Posted on December 27, 2007
Welcome back to our team's blog. We hope that you've had a safe and happy holiday season so far. We also wish that the coming new year is the best one yet!
In our last blog, we started a list of definitions of common real estate terms. These terms may be common to us, the title and escrow companies, and the lenders because we use them everyday. However, they may not be so familiar to someone who is buying a home for the first time, or maybe making their first property investment. If you need clarification of any of these definitions, please let me know...I'm happy to explain further.
Discount: A reduction in the interest rate offered by the lender, usually for an additional fee referred to as discount points. A form of loan fee, sometimes called a buy-down.
Earnest-money agreement: Also known as the sales contract, it is a written agreement between the purchaser and seller setting forth all terms and conditions of the sale. This "good faith" agreement is accompanied by a sum of money (earnest money) given to bind the sale.
Escrow: Process which is performed by a third party which makes certain the interest of the buyer and seller and lender are satisfied.
Equity: The interest or value which an owner has in real estate, over and above the mortgage or debt against it.
: Lenders require this when the borrower makes a low down payment, usually a amount less than 20 percent of the purchase price.
Loan to value ratio: The relationship of the loan amount to the appraised value of the property or the sale price, whichever is the lower. The ratio is usually expressed as a percentage.
Lien: The right given by law to satisfy debt. A legal claim of one person or company on the property of another for purposes of securing a debt.
And last but not least...
Negative amortization: Occurs when the monthly payment is not enough to pay interest on your loan. The unpaid interest is added to the unpaid balance of the loan. Instead of reducing the amount you owe, negative amortization means you owe more than you initially borrowed. This usually occurs only on certain adjustable-rate mortgages.
Well, I think that's enough for this post. Again, please let me know if you have any questions about these definitions, or again, would like to ask for a definition I haven't covered.
We hope you have a fantastic, safe, and prosperous new year. Thank you for your friendship, trust and business throughout the year...we wouldn't be here without you!!
The Craig McKenzie Team
Craig and Debbie