Homebuyers and sellers may find that real estate abbreviations and terminology can be confusing. As with all types of business, learning the lingo comes with experience in the field, but here you will find some definitions to help you with your real estate experience.
Amendment: a document that must be agreed upon by all parties and recognizes that a change in the contract has been made after the offer is accepted. For example: A change in the closing date.
Binding Agreement: the time at which all parties have agreed to the terms of the contract.
Closing Costs: expenses incurred by buyers and sellers in transferring ownership of a property. Closing costs normally include a loan origination fee, an attorney's fee, taxes, and charges for obtaining title insurance and a survey. Closing costs percentage will vary according to the area of the country; lenders often provide estimates of closing costs to prospective homebuyers.
Commission: the fee charged by a broker or agent for marketing and negotiating a real estate transaction. A commission is generally a percentage of the price of the property.
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: a written agreement to do or not to do a certain thing.
Discount points: a one-time up front charge of interest used to off set and reduce the current interest rate. Example: If the current interest rate is 8% the lender may allow you to pay 1 discount point and lower your rate to 7.75% over the life of the loan. A point is 1 percent of the amount of the mortgage.
Earnest money deposit: a deposit made by the potential homebuyer at the time the offer is made to show that he or she is serious about buying the house.
Escrow: an item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney, real estate broker, or escrow agent to be disbursed upon the closing of a sale of real estate.
Good Faith Estimate: it is a form on an estimate of the fees that you will pay to close your loan. This is a break down of the fees that charged by the lender, attorney, appraiser and other third party fees
Mortgage Escrow Account: the account in which a mortgage company holds the borrowers escrow payments prior to paying property expenses such as taxes, insurance, and homeowners association fees.
Exhibit: a document attached to a contract that brings clarity to a specific item in the contract. For example: The contract may be contingent upon the sale of another property.
Fixture: personal property that becomes real property when attached in a permanent manner to real estate. For example, when you install a ceiling fan it becomes real property and stays with the house when the house is sold.
Home Warranty: a type of insurance that covers repairs to specified parts of a house for a specific period of time. It is provided by the builder or property seller as a condition of the sale.
Listing: property that is for sale and placed on a listing service such as FMLS.
Loan Origination fee: a fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount.
Offer: the first step; an offer is made on a contract form by the purchaser's agent and submitted to the sellers agent. The seller may counter or accept the terms of the offer. When the parties reach a binding agreement, the offer becomes a contract.
PITI: The portions of your monthly payment amount which includes your principal, interest, taxes, and homeowner's insurance.
PMI: Private Mortgage Insurance (PMI) is usually mandatory for loans when the ratio of the amount of the loan to the value of the subject property is greater than 80%
Pre-paids: the prorated share of taxes for the current calendar year, homeowner's insurance policy for the first 14 months, and mortgage insurance premiums for generally 2 months. These funds are held by the mortgage company in an escrow account.
Property Inspector: a professional trained to inspect property. The inspector will provide the purchaser with a report detailing the condition of the systems and structure of the property. For example, the roof condition, age of the roof, and life left in the roof.
Seller's Disclosure: a detailed report disclosing any known problems or repairs made to the property during the sellers ownership of the property.
Title: A legal document evidencing a person's right to or ownership of property.
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.