terms and jargon. Your Gainesville Realtor® may have used some words or terms you might not understand and wonder “what does that mean?”. So make sure to ASK! We Realtors® tend to talk, talk, talk. Below are some terms to help you translate some of the strange/new terms you have heard regarding real estate.
Think of this as a real estate vocabulary tip of the day in our GainesvilleRealEstateTalk blog!
Amortization: The distribution of payments into installments over time. The terms of the agreement will determine how much of each payment goes toward interest and how much goes toward paying down the principal.
A.R.M.: Abbreviation for Adjustable Rate Mortgage. An A.R.M. is a loan program with an interest rate that changes throughout the life of the loan, as opposed to a fixed rate mortgage. This means if interest rates rise, a house payment may increase.
Balloon: The whopper of a payment due at the end of some loans.
CC&Rs: The covenants, conditions and restrictions overseen by Homeowners Associations. Also known as HOA docs.
Comps: Short for comparable properties to the home you’re buying or selling, used by Realtors to help determine property value.
Contingency: A section of the purchase agreement that spells out certain conditions that must be met before the sale can proceed. For example, necessary repairs recommended by the home inspector, appraised values, loan approval, termite inspections.
Closing: The meeting between the buyer and seller where mortgage documents are signed and the deed is transferred.
Deed: The legal document that transfers ownership of the property. This document is recorded in public records at the clerk of the court.
Disclosures: Information about the home that a seller must provide to a buyer. The extent of disclosures varies by state. Normally here in Florida there is a seller disclosure form, lead based paint disclosure if home built before 1978, and home owner association disclosure.
Earnest Money: A deposit of money buyers pay to sellers to prove their genuine intent to purchase. If the buyer walks away through no fault of the seller, the seller may keep the earnest money.
Escrow: Don’t worry — it’s not what you eat if you’re on the losing end of a bidding war. An account held by an independent third party while the buyer and seller negotiate the contract. Funds for earnest money, property taxes and homeowners insurance may be held in escrow.
Equity: What’s left of the fair market value of a home after subtracting the amount the owner still owes on the mortgage. “Sweat equity” refers to the manual labor performed to maintain and improve the property over the years.
***** Is your head spinning from all the industry jargon?
Fannie Mae: The Federal National Mortgage Association, created during the Great Depression as part of the New Deal to encourage home ownership. This government-sponsored lender is one of the biggest mortgage providers in the country.
FICO: Abbreviation for the Fair Isaac Company, the former name of the company that provides the software used to calculate your credit rating. Lenders use your credit rating to determine the amount and conditions of your mortgage. Your FICO score is based on the amount you currently owe on your debts, your payment history, recently opened lines of credit, length of credit history and the types of credit you use.
Freddie Mac: The Federal Home Loan Mortgage Corporation.The FHLMC was created in 1970 to expand the secondary market for mortgages in the US. Along with Fannie Mae, Freddie Mac buys mortgages on the secondary market, pools them, and sells them as a mortgage-backed security to investors on the open market.
GFE: The Good Faith Estimate form gives you an idea of what your closing charges and loan terms will be if you are approved for the loan you are applying for.
Lien: A legal claim against a property that must be satisfied before the property may be sold. Common liens include tax liens filed by the government if you haven’t paid your taxes, judgment liens from losing a lawsuit or an unpaid attorney, and mechanic’s liens from unpaid contractors or repairmen.
Lock-In (Rate Lock): A lender’s promise to guarantee a borrower a certain interest rate and loan terms for a specified period of time.
MLS: Short for the Multiple Listing Service, a database of all properties for sale.
PITI: Stands for Principal, Interest, Taxes and Insurance. This is your monthly mortgage payment. The principal is the part of the payment that pays down the loan, the interest is the part of the payment that pays the lender for loaning you the money to buy the property, and the taxes and insurance are usually paid into an escrow account each month.
Settlement Statement: The standard document with the details of the sales transaction and the closing costs.
Short Sale: When a home is sold for less than the amount the current owner owes the mortgage company.
TRID & TILA RESPA: TRID is the TILA / RESPA Integrated Disclosure Rule. in the mortgage world would we make an acronym out of acronyms… so let’s break this down a little further. TILA is the Truth in Lending Act and RESPA is the Real Estate Settlement Procedures Act. The CFPB modified both rules in its TRID final ruling.Warranty Deed: The document that proves ownership of a property, publicly recorded in the county in which the property is located.
Walk-Through: This is the final inspection the buyer makes of the home before closing to make certain the conditions of the property match the contract.
Hopefully this vocabulary lesson helped you feel more comfortable in the world of real estate. No Test Required! 🙂