Say What? Home-Buying Lingo You Should Know

Need a crash course on real estate terms? This glossary will get you started.

DTI, PMI, LTV … TBH, it can be hard to keep all this stuff straight. This lexicon of real estate terms and acronyms will help you speak the language like a pro.

Appraisal management company (AMC): An institution operated independently of a lender that, once notified by a lender, orders a home appraisal.

Appraisal: An informed, impartial and well-documented opinion of the value of a home, prepared by a licensed and certified appraiser and based on data about comparable homes in the area, as well as the appraiser’s own walkthrough.

Approved for short sale: A term that indicates that a homeowner’s bank has approved a reduced listing price on a home, and the home is ready for resale.

American Society of Home Inspectors (ASHI): A not-for-profit professional association that sets and promotes standards for property inspections and provides educational opportunities to its members. (i.e., Look for this accreditation or something similar when shopping for a home inspector.)

Attorney state: A state in which a real estate attorney is responsible for closing.

Back-end ratio: One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares the borrower’s monthly debt payments (proposed housing expenses, plus student loan, car payment, credit card debt, maintenance or child support and installment loans) to gross income.

Buyers market: Market conditions that exist when homes for sale outnumber buyers. Homes sit on the market a long time, and prices drop.

Cancellation of escrow: A situation in which a buyer backs out of a home purchase.

Capacity: The amount of money a home buyer can afford to borrow.

Cash-value policy: A homeowners insurance policy that pays the replacement cost of a home, minus depreciation, should damage occur.

Closing: A one- to two-hour meeting during which ownership of a home is transferred from seller to buyer. A closing is usually attended by the buyer, the seller, both real estate agents and the lender.

Closing costs: Fees associated with the purchase of a home that are due at the end of the sales transaction. Fees may include the appraisal, the home inspection, a title search, a pest inspection and more. Buyers should budget for an amount that is 1% to 3% of the home’s purchase price.

Closing disclosure (CD): A five-page document sent to the buyer three days before closing. This document spells out all the terms of the loan: the amount, the interest rate, the monthly payment, mortgage insurance, the monthly escrow amount and all closing costs.

Closing escrow: The final and official transfer of property from seller to buyer and delivery of appropriate paperwork to each party. Closing of escrow is the responsibility of the escrow agent.

Comparative market analysis (CMA): An in-depth analysis, prepared by a real estate agent, that determines the estimated value of a home based on recently sold homes of similar condition, size, features and age that are located in the same area.

Compliance agreement: A document signed by the buyer at closing, in which they agree to cooperate if the lender needs to fix any mistakes in the loan documents.

Comps: Or comparable sales, are homes in a given area that have sold within the past six months that a real estate agent uses to determine a home’s value.

Condo insurance: Homeowners insurance that covers personal property and the interior of a condo unit should damage occur.

Contingencies: Conditions written into a home purchase contract that protect the buyer should issues arise with financing, the home inspection, etc.

Conventional 97: A home loan that requires a down payment equivalent to 3% of the home’s purchase price. Private mortgage insurance, which is required, can be canceled when the owner reaches 80% equity.

Conventional loan: A home loan not guaranteed by a government agency, such as the FHA or the VA.

Days on market (DOM): The number of days a property listing is considered active.

Depository institutions: Banks, savings and loans, and credit unions. These institutions underwrite as well as set home loan pricing in-house.

Down payment: A certain portion of the home’s purchase price that a buyer must pay. A minimum requirement is often dictated by the loan type.

Debt-to-income ratio (DTI): A ratio that compares a home buyer’s expenses to gross income.

Earnest money: A security deposit made by the buyer to assure the seller of his or her intent to purchase.

Equity: A percentage of the home’s value owned by the homeowner.

Escrow account: An account required by a lender and funded by a buyer’s mortgage payment to pay the buyer’s homeowners insurance and property taxes.

Escrow agent: A neutral third-party officer who holds all paperwork and funding in trust until all parties in the transaction fulfill their obligations as part of the transfer of property ownership.

Escrow state: A state in which an escrow agent is responsible for closing.

Fannie Mae: A government-sponsored enterprise chartered in 1938 to help ensure a reliable and affordable supply of mortgage funds throughout the country.

Federal Reserve: The central bank of the United States, established in 1913 to provide the nation with a safer, more flexible and more stable monetary and financial system.

Federal Housing Administration (FHA): A government agency created by the National Housing Act of 1934 that insures loans made by private lenders.

FHA 203(k): A rehabilitation loan backed by the federal government that permits home buyers to finance money into a mortgage to repair, improve or upgrade a home.

