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Posted by admin on November 15, 2022
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Here are some real estate terms to help you navigate buying or selling a home in Colorado and Florida.

Acceleration clause – Also known as an acceleration covenant, this is a contract provision requiring the borrower to repay all of their outstanding loan to a lender if certain requirements — outlined by the lender — aren’t met.

Active contingent – When a seller accepts an offer from a buyer, that offer is contingent upon the buyer’s ability to meet certain conditions before the finalization of the sale. Contingencies might include the buyer selling their home, receiving mortgage approval, or reaching an agreement with the seller on the home inspection.

Addendum – If a buyer or seller wants to change an existing contract, they might add an addendum outlining the specific part of the contract they’d like to adjust and the parameters of that change. The rest of the contract stays the same, regardless of the addendum.

Adjustable-rate mortgage (ARM) – The interest rate for adjustable-rate mortgage changes periodically. You might start with lower monthly payments than you would with a fixed-rate mortgage, but fluctuating interest rates will likely make those monthly payments rise in the future.

Annual percentage rate (APR) – The annual percentage rate (APR) is the amount of interest charged on your loan every year.

Balloon mortgage – Instead of a traditional fixed-rate mortgage in which the owner pays on the loan in installments, a balloon mortgage is paid in one lump sum (e.g., the balloon payment). It’s usually associated with investment or construction projects that are issued for the short term and don’t require collateral.

Bridge loan – A bridge loan is a short-term loan a homeowner takes out against their property to finance the purchase of another property. It’s usually taken out for a period of a few weeks to up to three years.

Buydown – A buydown is a mortgage-financing technique lowering the buyer’s interest rate for anywhere from a few years to the lifetime of the loan. Usually, the property seller or contractor makes payments to the mortgage lender lowering the buyer’s monthly interest rates, which, in turn, lowers their monthly payments.

Certificate of reasonable value – A certificate of reasonable value (CRV) is issued by the Department of Veterans Affairs and is required for veterans to receive a VA loan. It establishes the maximum value of the property and therefore the maximum size of the loan.

Chain of title – Like a Blue Book for homes, the chain of title is the documentation of all past ownership of a property. It runs from the present owner to the very first owner of the property.

Clear title – Also known as a “just title,” “good title,” or a “free and clear title” — a clear title doesn’t have any kind of lien or levy from creditors. It means there’s no question of legal ownership of the property such as building code violations or bad surveys.

Closing – Closing is the final stage of the real estate transaction. The date is agreed upon when both the buyer and seller go under contract on the home. On the closing date, the property is legally transferred from seller to buyer.

Closing costs – Closing costs are usually comprised of between 2-5% of the total purchase price of the home. According to a recent survey by Zillow, the average homebuyer pays approximately $3,700 in closing costs. These fees are paid on or by the closing date.

Co-borrower – If a buyer is having trouble getting approved for a loan, they can elicit the help of a co-borrower. This person is usually a family member or friend who’s added to the mortgage and guarantees the loan. They’re listed on the title, have an ownership interest, sign loan documents, and are obligated to pay monthly mortgage payments if the buyer is unable to.

Due-on-sale clause – A due-on-sale clause protects lenders against below-market interest rates. It’s a contract provision requiring the seller of the property to repay the mortgage in full when the property is next sold. It is also called an acceleration clause.

Earnest money deposit – Earnest money is a deposit (usually 1-2% of the home’s total purchase price) made by a homebuyer at the time they enter into a contract with a seller. Earnest money demonstrates the buyer’s interest in the property and is generally deducted from your total down payment and closing costs.

Easement – An easement grants someone else the legal right to use another person’s land or property while leaving the title in the owner’s name.

Equal Credit Opportunity Act – The Equal Credit Opportunity Act (ECOA) was enacted on October 28, 1974, and rules it unlawful for creditors to discriminate against applications because of race, color, religion, national origin, sex, marital status, age, or because they receive public assistance.

Escrow – Escrow is part of the home-buying process. It happens when a third party holds something of value during the transaction. Most often, the “value” the third party holds onto is the buyer’s earnest money check. When the transaction is complete (usually at closing), the third party will release those funds to the seller.

Fair Credit Reporting Act – The Fair Credit Reporting Act (FCRA) was enacted in 1970 and ensures fairness, accuracy, and privacy of personal information contained in files maintained by credit reporting agencies. The goal of this act is to protect consumers from having misinformation used against them.

