Commonly Used Terms When Buying A Home

Appraiser    Professional who evaluates the market value of real estate for the buyer and lender

ARM     Adjustable Rate Mortgage, A type of mortgage rate loan whose interest rates changes periodically up or down, usually once a year.            

Closing Agent   Facilitates the closing of a mortgage loan by acting as an impartial third party.  The closing agent can be an escrow company, an attorney or title company agent depending on the region. 

Closing Costs    Costs the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayment for property taxes, etc.  Closing costs average 3-4% of the loan amount.  Typically, sellers can pay a portion of the closing costs if negotiated.

CMA    Comparative Market Analysis, Presented to perspective buyers and sellers by real estate agents.  Listing of properties showing prices and specifications.   Breakdown of comparable properties: currently available, past sales, as well as those that failed to sell.

Contingency    The dependence upon a stated event which must occur before a contract is binding.  For example:  The sale of a house being contingent upon the buyer receiving financing.

Deed    Given to pass title to the property

Deed OF Trust      Used in many states in place of a mortgage.  Property is transferred to a trustee by a borrower, in favor of the lender, and reconveyed upon full payment of the loan.  Commonly referred to as the "If You Pay, You Stay - If You Don't, You Won't" document.

Down Payment    Percentage of the price of a home that buyer must pay at closing.  Amount of down payment varies with each different type of loan program.

Earnest Money    Funds submitted with an offer to show "good faith" to follow through with the purchase.  Earnest money is placed by the broker in an escrow/trust account until closing.  At settlement, your deposit will be credited toward your down payment and closing costs.

FHA 203k    Type of FHA financing designed to provide for the rehabilitation of existing homes.  This financing allows buyers to roll their "fix-up" costs in to the loan

Fixed Rate Loan    Mortgage that has a rate of interest which remains the same over the life of the mortgage   

Home Inspection     After finding a home you wish to purchase, if requested, you will have a certain amount of time to have the home inspected before you proceed with the sale.   There are many different types of inspections to choose from. 

Hazard Insurance    Insurance that protects the homeowner from "casualty"(losses or damage to the home or personal property) and from "liability"(damages to other people or property).   Required by the lender and is usually included in the monthly mortgage payment.

Loan Origination Fee    A fee charged by the lender for evaluating, preparing, and submitting a proposed mortgage loan.   

MLS    Multiple Listing Service, computer information system usually run by county board of Realtors®, agents pay to have access to information regarding prices and details of houses on the market as well as past sales.

Mortgage Insurance Premium (MIP)    A charge paid by the borrower (usually as part of the closing costs) to obtain financing, especially when making a down payment of less than 20% of the purchase price, for example on an FHA loan.

MRIS    Metropolitan Regional Information System, our regions versions of the MLS, Montgomery County switched over from MLS to MRIS in Spring of 1996.  Planned to eventually cover 6 states in our area.  Coverage now includes most counties in Maryland, DC and Northern Virginia.

Note      Promise by borrower to repay a debt.  Specifies details regarding term of loan and interest rate.  Usually secured by a mortgage or deed of trust.

Points    An amount equal to 1% of the principal amount being borrowed.  The lender may charge several "points" in order to provide the loan.   

Property Disclosure/Disclaimer    Required from seller in Maryland, must disclose any known defects in the property to potential purchasers

Realtor    A real estate agent who is a member of the National Association of Realtors® and is good standing.  All Realtors® must abide by the NAR Code Of Ethics.  Only about half of real estate agents are Realtors®

Settlement Statement    Prepared by a broker, lender or escrow giving a complete breakdown of all costs involved in a real estate sale.  A separate statement is prepared for the seller and buyer.

Title Companies    Title companies perform a title search on the property and issue a title policy for the lender and the purchaser to insure that there is a valid mortgage lien against the property and title is clear.

Title Insurance    Protects lenders and homeowners against loss of their interest in property due to legal defects in the title.