Welcome to this month’s continuation of Understanding Real Estate Terms. We covered A-L in August with Part One. Now it’s time for Part Two!
Real Estate terms can be confusing, especially when you’re knee-deep in a process you are unsure of. Use this glossary any time you stumble across a term you don’t recognize!
Multiple Listing Services (MLS) – This is a special database available only to real estate agents and brokers. Industry professionals have the opportunity to submit listings and information to the database, effectively allowing them to search and compare listings beyond the scope of their own practice.
Points – The concept of points can be somewhat tricky. At it’s most basic, it is a fee paid to the lender in an effort to reduce the interest rate on your mortgage. The fee is equal to 1 percent of the total amount of the loan.
PITI – An acronym that stands for Principle, Interest, Taxes, and Insurance. Together, these items make up the primary costs associated with most mortgage payments.
Preapproved – Preapproval is only obtained after a lender conducts an in-depth review of the borrower’s financial background. It is only obtained after completing a thorough application, paying the required fees for processing, and submitting any documentation requested by the lender. If the application is approved, the buyer receives a “conditional commitment” from the lender for a particular loan amount. It does not guarantee that the loan will be issued.
Prequalified – Prequalification is the process of having a lender or specialist determine how much a particular buyer can afford to borrow. It is not an in-depth review and it does not guarantee that a loan will be granted. It merely serves as a starting point for the buyer to realistically assess property.
Private Mortgage Insurance (PMI) – This is a type of insurance for the lender. It serves to protect them in the event that the encounter a loss on the money they have lent (if a borrower defaults on their loan, for example). Lenders require this insurance be purchased on any conventional loan without a 20 percent down payment.
Rate Lock – An agreement between the lender and the borrower that states a specific interest rate and a predetermined length of time. The specified interest rate will be guaranteed for the indicated length of time, meaning it can not increase or decrease as market rates do.
Title Insurance – An insurance policy designed to pay out if the the property title defects or is subject to other title complications after the closing has been completed. Depending on the situation, it may be paid to the lender or the buyer.
Under Contract – Under Contract is a term given to any for-sale property that has accepted an offer, but not yet closed or met contingency requirements.