Nestopedia

With ARM loans, interest rates can change after an initial fixed rate period as they adjust based on the interest rate index the ARM is tied to (e.g., LIBOR, COFI, etc.). This loan type is less predictable than a traditional fixed-rate mortgage, but it can potentially yield lower interest rates during certain periods.

A cash offer is an all-cash bid, meaning a homebuyer wants to purchase the property without a mortgage loan or other financing. These offers are often more attractive to sellers, as they mean no buyer financing fall-through risk and, usually, a faster closing time.

An appraisal is required to gather the estimated value of a piece of real estate. During the home sale, the mortgage lender sends out an appraiser to get a professional opinion of the value of the property. This helps the lender decide if the property is worth the amount of the loan the potential buyer is seeking.

An appraisal contingency is a clause that allows a buyer to dissolve a purchase agreement if a home’s appraised value is less than the sale price. An appraiser hired by the buyer’s lender evaluates the value of the home to ensure that the loan is secured by an appropriate home value. Lenders want to ensure they are not “over-paying” for a property.

A property marketed in “as is” condition usually indicates that the seller is unwilling to perform most if not all repairs. It could also mean that it is priced “as is”, which is typically lower than market pricing in the area. Finally, “as is” is in the condition at the time the offer was written, and should something happen to the property from the time the offer was written to the closing time which alters that condition, then that property is no longer “as is”, as it was, and should be brought back to its original “as is” condition at the time of offer, at the cost of seller. Or in the alternative, the seller should release the buyer from their obligation to purchase and refund the monies spent by the buyer, such as earnest money.

When a buyer is interested in purchasing a property that is already under contract with someone else, that buyer has an opportunity to submit a “backup offer”, in case the first transaction falls apart. A backup offer must still be negotiated and any monies, such as earnest money, submitted, to confirm it is the next offer in line. There can only be one backup offer legally, as you cannot have a backup to the backup.

When a buyer makes an offer on a property they haven’t seen, even when it was possible to see it, that offer is considered a “blind offer”. It is most commonly used in a highly competitive area and/or circumstance, and used as an attempt to be first and win quickly.

A cash-on-cash return is a rate of return often used in real estate transactions that calculates the cash income earned on the cash invested in a property. Put simply, cash-on-cash return measures the annual return the investor made on the property in relation to the amount of mortgage paid during the same year. It is considered relatively easy to understand and one of the most important real estate ROI calculations.

Closing is when the home sale is considered final, which typically includes all parties’ signatures on all required documents, all monies conveyed, and when a lender is involved, with full lender’s approval. For some markets across the nation, recording the deed with the county clerk’s office is the ultimate and final step of closing. Once all of these items are completed, then a buyer’s access to the property is then provided, and the buyer is considered the new homeowner.

Closing costs are an assortment of fees, including fees charged by: a lender, the title company, attorneys, insurance companies, taxing authorities, homeowner’s associations, real estate agents, and other closing settlement related companies. These closing costs are typically paid at the time of closing a real estate transaction.

DOM is defined as the number of days from the date on which the property is listed for sale on the local real estate brokers’ multiple listing service (MLS) to the date when the seller has signed a contract for the sale of the property with the buyer.

This is the investment a homeowner has in their home. To calculate equity, take the market value of the home and subtract any mortgages or liens against the property. The amount leftover is the amount of equity you have in the home.

The escrow holder is the agent and depositary (impartial third-party) who collects the money, written instruments, documents, personal property, or other things of value to be held until the happening of specified events or the performance of described conditions, usually set forth in mutual, written instructions from the parties.

FHA loans are part of a group of loans that are insured by the federal government. This means that instead of actually lending money, the FHA insures banks and private lenders that they will cover losses they might incur in the event that the borrower does not repay the loan in full or timely.

With fixed rate mortgages, your interest rate stays the same for the duration of the loan. They are often available as 10, 15, 20 & 30-year loans. The 15- and 30-year loan are by far the most popular type of home loans, accounting for about 75% of all U.S. residential mortgages, according to Mortgageloan.com.

