I was surprised to read an article on first time buyers and some of the items they could not define BUT the darn article did not define them so here goes…
- Deed – This is the instrument that transfers ownership of the property from one party to another.
- Note – This is the evidence of the debt incurred (loan) by the Buyer to purchase the property. It is NOT recorded in the public record.
- Mortgage – This is document which pledges the property as collateral should the note not be repaid and placing conditions on the maintenance of the property such as it being insured and the taxes being paid. It IS recorded in the public record.
- Appraisal – This is a valuation of the property typically ordered by the bank. What’s the collateral worth?
- Assessment – This can be many things but it typically from a condominium or an HOA for something like concrete restoration that was not budget for. Or, it can be from a public body for something like a road or sewer extension.
- Principal – This is the amount you owe to the lender. At the start of the loan it say starts out at 100k and then as you make payments each month a portion of the payment goes to interest and a portion to paying down the debt or the principal.
- Escrow – Again in a real estate transaction it could be many items. A buyer will place funds into escrow, with the Escrow Agent, when they first go to contract to show that are serious buyers and in the event of a default by them it goes to the seller. Or it could be the money which the buyer will place with their lender so that the lender can pay things like the annual tax bill and insurance bill.
- HOA – Home Owners Association.
- COA – Condominium Owners Association.
- Earnest money – The money placed with the Escrow Agent noted above.
- Amortization – The changing amount of principal and interest in the monthly payment tot he lender. It is NOT the same every month. Google loan amortization table and you can play around with it.
- ARM – An Adjustable Rate Mortgage is one which the interest paid on the loan periodically adjusts to some published rate plus a “spread”.
- PMI – Purchase Mortgage Insurance
- FRM – Fixed rate mortgage
- PITI – Principal + Interest + Taxes + Insurance = Monthly Payment.
