Why understand the terminology when buying a Kingsland, Georgia home? Being able to speak the language with your real estate agent or mortgage representative is paramount to quality communication. When you can speak with your agent or mortgage representative using their language you will be better equipped to make proper decisions. Yes it is true that your real estate agent and mortgage representative speak in terms you can understand, but since you are on this site educating yourself I'd like to assume you have a genuine desire to elevate your knowledge base when looking to buy a home.
Here are some of the basic terms to know when looking at Homes For Sale in Kingsland, Georgia:
Appraisal: The actual value placed on the home by an appraiser. This is the number the bank uses to consider whether or not they will loan money on the home. The appraisal is a comparison of similar homes sold within the past few months and within the same neighborhood. Adjustments are made to account for larger, smaller, pool, no pool, 2 car garage vice 1 car garage, etc. Although a buyer may be (pre)approved to buy a home up to $150,000 if the home is only worth $140,000 the bank will not mortgage more than $140,000. The buyer can opt to use their own money to pay the difference, but we never see that happen. Afterall, why would anyone pay more than the home is worth?
Closing Attorney: The attorney that closes the loan. The attorney will do all the research on the property to ensure there are no obvious problems with the title. The lender will send all of their final loan documentation to this attorney to be signed and then send all the money to the attorney. After all the documentation has been completely and properly signed, the attorney will release the funds to the appropriate parties.
Closing Costs: These are the costs to obtain a loan and purchase the home. A home purchase without a loan will have minimal costs involved when compared to a home purchase that involves a loan. Some of the costs are a percentage of the loan (loan origination fee is typically 1%) while other costs are set no matter the purchase price (residential appraisals are typically around $400). Other closing costs are the attorney's fee, a property survey, underwriting fees, credit report fees, courier fees, etc. It is even possible, when properly negotiated, to wrap the escrow setup for taxes and insurance into closing costs.
Discount Points: This is a fee charged by the lender to "buy down" the interest rate. Many home buyers will shop for rates and find a decent interest rate (i.e. 6.25%) and then buy the rate down by paying one discount point (1% of the loan) resulting in an interest rate of 6%. Whether or not a buyer should take this approach depends on how long they plan on living in the home. If a discount point cost them $1500, the lower interest rate saves them $25 per month off their payment, it would take them 60 months (5 years) to break even. If they plan on living in the home 10 years it will payoff - if they move in 48 months (4 years) they have lost money on the decision to buy down their interest rate.
Home Inspection: After you have a home "under contract" you should have a home inspection done. It is not a legal requirement, but it is smart decision making. You as the buyer will select and pay a home inspector to go through the home from top to bottom. A good home inspector will go in the attic, on the roof, run water, check the basics of the heating and cooling system, etc. They will create a report explaining any issues they discovered and may even provide a list of suggestions to repair. Home inspectors often charge by the size of the home, but we generally find the typical home inspection will cost the buyer about $250-$350.
HUD-1: This is the form number for the Housing and Urban Development (HUD) document that is used when closing a real estate transaction. There are often a lot of other documents to be signed at the closing table, but this is the one that provides a complete breakdown of each party's costs. It is broken down into two columns; one for the buyer and one for the seller.
Loan Originator: Your mortgage representative. This is the person you will deal with for your loan, typically on the telephone or face-to-face. They will request all your income and expense documentation, pull your credit, etc. They will submit your application package to the underwriter.
Mortgage Pre-Qualification: Having a professional mortgage representative review your credit report, income and expenses, then telling you approximately how much money you can spend on your new home. It is all done locally and the mortgage representative is providing guidance and suggested purchase price based on their experience. This pre-qualification is not a guarantee; it is a rough estimate. If there are any issues or surprises on your credit report the mortgage representative can provide you guidance on how to remove the surprises.
Mortgage Pre-Approval: Much like a pre-qualification but it is going the extra step. The mortgage representative will have you, with their help, complete a mortgage application. In addition they will collect all documents proving your income(s) and expenses to complete the application package. This application package is sent to an underwriter just as if you have already started to buy a home (if you are doing it correctly you should not have already found a home). The underwriter reviews it according to lending rules and regulations and then approves your loan. Now when you find your new home you already know you can afford it and have been pre-approved for the loan necessary to buy it.
Mortgage: A mortgage is a conveyance or contract that pledges real or personal property as security for the performance of an obligation, usually the payment of a debt. The term comes from the Old French "dead pledge," apparently meaning that the pledge ends (dies) either when the obligation is fulfilled or the property is taken through foreclosure.
Purchase and Sale Agreement: The contractual offer to purchase the home. Currently the Georgia Association of Realtor version of the agreement is about seven pages long, plus additional exhibits or addendums. The purchase and sale agreement spells out all the terms, cost, obligations, expectations, price, etc on the purchase. When a disagreement arrises during the contract period (after the contracts are signed but before the closing) the purchase and sale agreement and any attached exhibits/addendums will dictate who is responsible for what actions.
Real Estate Agent: Like an attorney that is licensed by the state to practice law a real estate agent is licensed by the state to practice real estate. They must pass a class, a class room test, and then the state test before receiving a real estate license. In order to be compensated (legally) for assisting another business or individual in the sale, purchase, rental, property management of real property, a person or organization must hold a real estate license. You do not need a license to buy or sell your own real property.
Realtor: A real estate agent that has gone a step further than simply becoming a real estate agent. A real estate agent that has become a Realtor has become a member of a national organization with standards and ethics. There are extra costs involved to become a member, extra opportunities for education, a Code of Ethics that must be adhered to, and a bigger impact on the community. A comparison is that of the medical field; go to medical school and become a doctor, then as a Doctor, join the American Medical Association.
Termite Letter: A report created by an extiminator that has inspected the property. The letter either discloses evidence of current or previous termite issues, or discloses that there is no evidence of activity. Often a preliminary letter is done by the seller as they put the home on the market, but it is ultimately the buyers responsibility an must be done within 30 days of closing.
Underwriter: The person that works for the mortgage company that compares your loan application package against the financing guidelines and regulations. You may be informed that your application is in "underwriting" or on the desk of the "underwriter" but you will probably never meet this individual in person. It is their job to ensure the loan meets all requirements and judges the risk of foreclosure. |