Ben Kayes Buyer Magazine RRG 2015 Buyer Magazine - Kayes, Ben | Page 19
Earnest Money
A portion of a down payment given to the seller
by a potential buyer indicating the buyer’s intent
to complete the purchase of the property. This is
also called a “Good Faith” deposit, which is held
in escrow until closing.
Engineer Inspection
A physical inspection of the major systems
of a house by a licensed professional as a
contingency of the sale. The fee is paid by the
buyer and typically ranges from $250 to $400.
An engineer’s inspection is recommended but
not required. Also, it’s not to be confused with
an “appraisal” or “assessment.”
Escrow
The placement of money or documents with
a third party for safekeeping, pending the
fulfi llment or performance of a specifi ed act or
condition. Example: Your earnest money will be
held in a non-interest-bearing escrow account
until closing.
Federal Housing Administration (FHA)
An agency within the Department of Housing
and Urban Development (HUD) that administers
loan guarantee programs and loan insurance
programs to make more housing available.
Lien
A legal claim against a property that must be
paid when the property is sold.
Loan-to-Value Ratio (LTV)
The relationship between the amount of a home
mortgage and the total value of the property.
Most mortgages are between 80 to 95% of the
value. Example: If your down payment is 10%,
your LTV is 90%.
Lock-in-Rate
A commitment made by lenders on a mortgage
loan to “lock in” a certain rate, pending
mortgage approval. Lock-in periods vary.
Market Value
The highest price a buyer will pay for a property
and the lowest price the seller will accept.
Mortgage Broker
An individual or company that obtains
mortgages for others by fi nding lending
institutions, insurance companies or private
sources to lend the money. A mortgage
broker may also make collections and handle
disbursements.
Mortgage Insurance
A policy required by the lender when the buyer
borrows more than 80% LTV, as protection
against default.
Points
A dollar amount paid to a lender if it is necessary
to reduce the interest rate (not commonly done).
Principal, Interest, Taxes and Insurance
(PITI) Payment
A periodic (typically monthly) payment that
includes the principal and interest payment, plus
a contribution to the escrow account established
by the lender to pay insurance premiums and
property taxes on the property.
Private Mortgage Insurance (PMI)
Insurance issued to a lender by a private
company to protect the lender against loss on
a defaulted mortgage loan. Its use is usually
limited to loans with high loan-to-value ratios.
The borrower pays the premiums.
Radon
A colorless, odorless gas formed by the
breakdown of uranium in subsoils. It can enter
a basement through pores or cracks in the
foundation. Long-term, constant exposure
is considered to be a health hazard. Devices
designed to eliminate this gas cost about $1,200.
Savings and Loan Association (S&L)
Depository institutions that specialize in
originating, servicing and holding mortgage
loans, primarily on owner-occupied residential
property.
Savings Bank
A fi nancial institution organized to hold
individual depositors funds in interest-bearing
accounts – and to make long-term investments
such as home mortgage loans.
Title
A document that proves ownership.
Title Insurance
Protection for lenders and homeowners against
fi nancial loss resulting from legal defects in the
title.
Zoning Restrictions
Local municipal ordinances that classify property
according to specifi c uses such as single family,
residential, commercial, industrial, multi-family,
etc.