For many people, the most intimidating part of buying a house is dealing with the realtor. It is not handing over a huge check for a down payment or even the shopping process itself that raises their anxiety to an unthinkable level. It is often the confusion and frustration that comes along with trying to understand what the realtor is saying half the time.
Below are a few of the most confusing terms you will likely hear during your home buying process.
- Acceleration Clause – This clause in your home mortgage permits your lender to demand full payment for the outstanding balance. This is generally done if the individual transfers a title or defaults on their loan.
- Assessor – The value of a property is established for taxation purposes by the public official known as the assessor.
- Balloon Mortgage – The remaining principal balance of this mortgage loan needs to be paid by an agreed upon point in time. The final lump sum paid at the end is called a balloon payment.
- Common Areas – There are areas owned by a planned unit development. A few examples include swimming pools, parking areas, entryways, stairwells, elevators, and recreational facilities.
- Common Law – This unwritten body of law is something used in America, but it is based on a general custom in England.
- Cost of Funds Index (COFI) – Interest rate changes for some adjustable-rate mortgages is often determined using the Cost of Funds Index. It is the weighted average cost of borrowings, advances, and savings of financial institutions.
- Encroachment – This is a property improvement that extends illegally beyond your property.
- Escrow Analysis – This is performed annually by your lender to make sure you are being charged the correct amount for all anticipated expenditures.
- FHA Mortgage – The Federal Housing Administration ensures this type of mortgage. It is often called a government loan.
- Life Cap – If you have an adjustable-rate mortgage the life cap is the maximum amount that the interest rate is permitted to fluctuate up or down until the lease ends.
- Note – This legal document states that the borrower is to repay his mortgage loan at a known rate by a specific point in time.
- Rate Lock – If a lender allows you to lock in a rate, you have a specified amount of time to secure a loan at the special rate.
- Title Search – To ensure the seller is indeed the owner of the property you are interested in, you will perform a title search. This will also tell you if there are any outstanding claims or liens against the property.
- Two-step Mortgage – This adjustable rate mortgage starts with one interest rate for a specified number of years, and then has a different rate for the remainder of the loan.
- Vested – If an individual is vested, he is permitted to use a portion of his individual retirement fund or a similar source in the transaction.