Real estate is a very broad subject. So, of course, you won’t become an expert by reading a few articles in a week. It requires more grind.
However, whether you learn the ins and outs or not is secondary. If you’re planning to buy or sell a property, there sure are a few fundamentals that you should have a basic idea of at the very least. And this is true even if you’re working with top real estate agents and they are guiding your purchase or selling decision. It’s a good idea to be self-sufficient and be able to make your own real estate buying/selling/investing decisions on a broader level.
Here are 15 real estate terms you should know:
Amortization means paying off debt in regular installments over a set amount of time and is a key feature of a mortgage loan. A mortgage calculator lets you calculate your monthly payments, amortization schedule, and more based on your needs.
2. Cost of Funds Index (COFI)
A cost of funds index (COFI) is an index that represents a monthly average of interest expenses by savings institutions, mortgage companies, and other financial institutions. It’s used as the basis for variable mortgage rates that are tied to COFI.
3. Down payment
The down payment is the amount of money that you, the buyer, put towards the purchase of your home. Generally, you will have to pay between 3-20% of the purchase price, depending on a number of factors relating to your mortgage lender, your creditworthiness, and the type of loan that you’re applying for.
An encroachment can occur when the property line of one property owner ends, and the property line of the other owner begins at a particular point. If a structure from one property extends over that line, it is an encroachment.
Escrow is a legal concept where a neutral third party holds and regulates the payment of funds required for two parties involved in a given transaction.
Foreclosure is a legal process that allows a mortgage lender to seize property, evict the homeowner and sell the home after the owner has failed to make their monthly mortgage payments for an extended period of time.
7. Lease option
A lease option is a contract for the purchase of the real estate in which the buyer opens an escrow, makes a payment, and then exercises the option by buying the property later on, but until the sale occurs, the buyer is only renting it.
The loan-to-value (LTV) ratio is a percentage that shows how much of a home is financed with a loan. It is a critical component of mortgage underwriting, whether for the purchase or re-finance of a home.
9. Lock-in period
The lock-in period is the length of time a borrower must commit to before their loan becomes eligible for full repayment without penalty.
10. No-cost mortgage
No-cost mortgages simply involve the lender paying your settlement costs, but it will cost you more in the long run. The difference between no-cost and low-cost mortgages often comes down to a few points of APR. For example, the general interest rate for a no-cost mortgage may be five percent, whereas for a low-cost mortgage it may be 4.5 percent.
PITI stands for Principal, Interest, Taxes, and Insurance.
12. Quitclaim deed
A quitclaim deed is a legal instrument used to transfer real property from one person, called the grantor, to another person, called the grantee. Quitclaim deeds are often used when transferring property between family members or to clear up questions about who owns what interest in a piece of property.
13. Real estate agent
Real estate agents help people buy property, sell property, rent property and make a commission from each transaction. Real estate agents often work in tandem with real estate brokers but have different certifications.
14. Short sale
A short sale is a real estate transaction designed to circumvent foreclosure. It occurs when a homeowner cannot keep up with their mortgage payments and sells the property for less than what is owed on the mortgage.
The home title is the legal right to the home, which you will own once the home sales transaction is complete. The title of a property includes information about the deed, encumbrances, liens, and other issues that affect the ownership of the property.
Need help in buying or selling a property?
As mentioned, just by spending some time learning about the ins and outs of the real estate market won’t be an expert. So, if you’re looking to buy or sell a property, consider getting help from top real estate agents. Consult them and make the right purchase or sell decisions.