13 TERMS You Need to Know to Buy a House

in Purchasing a Home by Michael Archbold On 11 days ago 60 Views

The mortgage and real estate industries are full of terms we rarely hear in everyday life. Below are the most commonly used words and phrases that you’ll hear from your realtor or loan officer during the buying and selling processes; 13 terms you need to know to buy a house.

AMORTIZATION – To pay off gradually, usually by periodic payments of principal and interest or by payments to a sinking fund.

CLOSING DISCLOSURE – The closing disclosure outlines the costs and fees associated with the loan for the borrower. It lists closing fees as well as monthly payments for the borrower’s new mortgage. Borrowers will review and sign a copy of the final closing disclosure at the closing.

CONTINGENT OFFER – All purchase contracts have basic contingencies built-in. Two examples of standard contingencies are: the home must appraise at or above the agreed-upon offer price and the buyers have the option to request changes to the contract as the result of a home inspection. A “contingent offer” has all of the elements and contingencies of a standard purchase offer but with one or more additional provisions that could negate the original purchase offer. An example of a non-standard contingency is the completed sale of the buyer’s previous home.

DTI – DTI is the debt-to-income ratio. The underwriter uses this to help determine the level of risk that a mortgage applicant presents.

EARNEST MONEY – Earnest money is provided from the buyer to the seller during the initial purchase offer to boost their offer. It is applied toward the buyer’s costs at closing. If the amount of earnest money exceeds the buyer’s closing costs, then the earnest money can become part of the down payment.

FICO – An applicant’s FICO score (also known as credit score) is calculated by the major credit repositories and is helpful to the underwriter in determining risk.

FIXED RATE – Unlike an ARM, a Fixed Rate Mortgage retains the same interest rate throughout the life of the loan.

LOAN ESTIMATE – The loan estimate provides important details about a requested mortgage loan. Including the estimated interest rate, monthly payment, closing fees, and more.

LTV – The loan-to-value ratio (LTV) represents the percentage of a home’s appraised value being financed. LTV is another useful piece of information for the underwriter.

PITI – Borrowers who utilize an escrow account will pay the standard principal and interest (PI) but will also include taxes and insurance (TI) in their monthly payment. Escrow accounts are common in most states, especially on loans with a high LTV.

PMI – PMI means private mortgage insurance, which is the premium that accompanies some conventional loans with a high LTV. Both of these acronyms refer to insurance that covers the lender’s losses in case the borrower defaults on the loan.

PRE-APPROVAL – A loan is granted after a collection of some basic information. It is not a guarantee of a loan offer, but it is a great place to start.

PURCHASE AGREEMENT – The contract to purchase a piece of real estate. Purchase agreements are state-specific because real estate law varies by state.

Consider these 13 terms you need to know to buyer a house.

Information courtesy of: Ruoff Mortgage Company, Inc., d/b/a Ruoff Mortgage, is an Indiana corporation. For complete licensing information visit http://www.nmlsconsumeraccess.org/EntityDetails.aspx/COMPANY/141868. This is not an offer for extension of credit or a commitment to lend. All loans must satisfy company underwriting guidelines. Information and interest rate are subject to change at any time and without notice. Equal Housing Lender. NMLS#141868. 03202024

13 TERMS You Need to Know to Buy a House | RE/MAX Results | Hoosier Home Listings | Michael Archbold

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The consummate professional, Michael Archbold (Associate Broker, REALTOR, ePro) brings a diversified background to the world of real estate. Born and raised in Fort Wayne, Mike graduated Wayne High School in 1992. He received bachelors degrees in Accounting in 1997 from Indiana University and Information Technology in 2005 from Indiana Wesleyan University. Mike comes to RE/MAX with more than 20 years of experience in sales and accounting. He began his career in real estate in 2000 as an investor.