Foreclosure: A property repossessed by a bank when the owner fails to make mortgage payments.

Freddie Mac: A government agency chartered by Congress in 1970 to provide a constant source of mortgage funding for the nation’s housing markets.

Funding fee: A fee that protects the lender from loss and also funds the loan program itself. Examples include the VA funding fee and the FHA funding fee.

Gentrification: The process of rehabilitation and renewal that occurs in an urban area as the demographic changes. Rents and property values increase, culture changes and lower-income residents are often displaced.

Guaranteed replacement coverage: Homeowners insurance that covers what it would cost to replace property based on today’s prices, not original purchase price, should damage occur.

Homeowners association (HOA): The governing body of a housing development, condo or townhome complex that sets rules and regulations and charges dues and special assessments used to maintain common areas and cover unexpected expenses respectively.

Home equity line of credit (HELOC): A revolving line of credit with an adjustable interest rate. Like a credit card, this line of credit has a limit. There is a specified time during which money can be drawn. Payment in full is due at the end of the draw period.

Home equity loan: A lump-sum loan that allows the homeowner to use the equity in their home as collateral. The loan places a lien against the property and reduces home equity.

Home inspection: A nondestructive visual look at the systems in a building. Inspection occurs when the home is under contract or in escrow.

Homeowners insurance: A policy that protects the structure of the home, its contents, injury to others and living expenses should damage occur.

Housing ratio: One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares total housing cost (principal, homeowners insurance, taxes and private mortgage insurance) to gross income.

In escrow: A period of time (30 days or longer) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title searched for liens, etc.

Jumbo loan: A loan amount that exceeds the Fannie Mae/Freddie Mac limit, which is generally $425,100 in most parts of the U.S.

Listing price: The price of a home, as set by the seller.

Loan estimate: A three-page document sent to an applicant three days after they apply for a home loan. The document includes loan terms, monthly payment and closing costs.

Loan-to-value ratio (LTV): The amount of the loan divided by the price of the house. Lenders reward lower LTV ratios.

Market value coverage: Homeowners insurance that covers the amount the home would go for on the market, not the cost to repair, should damage occur.

Mechanic’s lien: A hold against a property, filed in the county recorder’s office by someone who’s done work on a home and not been paid. If the homeowner refuses to pay, the lien allows a foreclosure action.

Mortgage broker: A licensed professional who works on behalf of the buyer to secure financing through a bank or other lending institution.

Mortgage companies: Lenders who underwrite loans in-house and fund loans from a line of credit before selling them off to a loan buyer.

Mortgage interest deduction: Mortgage interest paid in a year subtracted from annual gross salary.

Mortgage interest rate: The price of borrowing money. The base rate is set by the Federal Reserve and then customized per borrower, based on credit score, down payment, property type and points the buyer pays to lower the rate.

Multiple listing service (MLS): A database where real estate agents list properties for sale.

Origination fee: A fee, charged by a broker or lender, to initiate and complete the home loan application process.

Piggyback loan: A combination of loans bundled to avoid private mortgage Insurance. One loan covers 80% of the home’s value, another loan covers 10% to 15% of the home’s value, and the buyer contributes the remainder.

Principal, interest, property taxes and homeowners insurance (PITI): The components of a monthly mortgage payment.

Private mortgage insurance (PMI): A fee charged to borrowers who make a down payment that is less than 20% of the home’s value. The fee, 0.3% to 1.5% of the yearly loan amount, can be canceled in certain circumstances when the borrower reaches 20% equity.

Points: Prepaid interest owed at closing, with one point representing 1% of the loan. Paying points, which are tax deductible, will lower the monthly mortgage payment.

Pre-approval: A thorough assessment of a borrower’s income, assets and other data to determine a loan amount they would qualify for. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home.

Pre-qualification: A basic assessment of income, assets and credit score to determine what, if any, loan programs a borrower might qualify for. A real estate agent will request a pre-approval or pre-qualification letter before showing a buyer a home.

Property tax exemption: A reduction in taxes based on specific criteria, such as installation of a renewable energy system or rehabilitation of a historic home.

Round table closing: All parties (the buyer, the seller, the real estate agents and maybe the lender) meet at a specified time to sign paperwork, pay fees and finalize the transfer of homeownership.

Sellers market: Market conditions that exist when buyers outnumber homes for sale. Bidding wars are common.

Short sale: The sale of a home by an owner who owes more on the home than it’s worth (i.e., “underwater” or “upside down”). The owner’s bank must approve a lower listing price before the home can be sold.

Special assessment: A fee charged by a condo complex HOA when cash on reserve is not enough to cover unexpected expenses.

