Louisville's Top Real Estate Terms Defined
Red Edge has found buyers ask what these terms mean the most. Read the top 25 terms to put a new wrinkle in your brain.
- Acceptance: the date when both parties, seller and buyer, have agreed to and completed signing and/or initialing the contract.
- Adjustable Rate Mortgage: a mortgage that permits the lender to adjust the mortgage’s interest rate periodically on the basis of changes in a specified index. Interest rates may move up or down, as market conditions change.
- Appraisal: an estimate of real estate value, usually issued to standards of FHA, VA and FHMA. Recent comparable sales in the neighborhood is the most important factor in determining value
- Closing: typically is overseen by a Real Estate Attorney, the Seller signs the deed, you sign a new mortgage, the old loan is paid off and the new loan is established. Seller(s), Agent(s), Attorney(s), Title Company and other service providers for the parties are paid. Keys are given from the Seller to the you!
- Deed: a written instrument, which when properly executed and delivered, conveys title to real property.
- Earnest Money: money deposited by a buyer under the terms of a contract, to be forfeited if the buyer defaults but applied to the purchase price if the sale is closed.
- Easement: the right to use the land of another.
- Equity: the value of real estate over and above the liens against it. It is obtained by subtracting the total liens from the value.
- Escrow Payment: that portion of a mortgagor’s monthly payment held in trust by the lender to pay for taxes, hazard insurance and other items as they become due.
- Fannie Mae: nickname for Federal National Mortgage Corporation (FNMA), a tax-paying corporation created by congress to support the secondary mortgages insured by FHA or guaranteed by VA, as well as conventional loans.
- Federal Housing Administration (FHA): an agency of the U.S. Department of Housing and Urban Development (HUD). Its main activity is the insuring of residential mortgage loans made by private lenders. The FHA sets standards for construction and underwriting but does not lend money or plan or construct housing.
- FHA Insured Mortgage: a mortgage under which the Federal Housing Administration insures loans made, according to its regulations.
- Fixed Rate Mortgage: a loan that fixes the interest rate at a prescribed rate for the duration of the loan.
- Foreclosure: procedure whereby property pledged as security for a debt is sold to pay the debt in the event of default.
- Freddie Mac: nickname for Federal Home Loan Mortgage Corporation (FHLMC), a federally controlled and operated corporation to support the secondary mortgage market. It purchases and sells residential conventional home mortgages.
- Lease with Option: a contract, which gives one the right to lease property at a certain sum with the option to purchase at a future date.
- Loan to Value Ratio (LTV): the ratio of the mortgage loan principal (amount borrowed) to the property’s appraised value (selling price). Example – on a $100,000 home, with a mortgage loan principal of $80,000 the loan to value ratio is 80%
- Mortgage: a legal document that pledges a property to the lender as security for payment of a debt.
- Mortgage Insurance Premium (MIP): the amount paid by a mortgagor for mortgage insurance. This insurance protects the investor from possible loss in the event of a borrower’s default on a loan.
- Note: a written promise to pay a certain amount of money.
- Origination Fee: a fee paid to a lender for services provided when granting a loan, usually a percentage of the face amount of the loan.
- Private Mortgage Insurance (PMI): see Mortgage Insurance Premium.
- Settlement Statement (HUD-1): a financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.
- Title Examination: copies of documents are gathered from various public records: deeds, deeds of trust, various assessments and matters of probate, heirship, divorce and bankruptcy are addressed. Verification of the legal owner and debts owed.
- Title Insurance: an insurance policy that protects the insured (buyer or lender) against loss arising from defects in the title.