Looking to buy a new home, but all the real estate lingo has you scratching your head? Here are just a few terms potential homebuyers might run into when buying a home or applying for a mortgage.
This is a term you will probably see when it comes to your mortgage. Amortization is a financial tool that helps equalize monthly mortgage payments. Typically, this means interest rates are higher early on in the loan. The amount of the mortgage payment going toward the interest decreases and the amount that goes toward the principal increases as the matures.
2. Assessed Value
This is a tool used to determine the value of a home and/or property. Typically, an assessor is sent to properties and homes to determine the assessed value for municipality purposes (i.e. taxes). Some factors include: home improvements, neighboring properties, property replacement costs, etc. Assessed values tend to not fluctuate as much as market values do. They also tend to be less influential than market values during the buying/selling process.
3. “As Is”
Probably one of the more self-explanatory terms you may run into when purchasing property. In real estate “as is” means the property will be sold to you without any additional repairs or improvements. This means you’re taking on any defects the home or property may have when you agree to purchase it, no matter the severity. Also, the seller will not provide any credits for improvements the home or property might need. This is the type of listing you’ll definitely want to have a home inspection done for before purchasing.
4. Closing Disclosure
This term pertains to your home mortgage. At least 3 days before you close on a home, you will receive a 5-page document from your lender explaining the details of the loan you choose to use. Details will include the loan terms, projected monthly costs, fees, closing costs, and other important disclosures.
5. Comparative Market Analysis (CMA)
A Comparative Market Analysis is a real estate tool used to determine the market value of a home. It helps determine what a home’s listing price should be set at when it goes on the market. CMA’s a generally determined by factors such as: amount of rooms, square footage, age of home, property tax, amenities. The CMA can also be determined by the neighborhood the home is located and surrounding homes both on the market or recently sold. The CMA is generally conducted by a real estate agent.
When an impartial third party is hired to handle a property transaction and transfer of money. Typically money is held “in escrow” until the transaction is completed and contracts are signed. When money is “in escrow” it cannot be touched by either the buyer or the seller.
7. Home Owners Association (HOA)
The term Home Owners Association (HOA) is often heard if you are seeking property in a condominium complex, town homes, historical districts, and housing developments. The HOA is typically in charge of maintaining the order and desired aesthetics of that particular area. More often than not, if you buy a home in an area with a HOA, you’ll pay monthly fees that go toward the maintenance and/or upkeep of the area they manage. It is very important to understand exactly what fees you would be paying before purchasing properties within a HOA.
8. Private Mortgage Insurance (PMI)
This is a term you’ll run into if you cant make your 20% down payment. Its an insurance policy taken out on the balance of your home loan. Its an added insurance for the lender that you’re home loan will be paid even if its defaulted on. This would be an added monthly cost for homeowners. The cost would depend on the cost of the home and the percentage rate used for the PMI.
9. Seller Concession
A seller concession can be seen as a credit the seller is giving to the buyer toward the purchase of the home. This often times lowers the cost for the buyer and makes the home move quicker for the seller.
10. Walk Through
The final walk through is one of the last steps toward buying a home. It is scheduled about a week before the closing date. It allows the buyer to do one last walk through of the home before the purchase is finalized to ensure the condition of the property is the same as it was when the offer was made. This is an opportunity to discuss any final repairs or issues you find with the home before you buy. It is highly recommended for the buyer to take their final walk through seriously as it could possibly prevent costly surprises in the long run.