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Real Estate Terms

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OThere are 16 entries in the glossary.Pages: 1 Occupancy DateThis provision is a good way to help ensure that your home will be ready for occupancy after the closing takes place. As part of your formal purchase offer, consider including a provision that holds the seller responsible for paying you rent should they not move out on or prior to the agreed-upon date. This allows you, for example, to use the money you receive to pay your own rent if you are leasing your current residence. OfferWhen you make an offer on a house, it means you are making a formal bid to buy a home. You can work with your real estate sales professional to put together a written bid that abides by the laws in your state. Your offer should include such aspects as the address of the home, the sales price, the type of mortgage financing you will use to purchase the home, any personal property that might be included as part of the sale, and a target date for closing and occupancy. An earnest money deposit typically accompanies the offer. Your real estate sales professional can provide guidance on other elements of the offer. Once you have made an offer, the seller has the opportunity to accept, decline, or make a counter-offer. If your offer is accepted, you have a ratified sales contract. This contract is the starting point for working with an approved lender to get the mortgage that's right for you. One-Year Adjustable-Rate MortgageThis adjustable-rate mortgage (ARM) offers a low initial interest rate with an interest rate that adjusts annually after the first year. The rate cap per annual adjustment is usually 2 percent; the lifetime adjustment caps can be 5 percent or 6 percent. This type of mortgage may be right for you if you anticipate a rapid increase in income over the first few years of your mortgage. That's because it lets you maximize your purchasing power immediately. It may also be the right mortgage for you if you plan to live in your home for only a few years. Advantages:

Maximizes your buying power immediately, especially if you expect your income to rise quickly in the next few years.

A low first-year interest rate and a 2 percent annual rate cap.

Some one-year ARMs let you convert to a fixed-rate loan at certain adjustment intervals.

 Ongoing CostsHome buyers should not forget that there are on-going costs associated with owning a home. They include, but are not limited to:

Monthly mortgage payment

Mortgage insurance

Homeowner's insurance

Property taxes

Utilities, such as gas, oil, water and electricity

Another cost home buyers should consider is how much it will cost to maintain their home. These costs include everything from cleaning and minor repairs to yard work and painting. Condominium owners and people living in planned unit developments should factor in any homeowners' association fees or similar costs. Open-end mortgageA mortgage that provides for the borrowing of additional funds. Operating expensesSuch as real estate taxes, insurance premiums, etc. Operating ratioRatio of operating expenses to effective gross income. Opportunity costThe "cost" of selecting one alternative is the benefit foregone from the next best alternative. OptionA Contract given by the owner of a property to another person, giving the latter a right to buy or lease the property at a certain price within a specified period of time. OptioneeA person who holds an option. OptionorAn owner who gives an option to another person. Original Principal BalanceThe total amount of principal owed on a mortgage before any payments are made. OriginationThe process that a lender goes through to get complete and correct informa-tion about a loan applicant's income and credit. Origination FeeA fee paid to a lender for processing a loan application. The origination fee is stated in the form of points. One point is 1 percent of the mortgage amount. The loan origination fee covers the administrative costs of processing the loan. It is often expressed in points. One point is 1 percent of the mortgage amount. For example, a $100,000 mortgage with a loan origination fee of 1 point would mean you pay $1,000. OverhangThe portion of a roof extending beyond the walls. Owner FinancingA property purchase transaction in which the property seller provides all or part of the financing. 

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