Buying a Home

The ABCs of Buying and Selling Property

• Adjustable rate mortgage (ARM): A mortgage where the rate can change based on designated market indicators.
• Assumable mortgage: When the buyer qualifies for and takes over the seller’s mortgage.
• Balloon mortgage: If a mortgage is not paid during the loan term, it is considered a balloon mortgage. The borrower then has the option to pay off the mortgage or refinance.
• Closing costs: Charges beyond the actual cost of the property that are paid when the escrow closes.
• Common interest development: Property such as townhouses where units are owned by single individuals or families, but common areas are shared.
• Disclosure: Sellers are required to announce or disclose physical and structural defects that are not readily observable.
• Earnest money deposit (EMD): A partial deposit that enters parties into a contract when a purchase offer is made. The rest of the deposit is paid when the sale closes.
• Escrow: A deal to ensure the financial safety of both parties where a neutral third party holds funds and documents until the closing of the sale.
• Foreclosure: When a mortgaged property is reclaimed due to a borrower’s failure to maintain payments.
• Fixed rate mortgage: A mortgage’s interest rate remains constant over a predetermined number of years.
• Hazard insurance: Part of homeowners’ policies that protects against physical damage.
• Homeowners' association: An organization where homeowners communicate and manage common areas.
• House closing: The sale is finalized and ownership of the house is transferred.
• Mortgage: A loan to help borrowers purchase a house. If the loan and its interest aren’t paid, the house can be reclaimed.
• Non-recurring closing costs: One time fees that must be paid when closing a home.
• PITI: The components of a mortgage: principal, interest, taxes, and insurance.
• Recurring closing costs: Costs that will occur throughout a buyer’s ownership of the home. These would be costs such as property tax.