Do you hear your real estate agent using words you don’t know? Here is your guide to understanding real estate lingo…
- Comparative Market Analysis (CMA): A CMA is a study of how comparable homes in the area have sold to help you determine a price for a property. You or your agent will need to do a CMA to price your home right. If you are a buyer, you will want a CMA done on the house you are looking to buy before making an offer.
- Appraisal: An appraisal is the act of judging the value, condition, or importance of something. You will want an appraisal on the house you are planning to buy. The appraisal will tell you the value of the property.
- Debt to Income Ratio: This is the ratio between your debt & income. Your debt cannot exceed 43% of your income. You will hear this term used when applying for a loan.
- Pre-qualification: This is the process to determine if a borrower is qualified for a loan. You will want to be pre-qualified before shopping for your home so that you know what you can afford. You also will want proof that you are able to buy when you make an offer. This will tell the seller that you are serious.
- Principle and Interest: The principle is the amount of the loan. The interest is the amount you are paying to the lender to use their money. When figuring your mortgage payment, you will hear the lender talk about your “principle and interest” payment. Taxes, insurance and PMI are added to the principle and interest payment to give you your monthly mortgage payment amount.
- Escrow: This is an account where you will put money to hold. When you make an offer, you will put earnest money in escrow to hold until closing. After closing, the taxes and insurance part of your mortgage payment will be put in an escrow account to hold until they become due once each year. (Read more about escrow here)
- Earnest Money: Earnest money is a payment made to the seller to show serious intention of buying the home if an agreement is reached.
- Contengencies: Contengencies are conditions that must be met before an offer can proceed. Contengencies are listed in the offer and agreed upon by both parties.
- Mortgage: The loan you take out on your home.
- Private Mortgage Insurance (PMI): The purpose of mortgage insurance is to reimburse the lender if the borrower defaults on the loan. The borrower will pay the premiums.
- Loan to Value Ratio: This ratio is used by the lender to determine if the value of the loan is worth the risk involved.
- Closing Costs: Closing costs include all of the fees, commissions, and expenses involved in closing on a home. Usually closing costs are around 6% of the purchase price of the home.
- Home Owners Association (HOA): The HOA is an organization that sets rules and regulations for a particular neighborhood or community.
Our goal is to keep you well informed, and we feel that it is necessary for you to understand what your real estate agent and your lender are talking about when they use these common buzzwords. If you ever have any questions, don’t hesitate to ask. Your satisfaction is our #1 goal. Call us anytime @ 720-593-2014. We look forward to hearing from you!
Sources: bankrate.com, househunt.com, wikipedia.com