Home Buying Terms

Adjustable -rate mortgage (ARM): unlike a traditional fixed-rate loan, an adjustable rate mortgage begins at a set interest rate and, following a defined term, periodically changes based on prevailing market rates. Often the mortgage contains a cap above which the interest rate cannot reset. ARMS are attractive to borrowers because they typically offer lower initial monthly payments.

 

Appraisal: written assessment of a property’s fair market value. A professional appraiser, who may work independently or with a lender, bases the appraisal primarily on an analysis of comparable sales of similar real estate in the neighborhood.

Building Codes: minimum construction standards set by state or local laws for public safety and health. Includes the design, construction, repair and quality of building materials, as well as the use and occupancy of structures.

 

CC & Rs: stands for covenants, conditions and restrictions. They are the rules and terms by which a property owner agrees to abide.

 

Conveyance: document used to transfer title. A deed is a conveyance.

 

Earnest money deposit: money that accompanies an offer to purchase as evidence of good faith. It is almost always a personal check, certified check or money order rather than cash.

 

Fair market value: the highest price that a willing buyer would pay, and the lowest price a willing seller would accept.

 

Fixed-rate Loans: generally have repayment terms of 15, 20 or 30 years. Both the interest rate and the monthy payments (for principle and interest) stay the same during the life of the loan. The interest rate is the cost of borrowing money expressed as a percentage rate. Interest rates can change because of market conditions.

 

Homestead protection: state and federal laws that protect against the forced sale of a person’s home by creditors. Also, upon the death of one spouse, provides the other with a home for life.

 

Housing codes: local regulations that set minimum conditions under which dwellings are considered fit for human habitation. It guards against unsanitary or unsafe conditions and overcrowding.

Loan origination fee: paid by the borrower to get a loan. It covers expenses incurred by the lender, such as the cost of the appraisal, credit report, title search, etc.

 

Master plan: long-range, comprehensive guise for the physical growth or development of a community.

 

Mortgage: legal document that creates a lien on property; it secures the repayment of a loan.

 

Report of title: document required before title insurance can be issued. It states the name of the owner, a legal description of the property, and the status of taxes, liens and anything else that might affect the marketability of the title.

 

Sales contract: contract that contains the terms of the agreement between the buyer and seller for the sale of a particular parcel or parcels of real estate.

 

Subdivision: a tract of land divided by the owner into small lots for home sites or other use.

Tax shelter: a real estate investment that produces income-tax deductions for its owners.

 

Warranty deed: a deed in which the grantor guarantees that he or she is giving the grantee good title free of encumbrances. Considered to be the best deed a grantee can receive.

 

Zoning: procedure that classifies real property for a number of different uses: residential, commercial, industrial, etc. in accordance with a land-use plan.