First time buyers face a learning curve that can feel overwhelming if the right level of support and education is not available. It's not enough to merely educate one's self on buying strategies, mortgage application, and closing process. Buyers must also navigate through a sea of unfamiliar legalese, home building lingo and real estate specific jargon.

The glossary below is by no means complete and is no substitute for the careful guidance of an experienced real estate agent, but it can serve as a good primer for consumers getting their feet wet in real estate for the first time.

This is the second installment, be sure to see part 1. 

Debt-to-Income Ratio
The ratio of total monthly debt payments (housing expenses, installment debts, etc.) to gross monthly income. Generally, the VA requires a ratio at or below 41 percent to guarantee a home loan.

Earnest Money Deposit - A deposit made by the potential home buyer as evidence of good faith that he or she is serious about buying the house.

Escrow - An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.

Equity - A homeowner's financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

Full Disclosure - In real estate, revealing all the known facts which may affect the decision of a buyer or tenant. A broker must disclose identified defects in the property for sale or lease.

Gift Letter
If your relatives can contribute additional funds in the event you don't have enough money to close a sale, they will need to send this to the lender, stating that the donor does not expect to be repaid. Donated funds must be verified before the home sale is closed.

Lien - A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

Loan-To-Value Percentage (LTV)
The relationship between the unpaid principal balance of the mortgage and the appraised value (or sales price if it is lower) of the property.

Lock-In
Written agreement guaranteeing the homebuyer a specified interest rate provided the loan is closed within a set period of time. The lock-in also usually specifies the number of points to be paid at closing.

Mortgage Banker
Company that originates mortgages exclusively for resale in the secondary market.

Mortgage Broker
Individual or company that for a fee acts as an intermediary between borrowers and lenders.

Origination Fee
A fee paid to a lender for processing a loan application; it is stated as a percentage of the mortgage amount.

Owner Financing
A property purchase transaction in which the property seller provides all or part of the financing.

PITI
Principal, Interest, Taxes, and Insurance, the components of a monthly mortgage payment.

Points
A one-time charge by the lender to increase the yield of the loan; a point is 1 percent of the amount of the mortgage.

Private mortgage insurance (PMI) - Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI when the amount borrowed exceeds 80% of the purchase price or home's value.

Property Taxes
Collected by local governments and included in your monthly payments, these are based on the assessed value of real property.

Helping you find your home is our goal
Getting you through the process is our expertise
 
 
Reechia & Keith
Plano Texas Real Estate