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PLAIN ENGLISH MONTGOMERY COUNTY REAL ESTATE TERMS
Adjustable-rate mortgage (ARM)
A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes. ARMs may adjust in as little as 30 days or as long as 7-10 years. The 5 year arm, for instance, is fixed for 5 years and then adjusts.
Appraisal
A written report of the inspection of a licensed Appraiser of the price paid for a property, primarily based on an analysis of comparable sales of similar homes nearby. Generally paid for by the buyer and ordered and reviewed by the lender.
Balloon mortgage
A mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a 5 year ARM could balloon in five years and the balance would be due in full.
Bridge loan
Bridge loans are used for home buyers who have not sold their present home. If a home owner had sufficient equity in their home, they can "bridge" their equity from their existing home to their new purchase for down payment and closing costs. Example: Owners have $100,000 equity. They "borrow" $70,000 to use for the down payment and closing costs on their new purchase. The bridge loan will be paid when the old house sells.
Clear title
A title that is free of liens or legal questions as to ownership of the property. Clear title is needed to obtain title insurance for the new owners.
Closing costs
Closing costs fees to the buyer to pay for the cost of transferring title from the seller to the buyer. Paid at settlement, closing costs in Montgomery County are approx. 3-4% of the contract price plus the down payment.
Deposit
A sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an "earnest money deposit."
Equity
The difference between what the home owner owes on the mortgage(s) and the fair market value of the property.
Fixed-rate mortgage
The interest rate is fixed for the term of the loan, usually 30 years.
Hazard insurance
Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards. Sometimes called Homeowner's Insurance.
Home inspection
A thorough inspection of a house usually performed for a home buyer immediately following an agreement on price and terms for the purchase of a house.
Lien
A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
Note
A legal document that obligates a borrower to repay a mortgage loan at a stated interest rate during a specified period of time.
PITI
This stands for principal, interest, taxes and insurance.
Point
A point is 1 percent of the amount of the mortgage.
P re-approval
A borrower has made loan application and the provided the lender with supporting documents for income and liabilities. The lender has approved the
borrow for a specific amount of money pending the appraisal.
Pre-qualification
Credit approval wherein a lender reviews a credit report and has determined that the borrower is qualified to borrow a specific amount of money.
Principal balance
The outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges.
Planned Unit Development (PUD)
A project or subdivision that includes common property that is owned and maintained by a homeowners' association for the benefit and use of the
individual PUD unit owners. Can be recreation amenities such as a pool, gym, walking paths, etc.
Real estate agent
A person licensed to manage the sale of real estate.
Second mortgage
A mortgage that has a lien position subordinate to the first mortgage. Often used by purchasers to reduce the down payment, i.e.,
80% First Mortgage, 10% Second Mortgage, 10% Down Payment.
Settlement statement
Universal Settlement Statement used to reconcile the financial transaction for the buyer and seller.
Survey
A drawing showing the legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Title
A legal document evidencing a person's right to or ownership of a property. Recorded in the county land records.
Title company
A company that specializes in examining and insuring titles to real estate. Also conducts settlement procedures.
Truth-in-Lending
A federal law that requires lenders to fully disclose, in writing, the terms and conditions of a mortgage, including the annual percentage rate (APR) and other charges.
Real Estate in Montgomery County MD
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