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Real Estate Terms & Definitions

Adjustable Rate Mortgage (ARM)
interest rates on this type of mortgage are periodically adjusted up or down depending on a specified financial index

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 for a loan, including points and fees, in addition to the stated interest rate

an expert opinion of the value or worth of a property

Assessed Value
the value placed on property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value

Balloon Payment
a large principal payment due all at once at the end of some loan terms

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 to buyer and documents are recorded

the deed to property is legally transferred from seller to buyer and documents are recorded

Closing Costs
see "Settlement"

a fee (usually a percentage of the total transaction) paid to an agent or broker for services performed

Comparative Market Analysis (CMA)
a survey of 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

a condition in a contract that must be met for the contract to be binding

a binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property)

a legal document that formally conveys ownership of the 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 a lender

the value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgage and liens

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."

a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to property and belongs to the property when it is sold

Hazard Insurance
compensates for property damage from specified hazards such as fire and wind

the cost of borrowing money, usually expressed as a percentage rate

a security claim on property until a debt is satisfied

Listing Contact
an agreement whereby an owner engages a real estate company for a specified period of time to sell property, for which, upon sale, the agent receives commission

Market Value
the price that is established by present economic conditions, location and general trends

Market Price
the actual price at which property is sold

security claim by a lender against 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

principle, interest, taxes and insurance, forming the basis for monthly mortgage payments

one percent of the loan principle. 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

one of the parties to a contract; or the amount of money borrowed, for which interest is charged

divide or assess proportionately

Purchase & Sale Agreement
see "Contract," or refer to "Purchase and Sale Agreement" in this guide

all financial transactions required to make the contract final. See "Settlement - Who Pays What?" in this guide

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 that there are no legal encumbrances.

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