- Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).
- Adjustment Period
The length of time between interest rate changes on an ARM. For example, a loan with an adjustment period of one year is called a one-year ARM, which means that the interest rate can change once a year.
Repayment of a loan in installments of principal and interest, rather than interest-only payments.
- Annual Percentage Rate (APR)
The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.
An estimate of the property’s value.
- Assumption of Mortgage
A buyer’s agreement to assume the liability under an existing note that is secured by a mortgage or deed of trust. The lender must approve the buyer in order to release the original borrower (usually the seller) from liability.
- Balloon Payment
A lump sum principal payment due at the end of some mortgages or other long-term loans.
Sometimes known as an offer to purchase or an earnest money receipt. A binder is the acknowledgment of a deposit along with a brief written agreement to enter into a contract for the sale of real estate.
Permanent—prepaid interest that brings the note rate on the loan down to a lower, permanent rate. Temporary—prepaid interest that lowers the note rate temporarily on the loan, allowing the buyer to more readily qualify and to increase payments as income grows.
The limit on how much an interest rate or monthly payment can change, either at each adjustment or over the life of the mortgage.
- Cash Reserves
The amount of the buyer’s liquid cash remaining after making the down payment and paying all closing costs.
Covenants, conditions and restrictions. A document that controls the use, requirements and restrictions of a property.
- Certificate of Commitment
The lender’s approval of a VA loan, which is usually good for up to six months.
- Certificate of Reasonable Value (CRV)
A document that establishes the maximum value and loan amount for a VA guaranteed mortgage.
- Closing Statement
The financial disclosure statement that accounts for all of the funds received and expected at the closing, including deposits for taxes, hazard insurance, and mortgage insurance.
- Commitment Period
The period during which a loan approval is valid.
A form of real estate ownership where the owner receives title to a particular unit and has a proportionate interest in certain common areas. The unit itself is generally a separately owned space whose interior surface (walls, floors and ceilings) serve as its boundaries.
A condition that must be satisfied before a contract is binding. For instance, a sales agreement may be contingent upon the buyer obtaining financing.
- Conversion Clause
A provision in some ARMs that enables home buyers to change an ARM to a fixed rate loan, usually after the first adjustment period. The new fixed rate is generally set at the prevailing interest rate for fixed rate mortgages. This conversion feature may cost extra.
A form of multiple ownership in which a corporation or business trust entity holds title to a property and grants occupancy rights to shareholders by means of proprietary leases or similar arrangements.
Certified Residential Broker. To be certified, a broker must be a member of the National Association of Realtors,® have five years experience as a licensed broker and have completed required Residential Division courses.
Certified Residential Specialist.
- Debt Ratios
The comparison of a buyer’s housing costs to his or her gross or net effective income, and the comparison of a buyer’s total long-term debt to his or her gross or net effective income. The first ratio is housing ratio; the second ratio is total debt ratio.
- Due-On-Sale Clause
A clause that requires a full payment of a mortgage or deed of trust when the secured property changes ownership.
|Q: When buying a new home, what upgrades should you look for? Do we upgrade the lot? Pick more square footage? Add an extra bedroom? Which holds the best value?
A: A lot depends on why you are buying the house.Are you buying it mostly as a home or mostly as an investment? There is a big difference. For the most part, upgrades are high-profit items for builders.They aren’t designed to enhance the value of the house, rather to make you happier with the house you will buy.If you are looking at your home as an investment, then you buy from the smaller to medium size in the tract and spend only a minimal amount on upgrades.If you are looking at your purchase as a home, then you select upgrades that will enhance your quality of living.For specific information on what to look for in a house when resale value is a consideration http://realestateabc.com/homebuying/house.htm).
|Q: What is a FSBO?
A: This is a term that real estate agents use to refer to a home owner who chooses to sell their own home.
|Q: What are some of your options for paying off your mortgage?
