This is in continuation to my previous two blog posts to understand the real estate terminology. This post explains some of the important residential real estate terms from O to V. Before I begin, it will be helpful to remind you that this post is intended to cover information about some basic real estate terms. We are sure that these have been and are informative and worthwhile reading for you. Must share your review and feedback with us because your opinions do matter a lot!
Offer: Indication by a potential buyer of willingness to purchase a home at a specific price; generally made in writing.
Origination: This is the process of preparing, submitting, and evaluating a loan application. It generally includes a credit check, verification of employment, and a property appraisal.
Origination Fee: The charge for originating a loan; is usually calculated in the form of points and paid at closing.
Partial Claim: A loss mitigation option offered by the FHA (Federal Housing Administration) that allows a borrower, with help from a lender, to get an interest-free loan from HUD (Housing and Urban Development) to bring their mortgage payments up to date.
PITI: Principal, Interest, Taxes, and Insurance – are the four elements of a monthly mortgage payment. While the payment of principal and interest amount go directly towards repayment of the loan, the balance goes into an escrow account to cover payment of taxes and insurance whenever due.
PMI: Privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price; are termed as Private Mortgage Insurance.
Pre-Approve: is when a lender commits to lend to a potential borrower. This commitment remains if the borrower meets the qualification requirements at the time of actual purchase.
Pre-foreclosure Sale: Allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.
Pre-qualify: A lender informally determines the maximum amount an individual is eligible to borrow.
Premium: An amount paid on a regular schedule by a policyholder to maintain insurance coverage.
Prepayment: Payment of the mortgage loan before the scheduled due date. This may attract a prepayment penalty.
Principal: The amount borrowed from a lender; and does not include any interest or fees.
Radon: A radioactive gas found in some homes that can cause health problems, if present above tolerance levels.
Real Estate Agent: An individual who is licensed to negotiate and arrange real estate sales; and generally works for a real estate broker.
Realtor: A real estate agent or broker who is a member of the National Association of Realtors, and its local state associations.
Refinancing: Paying off one loan by obtaining another; refinancing is generally done to secure better loan terms.
Rehabilitation Mortgage: A mortgage that covers the cost of rehabilitating (repairing or improving) a property. Some rehabilitation mortgages such as the FHA’s 203(k) allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.
RESPA: Real Estate Settlement Procedures Act; is a law to protect consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships.
Settlement: Another name for closing.
Special Forbearance: A loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.
Subordinate: To place in a rank of lesser importance or to make one claim secondary to another.
Survey: A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.
Sweat Equity: Using labor to build or improve a property as part of the down payment.
Title 1: An FHA-insured loan that allows a borrower to make non-luxury improvements (such as renovations or repairs) to their home; Title-1 loans of less than $7,500 do not require a property lien.
Title Insurance: Insurance that protects the lender against any claims that arise from arguments about ownership of the property.
Title search: A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.
Truth-in-Lending: A federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.
Underwriting: The process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower’s credit history and a judgment of the property value.
VA: Department of Veterans Affairs: a federal agency which guarantees loans made to veterans. It is similar to mortgage insurance, and protects lender against loss that may result from a borrower default.