GLOSSARY
Amortization - a method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed.
Annual Percentage Rate - the actual finance charge fro a loan, including points and fees, in addition to the sated interest rate.
Appraisal - an expert opinion of the value or worth of a property.
Assessed Value - the value placed on a property by a municipality for purposes of levying taxes. It may differ widely from the appraised or market value.
Balloon Payment - a large principal payment due all at once at the end of some loan terms.
CAP - a limit on how much the interest rate can change in an adjustable rate mortgage.
Certificate of Title - a document, signed by a title examiner, stating that a seller has an insurable title to the property.
Closing - the deed to a property is legally transferred from seller to buyer and documents are recorded.
Closing Costs - all financial transactions required to make the contract final.
Commission - a fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.
Comparative Market Analysis - a survey of the attributes and selling process of comparable homes on the market or recently sold. Used to help determine a correct pricing strategy for a seller's property.
Contingency - a condition in a contract that must be met for the contract to be binding.
Contract - a binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for the title to property).
Deed - a legal document that formally conveys ownership of a property from seller to buyer.
Down Payment - a percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender.
Equity - the value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgage and liens.
Escrow - a fund or account held by a third-party custodian until conditions of a contract are met.
Fixed Rate Mortgage - interest rates on this type of mortgage remain the same over the life of the loan. Compare to "adjustable rate mortgage".
Fixture - a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to a property and belongs to the property when it is sold.
Hazard Insurance - compensates for property damaged from specific hazards such as fire and wind.
Interest - the cost of borrowing money, usually expressed as a percentage rate.
Lien - a security claim on a property until a debt is satisfied.
Listing Contract - an agreement whereby an owner engages a real estate company for a specific period of time to sell a property, for which, upon the sale, the agent receives a commission.
Market Price - the actual price at which a property is sold.
Market Value - the price that is established by present economic conditions, location and general trends.
Mortgage - security claim by a lender against a property until the debt is paid.
Multiple Listing Service (MLS) - a system that provides to its members detailed information about properties for sale.
Origination Fee - an application fee(s) for processing a proposed mortgage loan.
PITI - principal, interest, taxes, insurance, forming the basis for monthly mortgage payments.
Point - one percent of the loan principal. It's charged in addition to interest and fees.
Prepayment Penalty - a fee paid by a borrower who pays off the loan before it is due.
Principal - one of the parties to a contract; or the amount of money borrowed, for which interest is charged.
Prorate - divide or assess proportionately.
Settlement - all financial transactions required to make the contract final.
Title - a document that indicates ownership of a specific property.
Title Search - detailed examination of the entire document history of a property title to make sure there are no legal encumbrances.
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FREQUENTLY ASKED QUESTIONS - BUYERS
Poulsbo Marina
What if I need to sell my home before I buy a new one? - To put yourself in the best negotiating position before you find the new home you want, hire a qualified real estate agent to help you put you home on the market. Once you write and offer on a new home, your offer will be "contingent" on the sale of your home. A buyer in this position may not have the same negotiating power as one whose home has already sold (or at least has an accepted offer). The seller may be hesitant to accept your offer because there are too many things that must happen before the sale can close. A bridge loan may be an option for you.
What is the difference between prequalified and preapproved? - These terms refer to your status in the loan approval process. Prequalification is a determination of our probable ability to obtain a loan. To become prequalified, meet with a loan officer or mortgage company. They will help you determine the price you can afford, based on your monthly income and your current debt, as well as the cash you have for a down payment. Preapproval means that the mortgage lender has already verified and approved your credit and employment. Obtaining preapproval early in the process will make your offer more attractive to the seller.
How does my offer get presented to the seller? - I will call the agent who is the listing agent for the home you have chosen. We will make an appointment with the seller to present your offer. I will be there to explain the details of your offer and negotiate on your behalf.
What happens if I offer less than the asking price? If you offer less money, the seller has three options. They can accept the lower offer, counter your offer or reject it completely. Remember that there could be another buyer who is also interested in the home you’ve chosen. IF they happen to write an offer at the same time you do, the seller will have two offers to compare. There are usually many aspects of each offer to consider, but ultimately the seller will want to accept the best and most complete offer. In active real estate markets, homes often sell for their listed price. In hot markets, there may be many buyers vying for the same house, which sometimes drives the final sale price above the original listing price. As a real estate professional, I can help you plan your strategy, based on the current real estate market in
Does it cost me money to make an offer? - When you write the offer on the home you’ve chosen, you will be expected to include an earnest money deposit. The deposit is a sign of your good faith that you are seriously interested in buying the home.
Where does my earnest money go? - Once the buyer and the sell have a mutually accepted offer, the earnest money is deposited into a trust account of the real estate company of the closing agent (often the escrow company). That deposit becomes a credit to the buyer, and becomes part of the purchase expense.
Can I lose my earnest money? - Real estate contracts are complicated legal transactions. This is another area where having a knowledgeable and professional agent is a necessity. Rarely does the buyer lose the earnest money. Most often, if the transaction falls apart, there are circumstances beyond the buyer’s control that cause it to happen. If the buyer willfully decides, however, that they no longer want to buy the house and has no legal reason for rescinding their offer, then the seller has the right to retain the earnest money.
Is that all the money that’s involved? - Many lenders require the cost of the appraisal and credit report at the time of the loan application. Those costs will be credited to your closing costs at the time of closing however.
What are closing costs? - Closing costs are charges paid to various entities during the real estate transaction. They can include escrow fees, documents preparation fees, cost of an inspection and lender fees.
What is a point? - A point is equal to tone percent of the loan principal. Some lenders charge points, in addition to interest and fees, at closing.
What is title insurance? - Title insurance protects against loss from any defect in the legal title, liens against the property or other adverse claims. The lender usually requires title insurance.