A: Paying a little extra on your mortgage each month can save you some serious money. Below is a sample payoff schedule on a $150,000 loan with an eight percent fixed rate for 30 years. Note: Paying less than 10 percent extra per month can save nearly half the price of the house! -No extra payment loan payoff: June 3, 2028Payment: $1,100.65/month interest cost: $246,232.88?-$50/month extra loan payoff: June 3, 2024Payment: $1,150.65/month you save: $44,150.28 ?-$100/month extra loan payoff: June 3, 2021Payment: $1,200.65/month you save: $72,953.22
|Q: Why should I use a real estate salesperson or agent?
A: A real estate salesperson is more than just a sales person.They act on your behalf as your agent, providing you with advice and guidance to help you buy or sell a home.They do get paid for what they do, but so do other professions that provide advice, guidance, and have a service to sell –such as Lawyers.With the advent of the Internet more information and help is now available to home buyers and seller.The information on listings available for sale is mostly current – but not fully.However, only an agent can give you the most up to date information on what has sold or is still for sale. Do not underestimate this advantage. When selling your home, you reach the most buyers by listing in the Multiple Listing Service.Only a licensed real estate agent who is also a member of your local MLS can get you listed there. This then gets you automatically listed on some of the other major real estate web sites.If you’re buying or selling a home, the MLS is your agent’s best tool to help you reach your goal.In the past, agents were the only way home buyers and sellers could reach certain information.Because today’s home buyers and sellers are so much better informed than in the past, expertise and ability are becoming more important. Be sure that your agent is up to date on all the current available technologies to help you buy or sell a home.
|Q: What should you be aware of that the house inspector should be doing during the inspection of the house you are buying?
A: The Inspector should be checking the following things:-Drainage -Foundation -Roof & Water Leaks -Paint -Plumbing -Wiring -Heating -Fireplace
|Q: Who pays the typical fees attached to the home buying process?
A: Buyer pays for the following: -Appraisal -Credit Report -Discount Points -Escrow Payments -Homeowner’s Association Fees -Insurance Impounds -Interest Adjustment -Mortgage Insurance Impounds -One-time MIP (FHA only) -Origination Fees -Prepaid Insurance -Recording Fees -Tax Impounds -Title Policy -VA Funding Fee (VA only) Seller pays for the following:-Discount Points -Escrow Fee -Home Warranty Program -Interest Adjustment -Title Policy -Pest Inspection -Real Estate Commission -Tax Service
|Q: Are there any programs to help first-time home buyers? And for people who have decent incomes, but still find it difficult to buy their first home?
A: There are many programs. Most have income restrictions, but those may not be as low as you assume.Most lenders offer first-time buyer programs. Many feature low down payments, 5% or less, and some allow buyers to use borrowed funds or gifts to be used as a portion of even a reduced down payment. Some lenders also offer down payment assistance, typically in the form of a below-market-rate second mortgage, to help buyers for whom even a small down payment is a problem. But those programs are usually reserved for very low-income borrowers.Some non profits (Nehemiah Corp. and AmeriDream are the two best known) offer gifts outright to buyers of up to 6% of the sale price, with no first-time buyer requirement and no restrictions on income or the location of the property. But sellers in these transactions must make a donation to the fund equal to the amount of the gift, plus a processing fee.Programs for first-time buyers often feature higher qualifying ratios and lower down-payment requirements. The rule of thumb for standard mortgages is that a buyer’s monthly housing payments, including principal, interest, mortgage and insurance, can’t exceed about 28% of monthly, after-tax income; housing payments plus all other debt payments can’t exceed 36% of their monthly, after-tax income.Some special loan programs increase those ratios, sometimes significantly. Many also feature more generous underwriting standards, for example, considering rent payments and other nontraditional sources to determine an applicant’s capability to qualify for a home loan.Buyers whose incomes are too high to qualify for the above programs might consider Federal Housing Administration loans. These loans have no income requirements, and are not limited to first-time buyers. They also permit down payments of as little as 3%, all or some of which may come in the form of gifts from family members.However, limits on purchase prices may make this program less practical in states where housing costs are high.Another option available only to veterans – is a Veterans Administration loan, which has no down-payment requirement. The VA itself does not set a maximum, but the secondary market investors who purchase the loans will not consent to loans for more than $240,000. Because of the number and diversity of first-time buyer programs – and the intense competition in the mortgage market – don’t assume you can’t qualify for a mortgage. In addition to exploring some of the programs mentioned here, contact several lenders, including smaller, local institutions, to find out whether they offer any programs that might meet your requirements.
|Q: Where can you find the Real Estate Agent’s Code of Ethics?