Hard money loans are a way to borrow without using traditional lenders. Hard money lenders finance the loan based on the property in question, not on your credit score, and typically require a large down payment and short repayment schedule, according to Nerdwallet.

A home sale contingency gives the buyer a specified amount of time to sell and settle their existing home in order to finance the new one. This type of contingency protects buyers because if an existing home doesn't sell for at least the asking price, the buyer can back out of the contract without legal consequences.

Traditionally, when you purchase a home, you own the home and the land the property is built on. There are some circumstances that involve a land lease, which means you would own the home while paying rent to the landowner for the land.

a clause that allows buyers to cancel the contract of the home purchase with no penalties, and a refund of their earnest money deposit if they’re unable to secure a mortgage. When a buyer is ready to buy a property, the first step is to submit a purchase offer to the seller. If they haven’t been preapproved for a mortgage or aren't sure whether they’ll qualify for the appropriate loan, they can add a mortgage contingency to the offer.

Buyers make a formal offer on the home they want to purchase. The offer can be the full list price, or what you and your agent deem a fair market value. The buyer’s agent puts the offer in writing, asks you to sign it, and then submits it to the seller’s agent. The seller might immediately accept it, in which case it becomes the parties’ purchase contract, or may make what’s known as a counter offer. It’s the art of negotiation, recorded in paperwork.

Getting pre-approved requires home buyers to fill out an application that allows a lender to determine their financial situation, including their debt-to-income ratio, ability to repay and credit-worthiness. Once this is in hand, the lender can give the buyer a letter stating the exact loan amount they have been pre-approved for along with the total sales price they are approved for. The letter will usually indicate both the buyer’s estimated down payment along with the potential interest rate. Because it is much more thorough than a pre-qualification letter, most sellers prefer to see a pre-approval letter with an offer.

A pre-qualification is a lender’ estimate of the amount a home buyer can expect to be approved for during the loan process. Getting pre-qualified is a quick assessment by a lender of the buyer’s financial situation based solely off of what a buyer tells a lender, and not based with any proof or verifications.

A preliminary report reveals any issues with a title that need to be dealt with by the seller in order to deliver a clear title. It gives details such as ownership history, liens, and easements. The title company gathers this report by searching existing property records at the county recorder’s office. This report is required for a title insurance company to issue a title insurance policy. Most lenders require borrowers to purchase title insurance coverage to protect their interest in a property. It’s customary in many areas for a seller to pay for this policy, although it is a negotiable item.

A seller’s disclosure is a disclosure by the seller of information about the property, or which could affect a buyer’s decision to purchase the property, all of which to the best of the seller’s knowledge.A seller must also indicate items which are not specific to the property itself but related to a person’s enjoyment of the property, such as pest problems, property line disputes, knowledge of major construction projects in the area, military base related noises or activities, association related assessments or legal issues, unusual odors caused by a nearby factory, or even recent deaths on the property as permitted by law.

In a short sale, the property is being sold for less than the debt secured by the property. Short sales will require the approval of the seller’s lender(s) as the proceeds of the sale will be just “short” of the amount owed; most lenders’ processes of approving short sales are long and drawn out, requiring more time to close than a traditional sale.

Tenancy in common describes a type of joint ownership of a property, whether a single family property or a commercial building. The tenants in common all own the property, but in different ratios. Depending on the property type will determine the ease or difficulty in securing financing. Also to note, tenants in common do not have the right to survivorship (the surviving owners do not get to split up the deceased tenant’s property interest), and instead, the deceased tenant’s ownership interest/percentage actually falls to their own estate, as defined by their will or the governing law.

A trust sale means that the home is being sold by a trustee of a living trust – and not a private party. More often than not this is because the original homeowner has passed away, or has placed their assets in a living trust.The trustee may not be as emotionally attached to the property as a traditional owner, which could translate to them accepting a less attractive offer as the trustee may prefer to offload the property.