Fixed-rate mortgage – A fixed-rate mortgage is one of the most common types of loans. It comes with an interest rate that stays the same for the lifetime of the loan and provides the borrower with more stability and predictability over the lifetime of their loan.

For sale by owner – Homes listed as for sale by owner (FSBO) are being sold without the help of a real estate agent. The biggest benefit to the seller is they avoid paying commission fees — but there are few benefits to the buyer.

Real estate agent – A real estate agent is licensed to negotiate and coordinate the buying and selling of real estate transactions. Most real estate agents must work for a realtor or broker with additional training and certification.

Planned unit development – A planned unit development (PUD) is a housing community made up of single-family residences, townhomes, and condominiums — as well as commercial units. PUDs offer many common areas owned by the HOA and amenities beyond what normal apartment buildings or townhomes offer, including tennis courts and outdoor playgrounds.

Broker – A real estate broker has passed a broker’s license exam and received education beyond what the state requires of real estate agents. They understand real estate law, construction, and property management. Real estate agents are required to work under the supervision of a broker.

Sale-leaseback – A sale-leaseback occurs when a buyer closes on a home and then leases back tenancy to the seller. This usually occurs when the seller needs more time to vacate the home, in which case, the buyer becomes a sort of landlord and receives payment from the seller for every day they remain in the home.

Real Estate Settlement Procedures Act – The Real Estate Settlement Procedures Act (RESPA) requires lenders to provide disclosures to borrowers informing them of real estate transactions, settlement services, and relevant consumer protection laws. Its goal is to regulate settlement costs, prohibit specific practices such as kickbacks, and limits the use of escrow accounts.

Prime interest rate – The prime interest rate is typically awarded to a U.S. bank’s best customers. It’s the best-available loan rate and is usually three points above the federal funds rate: the rate banks charge each other for overnight loans.

Pre-approval – Before submitting an offer on a home (or even engaging with a real estate agent) you’ll likely be required to get pre-approved. This means a lender has checked your credit, verified your information, and approved you for up to a specific loan amount for a period of up to 90 days.

Active under contract – A house is listed as “active under contract” when the seller has accepted an offer with contingencies, but still wants the house to be listed as active. In this situation, the seller is also likely to accept backup offers in case their current offer fails to meet its contingencies.

Deed-in-lieu of foreclosure – A deed-in-lieu of foreclosure is a document transferring the title of a property from a homeowner to the bank that holds the mortgage. A homeowner might submit a deed-in-lieu of foreclosure if the bank has denied them a loan modification or short sale. However, the bank can deny the request for a deed-in-lieu (and often do).

Short sale – A short sale occurs when a homeowner sells their property for less than what’s owed on the mortgage. A short sale allows the lender to recoup some of the loans that are owed to them but must be approved by the lender before the seller moves forward.

Why Use A Realtor – Buying a home typically requires a variety of forms, reports, disclosures, and other legal and financial documents. A knowledgeable real estate agent will know what’s required in your market, helping you avoid delays and costly mistakes. Also, there’s a lot of jargon involved in a real estate transaction; you want to work with a professional who can speak the language.

Jumbo loan – Conforming loan limits cap the dollar value that can be backed by government-sponsored programs. A jumbo mortgage exceeds these conforming loan limits, which are tied to local median home values.

Lease option – A lease option is like rent-to-own for real estate. It gives the lessee the ability to lease a property with the option to buy. It includes a legal agreement with a monthly rental amount due, while also including an option to buy the property for a predetermined price at any time during the length of the agreement.

Mortgage – A mortgage is an agreement between a borrower and a lender giving the lender the right to the borrower’s property if the borrower is unable to make loan payments (with interest) within an agreed-upon timeline.

Mortgage insurance – If a homebuyer makes a down payment of less than 20% of the purchase price of a home or is the recipient of an FHA or USDA loan, they’ll usually be required to pay mortgage insurance. It lowers the risk of a lender giving you a loan, but it also increases the cost of the loan.

FHA loan – Federal Housing Administration (FHA) loans have been around since 1934 and are meant to help first-time homebuyers. The FHA insures the loan, making it easier for lenders to offer the homebuyer a better deal, including a lower down payment (as low as 3.5% of the purchase price), low closing costs, and easier credit qualifying.

Conventional loan – A conventional loan is any mortgage loan that is not insured or guaranteed by the government  (such as under Federal Housing Administration, Department of Veterans Affairs, or Department of Agriculture loan programs). Conventional loans can be conforming or non-conforming.

VA loan – VA Home Loans are provided by private lenders, such as banks and mortgage companies. VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.

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