A: Many real estate agents are members of the National Association of Realtors, which does have a code of ethics for their members. You can find it on the internet at realtor.org.
|Q: What’s the difference between a real estate agent and a broker?
A: Most states require real estate sales professionals to be licensed by that state. This is so that they can control and regulate the education and experience requirements. Many may also have a central authority to resolve consumer problems.State to state the terminology used for real estate professionals varies little.Brokers are generally required to have more education and experience than real estate salespersons or agents.The person you normally deal with is a real estate agent.This salesperson is licensed by the state, but must work for a broker.All listings are placed in the broker’s name, not the salesperson’s.A broker can deal directly with home buyers and sellers, or can have a staff of salespersons or agents working for them.
|Q: What is a buyer’s agent?What does he or she do for a buyer and who usually pays this service?
A: On most transactions, there is usually a listing agent and a selling agent. The selling agent is sometimes referred to as the buyer’s agent, because he or she works on behalf of the buyer. This is easier than explaining that the selling agent is not the listing agent but rather the buyer’s agent. There are some agents that call themselves buyer’s agents, exclusive buyer’s agents, or even buyer’s representatives. This is just marketing. However, part of the reason is because they want to accentuate the reasons a buyer should not go directly to the listing agent when they wish to purchase real estate. This has to do with agency. If a buyer goes directly to the listing agent they are dealing with an agent that has conflicting interests and responsibilities. Their job is to get the best price for the seller and they may not represent the best interests of the buyer. Buyer’s Agent indicates they are only working for the buyer in a real estate transaction. The commission is still paid by the seller with extremely rare exceptions. They either get paid by the seller or provide a credit to the buyer for the real estate commission. In this case then the buyer pays the commission.
|Q: When you buy a home what may be claimed as a tax deduction?
A: This is a question for a CPA or whoever does your taxes.We encourage you to follow up with a professional tax advisor. There are certain limits and restrictions that do not affect most people, but this is another reason you should contact a tax professional with your questions.Briefly, assuming you itemize your deductions, own and occupy the home, you can deduct both property taxes paid on the home and interest paid on your mortgage.You can deduct the points and prepaid interest you make during the actual purchase, whether you pay them or the seller pays them on your behalf.
|Q: When making a choice between a newer home in a more modern neighborhood or remodeled home in an older one which makes the most sense as an investment?
A: Remember that you buy a home for it’s feeling to you as a home.Which neighborhood would you and your family be most happy in? Because pricing should be considered in relation to the local neighborhood and not compared to homes in other neighborhoods (for the most part) when considering a home for it’s resale value and the one you are thinking of is in an older area check to see if it is at the upper end of values for that neighborhood. If so, then it may not be the best choice.If it is similar or lower in price to the others, this is better. Consider also, is it located in an area in decline, or are others going to be fixing things up, too, so that it is a neighborhood that is improving? If so, it may be a very good deal as long as you don’t overpay.
|Q: We all want to buy a house with a good resale value.How do you determine if your house will increase in value within the short term so that you can then upgrade to a newer or better home?I can buy a smaller house in a great location or get twice as much house in a good location.Which is a wiser decision?
A: They often say, Location, location, location, and they are often right. However, with all investments, there are risks to your wallet. Make sure that the house does not back to any busy streets and is as close to the interior of the tract as possible. Always avoid corners and intersections.Choose the middle of the block. Be sure it has at least two bathrooms.Sometimes it is timing that works out best for you.As when you buy a home before a major surge in local prices.
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