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Glossary of Terms
Addenda (addendum, singular): Supplemental documents added on to the purchase agreement that become a part of the legally binding document. Adjustable Rate Mortgage (ARM): A loan for which the interest rate fluctuates during the term, based on an index to which the interest rate is tied. Amortization Chart: A chart that breaks out the principal and interest you pay on a loan each year, over the term of the loan. Annual Percentage Rate (APR): Expressed as an actual rate, this is really the cost of the loan. It includes the interest rate, points on the loan, the loan origination fee, and all other charges made by the lender. Arbitration Agreement: An agreement the seller and buyer can make to settle all disputes about the property out of court. If both parties sign, they agree to have an independent arbitrator decide disputes. Assessments: City taxes homeowners must pay periodically when the city decides to make improvements to city property. Association Dues: The monthly payment condominium and town house owners must make for upkeep and management of shared property. The association is made up of condominium unit or town house owners. Assumable: Describes a loan that a buyer can take over from the seller. Ceramic Tile: Tile baked in a kiln until hard, that is imperious to water. Closing Costs: Costs involved in transferring the ownership of a home. Commitment Letter: The letter your lender may send you stating that your loan is approved and describing the terms of the loan. Conventional Loans: Home loans not backed by the government. Contingency: A clause that is added to the purchase agreement stating that certain conditions must be met within a specified time period for the purchase agreement to be valid. Default: Failure to make loan payments when they are due. Down Payment: The amount of the purchase price you pay up front to the seller when you buy a home. The amount depends on the loan you are taking out, but is usually from 3 to 25 percent of the loan amount. Dry Wall: Wall product made of plasterboard, which comes in 1/2 and 5/8 inch thickness. Other materials such as gypsum and fiberboard are also used. Earnest Money: "Good Faith" money usually given to he agent when you make a bid on a home. Electric Service Panel: The main cabinet where electric current enters and then branches though out the house. The main switch to disconnect the entire house current is installed there; along with the circuit breakers or fuses. Equity: The portion of the home's value that you own , free and clear of any mortgage or lien. Escrow: Funds, a bond or a deed, held by a third party that will not be released to the grantee until conditions of a contract or an agreement are fulfilled. FHA Loans: Home loans made by the Federal Housing Administration that have low down payments and allow you to borrow a larger amount than you would be allowed to borrow in a conventional loan. Fair Credit Reporting Act: A federal law that gives you the right to challenge the accuracy of information in your credit report. Fire Brick: A heat resistant brick made of special clay. Fixed-rate Loan: Loans with constant interest rates over the term of the loan. Footing: An underground structure used to support the house, usually in the form of the outside walls or consistent to the pattern of the posts or pedestals. Grade: The slope or pitch of the ground. Good-faith Estimate: The disclosure form on which your lender estimates all closing costs. A lender must give you this form within three days after you apply for a loan. Hardwood: Lumber used to floor rooms in a house. The lumber is taken from trees that shed broad leaves in the fall. HUD-1 Form: A settlement statement listing all the closing costs. The U.S. Department of Housing and Urban Development requires that a closer make this statement available to a buyer one business day before the closing. Homeowner's Insurance: Also called hazard insurance. This is insurance home buyers must purchase to protect the investment they and their lender have in the home. Homestead Taxes: Property taxes paid by live-in property owners. Load-Bearing: Walls that bear weight in addition to their own. Loan Origination Fee: This is a fee you pay a lender for handling your loan application. Loan Processing: A lender's analysis of your ability to qualify for a loan. The analysis involves weighing your income, credit report and financial records against the value of the home you want to buy. Lock-In Agreement: An agreement you can make with your lender to guarantee you the interest rate your lender quotes for your loan. YOu can lock in a rate when you apply for a loan or at any time before the closing. Millwork: Finished woodwork that is partly assembled at the mill. Molding: Wood strip machined in various shapes, sizes and designed for ornamental trim. Mortgage Discount Points: Prepaid interest on a loan. One point equals 1% of the total loan. Mortgage Insurance Premium (MIO): An insurance premium the buyer is required to pay for an FHA loan. The cost is 2 or 3 percent of the loan. This can be paid as part of the monthly payments. Multiple Listing Service (MLS): A service that real estate agents subscribe to that lists homes for sale and homes that have sold by neighborhood, price and features. Pitch: The angle of a roof from the the lowest part to the peak. PITI: Monthly loan payments which include "principle, interest, taxes, and insurance." Private Mortgage Insurance (PMI): Insurance you pay when you take out a conventional loan. Most lenders charge this if you make less than a 20% down payment on a home. It protects the lender from losing money owed on a loan if a buyer defaults on the loan. Property Tax Adjustment: An adjustment made to reimburse the seller or buyer for taxes. Purchase Agreement: The legally-binding document that lists all the terms of a home sale including contingencies. Real Estate Settlement Procedures Act (RESPA): The federal law that regulates lenders' closing or settlement practices. Sales Contract: The contract between the buyer and the seller. Most contracts will, in detail, explain the specifications of the purchase: who is responsible for providing it, what guarantees there are, how much the closing costs will be, and when the move-in date will be. Shake: Cedar shingles that are hand trimmed. Sheathing: Boards or dry wall that is attached to the skeleton of the house to form unfinished walls. Sump Pump: A device used to suck water out of basements that are below the sewer line. Title: Evidence of a person's legal right to the ownership of a property, usually in the form of a certificate or a signed contract. Title Insurance: The insurance you pay to protect your lender against claims on the title of your property. As a buyer, you can also take out title insurance to protect yourself against claims. Truth-in-Disclosure Statement: A statement your lender must give you informing you of all the fees and costs of a loan using the annual percentage rate. Underwriting: Risk analysis conducted by a lender to decide whether or not to approve you for a loan. Valley: An internal or depressed angle formed by the junction at the bottom of two sloping sides of the roof. Veteran's Administration Loan (VA Loan): Low interest, no down payment loans available to those who have served in the U.S. Military. We hope you've found our glossary of terms useful. Be sure to visit our other help pages for more good tips and information.
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