Make Sense of those Confusing Real Estate Conversations
Buying or selling a home can be stressful. But what may be even more stressful is having a conversation with your realtor or mortgage lender where you don’t really understand what they are talking about. Here’s a quick dictionary for you to help navigate those tricky conversations.
A mortgage lender will provide you with a letter stating based on an initial look at your financials you are qualified to buy a house within a certain range. Most sellers will look for a pre-approval letter when reviewing a contract to ensure the buyer is financially sound.
Escrow (Good Faith Check)
An agreed upon amount of money that the buyer gives as a gesture of good faith that they are serious about moving forward on the contract. The escrow check is held by either the listing or buyer’s agent and is given back to the buyer at closing.
The buyer pays a certified inspector to tour and report on the condition of the home. Once the report is complete, the buyer has an opportunity to negotiate any repairs or they could choose to terminate the contract without penalty.
A type of loan backed by the Veterans Administration that is available to American veterans. It allows the buyer to secure long-term financing without having to make a down payment but may have higher interest rates and stricter inspection standards.
A type of loan backed by the Federal Housing Administration that allows borrowers to make a lower down payment. FHA borrowers must pay mortgage insurance, which can increase their monthly payment. FHA loans also may have stricter inspection standards.
Any loan not covered by the Veterans Administration or Federal Housing Administration. A conventional loan allows the borrower to select their down payment usually without the additional cost of mortgage insurance.
A lender will always have a certified third party give their opinion on the price of the home. The appraiser will spend several hours touring the home and comparing like homes in the neighborhood to determine the home’s price. The appraiser must value the home at or above the loan amount or the lender will not approve financing.
Shortly before you are scheduled to close on your home, the closing attorney should send a statement for you to review. This closing statement will list credits and debits due to the seller and buyer, giving each party a total of what monies they will need to bring to or will receive at closing. It is important to review this carefully to ensure any monetary amounts or home warranties promised during contract negotiation are listed properly. It will be too late to change the closing statement on closing day.
A short sale will occur when a homeowner sells a house for less than the remaining loan. Short sales can be a lengthy process because they require approval from the lender.
A foreclosure can occur when a homeowner fails to pay their mortgage. The mortgage company can seize the property through a court order and evict the homeowner. The mortgage company would then try to recoup their loss by selling the home.
When preparing for closing, your closing attorney or title company will perform a title search to ensure the homeowner owns the property and is free to sell it. Title insurance defends the homeowner in court if someone else claims they have a right to the property.