Kayes RRG Buyers Magazine | 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 fulfillment or performance of a specified 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 finding 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 financial 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 financial loss resulting from legal defects in the title. Zoning Restrictions Local municipal ordinances that classify property according to specific uses such as single family, residential, commercial, industrial, multi-family, etc.