![]() Many years ago, I worked in banking while my husband worked was (and still is) in water chemistry. Each one of us had our own terms that we used on a daily basis, and while I knew what I was saying, I had absolutely no idea what he was talking about. Real estate terms are the same. If you do not use them on a daily basis, the definitions may not be on the tip of your tongue. There are also some that are confusing and you may think you know what the term means, but you may be a bit off in your definition. I’m not judging, I don’t know the terms that you use in your industry, so you can’t expect to know all of the terminology in mine. Here are some of the terms that I see people having the most questions about: ![]() “First Time Home-Buyer” - Raise your hand if you know what this means. Now 75% of you need to lower your hands. Most people don’t realize that first time home buyers might have actually bought a home before. The term refers to anyone who has not owned a home in the last 3 years. “LTV” - This stands for Loan to Value. If you buy a home and your down payment is 3%, than your Loan to Value (LTV) is 97%. “FHA Inspection or Appraisal” - The Department of Housing and Urban Development (HUD) requires the appraiser to determine the current market value. But they also require a property inspection to make sure the home meets HUD's minimum standards for health and safety. This “inspection” should not be confused with a home inspection. It does not find all the flaws that a licensed home inspector would find. All this does is make sure that “minimum standards” are met, so you still need a home inspection as well. ![]() “Appraised Value” - An opinion of a property's fair market value, based on an appraiser's knowledge, experience, and analysis of the property. No to be confused with... “Assessed Value” - The valuation placed on property by a public tax assessor for purposes of taxation. The assessed value of a property is almost always lower than it’s appraised value. “PITI” - This is what your monthly mortgage payment consists of. It stands for Principal, Interest, Taxes and Insurance. In most mortgage payments for your primary residence, lenders will make the payments for your property taxes and home insurance. It’s their way of making sure that the home is insured, and that the city won’t be foreclosing on you for non-payment of taxes. ![]() “HUD-1 Settlement Statement” - A document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow amounts. The totals at the bottom of the HUD-1 statement show the seller's net proceeds and the buyer's net payment at closing. The HUD1 statement is also known as the "closing statement" or "settlement sheet." “Real Estate Settlement Procedures Act (RESPA)” - A consumer protection law that requires lenders to give borrowers advance notice of closing costs. “Amortization schedule” - A table that shows how much of each payment will be applied toward principal and how much toward interest over the life of the loan. It also shows the gradual decrease of the loan balance until it reaches zero. “PMI” - This stands for Private Mortgage Insurance. When your down payment is less than 20%, you usually have to pay for Mortgage Insurance (PMI). This protects the lender in case you don't make your house payments, they repossess your house, and they have to sell it for less than what is still owed. I have most certainly missed a few definitions, but these are the ones I most commonly get asked about. If there is another definition you would like, or a term that you have questions about, call or email me at anytime and I would be more than happy to help you out!
Michele Boyer, REALTOR Magnolia Properties 386-315-4162 boyer33@gmail.com
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