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GLOSSERY & TERMS

HOMEBUYER'S GLOSSARY

EXCLUSIVE RIGHT TO SELL LISTING - A written agreement between owner and agent giving agent the right to sell a property and collect a fee for a set term.

FAIR MARKET VALUE - The price at which a willing seller would sell and a willing a buyer would buy, neither being under abnormal pressure.

LOAN ORIGINATION FEE - Normally 1% of the loan amount, charged by the lender to the buyer.

MORTGAGE - A legal document that provides security for repayment of a promissory note.

MORTGAGEE'S TITLE POLICY - Required by lenders to ensure that the lender has a valid lien.  It does not protect the buyer.  Also required for 2nd mortgages.

OWNER'S TITLE POLICY - Insures the buyer against loss due to any defect of the title not excepted to or excluded from the policy.

POINTS - Paid by the buyer or seller.  One point is equal to one percent of the loan amount.

PRINCIPAL - The employer of an agent in an agency relationship. 

RECORDING FEE - Charged by the County Recorder to record documents in the public records.  Charges are based on number of pages recorded.

SEPTIC INSPECTION - The septic system must have certificate by the city or county Health Department.

SURVEY - Survey of property required by lender; shows a lot size, easements, andy encroachments, locations of improvements, etc...

TAX SERVICE FEE - Required by the lender for collection and disbursement of tax escrow by a servicing company.

TERMITE INSPECTION - Required by lender to show property free and clear of active termites.

TIME IS OF THE ESSENCE - Demands punctual performance in a binding contract.

TITLE POLICY - Insurance policy on the ownership of real property, against defects in title.

TITLE - In dealing with Real Property, title means ownership.

UNDERWRITING FEE - Charged by a lender to underwrite the loan.

VA FUNDING FEE - Veteran's Administration charge for originating a VA loan.

WAREHOUSE FEE - Charged by the lender to hold the loan locally before selling it in the secondary mortgage market to an investor.

ZONING - Act of city authorities specifying type of use for which property may be used.

HOMESELLER'S GLOSSARY

AGENCY  - A legal relationship in which someone (principal) hires someone else (agent) to represent them to a third party. 

APPLICATION FEE - A fee to cover some of the charges of the loan process. 

APPRAISAL FEE - A fee charged by the lender for an appraisal. 

ASSESSED VALUE - The value placed on property by the County Assessor District as a basis for taxation. 

BALLON PAYMENT - An instance in which the final installment payment on a note is greater than the preceding payments, and pays the note in full. 

OWNER'S TITLE POLICY - Insures the buyer against loss due to any defect of the title not excepted to or excluded from the policy.

CHAIN OF TITLE - A history of conveyances and encumbrances affecting the title of real property. 

CONVENTIONAL MORTGAGE - A mortgage securing a loan made by investors without government underwriting - that is, not FHA insured or VA guaranteed 

CONVEY OR CONVEYANCE - Process of transferring ownership of property from one person to another. 

COURIER FEE - Charges for delivery. 

CREDIT REPORT FEE - Assessed by the lender for a required credit report from a credit bureau. 

DEED - A document which, when properly executed and delivered, conveys title of real property. 

DISCOUNT POINTS - A negotiable fee paid to the lender to secure financing for the buyer. Discount points are up-front interest charges to reduce the interest rate on the loan over the life, or a portion, of the loan's term. One discount point equals one percent of the loan amount. 

EARNEST MONEY - Money deposited by a buyer as evidence of good faith. 

ENCUMBRANCE - Anything that affects or limits the ownership of real property, such as mortgages, liens, easements or restrictions of any kind. 

ESCROW FEE - Charged by the title company to service the transaction and to escrow money and documents. 

ESCROW - The deposit of documents and funds with instructions to a neutral third party to carry out the provisions of an agreement or contract. 

TERMS TO KNOW

  • Adjustable Rate Mortgage (ARM): A mortgage with an interest rate that changes over time in line with
    movements in the index. ARMs are also referred to as
    AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

  • Adjustment Period: The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.

  • Amortization: Repayment of a loan in equal installments of principal and interest, rather than interest-only payments.

  • Annual Percentage Rate (APR): The total finance charges (interest, loan fees, points) expressed as a percentage of the loan amount.

  • Assumption of Mortgage: A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.

  • Balloon Payment: A lump sum principal payment due at the end of some mortgages or other long-term loans.

  • Binder: Sometimes known as an offer to purchase or an earnest money request. A binder is the acknowledgment of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.

  • Cap: The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.

  • CC&R’s: Covenants, Conditions and Restrictions. A document that controls the use, requirements and restric- tions of a property.

  • Certificate of Reasonable Value (CRV): A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.

  • Closing Statement: The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.

  • Condominium: A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surfaces (wall, floors and ceilings) serve as its boundaries.

  • Contingency: A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.

  • CRB: Certified Residential Broker. To be certified, a broker must be a member of the National Association of Realtors®, have five years experience as a licensed broker and have completed five required Residential Division courses. 

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