Monday, January 7, 2013

The Real Estate Dictionary Part 2

Welcome back for Part 2 of our Basic Real Estate Definitions Blog Series. Click Here if you missed Part 1.

Basic Real Estate Definitions - F - Z

Foreclosure. A foreclosure occurs when a home owner is no longer able to pay their mortgage. If they are not able to refinance, work with their lender, or qualify for one of the current government assistance programs, the foreclosure process will begin. Eventually, the bank/lender takes the home back and works to resell it - hoping to get (at least) a return on their original investment. Fortunately, current California foreclosure rates are beginning to decline.

Home Equity Line of Credit. If the real estate market continues to go up over time, your home will become more valuable. If the difference between the current cost of your home, and the amount you originally paid, is positive - then you have gained equity. You can use this equity and apply for a loan which is granted on the amount of your equity, rather than your income, and receive payment for a predetermined amount.

Home Inspection. A home inspection protects you, the buyer, from purchasing a home which has inherent structural damage which you would be forced to deal with in the future. Depending on the outcome of the inspection, you may forgo the home altogether, or negotiate for a better price to compensate for the repairs which need to be made.

Homeowner's Association. (HOA
). If you are buying new construction, or a condominium, you may be joining an HOA. The responsibilities of the HOA vary, but you will pay a monthly fee and that fee will cover certain improvements, upkeep, and amenities.

Lease Option. This is a creative option which allows the buyer and seller to negotiate a sales price and a monthly rent. A certain portion of the rent and/or additional funds can be put towards the down payment on the house. This is a good way for buyers to see if they really want to purchase a house before committing.

Loan Servicing.
Just because a certain lender issues your loan, doesn't mean you will always make payments to that lender. Loan servicing companies can "buy" the loan, or manage the loan, and you will receive paperwork regarding the transfer and make your payments to the loan servicer.

Mortgage Insurance (MI). This is usually required by lenders if your loan is for more than 80% of the total purchase price. You will pay a little extra to insure them should you eventually default on your loan.

PITI (Principal, Interest, Taxes & Insurance). These days, most loans are "compounded" and each of these fees is already built into your monthly mortgage total. However, if you opt not to take a compounded loan, your lender will incorporate PITI costs when calculating your debt-to-income ratio.

Title Company. This is the agency that examines and insures that the property title(s) is clear before the transaction is complete. In California, most Title Companies also handle the escrow funds.

Now you can conquer the real estate world with new-found real estate vocabulary fluency. Good Luck!

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