Tax lien: The government’s legal claim against property when the homeowner neglects or fails to pay a tax debt.

Third-party review required: Verbiage included in a home listing to indicate that the lender has not yet approved the home for short sale. The seller must submit the buyer’s offer to the lender for approval.

Title insurance: Insurance that protects the buyer and lender should an individual or entity step forward with a claim that was attached to the property before the seller transferred legal ownership of the property or “title” to the buyer.

Transfer stamps: The form in which transfer taxes are paid by the home buyer. Stamps can also serve as proof of transfer tax payment.

Transfer taxes: Fees imposed by the state, county or municipality on transfer of title.

Under contract: A period of time (30 days or longer) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title is searched for liens, etc.

Underwater or upside down: A situation in which a homeowner owes more for a property than it’s worth.

Underwriting: A process a lender follows to assess a home loan applicant’s income, assets and credit, and the risk involved in offering the applicant a mortgage.

VA home loan: A home loan partially guaranteed by the United States Department of Veteran Affairs and offered by private lenders, such as banks and mortgage companies.

VantageScore: A credit scoring model lenders use to make lending decisions. A borrower’s score is based on bill-paying habits, debt balances, age, variety of credit accounts and number of inquiries on credit reports.

Walkthrough: A buyer’s final inspection of a home before closing.

Water certificate: A document that certifies that a water account has been paid in full. The seller must produce this certificate at closing.

Related:

Source: zillow.com

Selling? Increase Your Home’s “Screen Appeal”

With home showings going online during COVID-19, learn how to make your listing stand out on screen.

If you were counting on crowded open houses (or any open houses, for that matter) to sell your home, you’ve probably been rethinking your strategy. With many people staying home, online for-sale listings have taken on more importance than ever, and it all starts with increasing your home’s screen appeal.  

Stage your space

The first step in staging your home is aggressive decluttering. Put away all the kids’ and pets’ toys, store or recycle loose magazines and box up your picture frames and mementos for now. You don’t want to erase all the personality from your home, but you do want it to feel neutral so potential buyers can imagine themselves living there. Plus, the less random stuff on display, the more spacious your rooms will look. 

Next, consider the layout. You may love how your rooms are arranged, but your furniture placement might not maximize space on screen. Take some test photos to see if the current layout photographs well. If you’re planning on creating a recorded or live video tour, do a video chat walkthrough with a friend and see if you have a clear path between furniture pieces. You definitely want to avoid tripping over an ottoman while doing a live tour.

Finally, clean and dust every surface in sight, and replace all the lightbulbs so that rooms are as bright as they can be — even the most beautiful spaces won’t read well on camera if they’re too dark.

Consider virtual staging

If your current home is empty, you have a few options: 

  • You can leave it empty. (But staged homes tend to sell faster.) 
  • You can purchase furniture, if you’re able to have it safely delivered to your home. You just need a few key pieces to show the scale of a room — a couch, coffee table and rug establish a living room’s size, for instance. You can always resell or donate the pieces to charity later if you don’t want to keep them. 
  • You could try virtual staging, which digitally adds furnishings to your space. It’s come a long way and can make a home look very attractive. There are many online services as well as DIY apps to choose from. 

Your home looks great now share it

There are a few ways of showcasing your home online to generate more interest, even when having an agent or professional photographer doing the legwork is not an option or involves creative solutions.

For still photographs, see our comprehensive photography guide for home sellers

For guidance on creating recorded or live video walkthroughs, check out these tips

And finally, consider trying out the free Zillow 3D Home® app, an easy way to create a virtual tour on an iPhone and post it to Zillow, Trulia your social accounts and beyond.

Source: zillow.com

Bodnar of MMG: Stimulus Plan Brings 3 Things Rates Don’t Like

2021 has ushered in plenty of market turbulence, according to Bill Bodnar of The Mortgage Market Guide (MMG). Rates have been on the rise due to escalating inflation expectations.

Another $1.9T stimulus plan brings three things Bonds/rates don’t like.

Hear Bodnar’s thoughts on Stimulus, the Fed and more answers in the video below.

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Source: themortgageleader.com

How to Set a Home Renovation Budget

Before you start picking out tile and paint chips, be sure you know how much it will cost to remodel your house.

Have you just moved into a new place and want to spruce it up? Or maybe you’ve been in your home for a while and feel ready for a change. The easy part is knowing your goal for home remodeling — whether you’re trying to keep up with your growing family, add office space, modernize dated features or generally increase your home’s value.

Even if you’re ready for a kitchen renovation or anxious for a bathroom remodel, figuring out how to plan a home renovation that doesn’t break the bank can be tricky.

Here are five key steps in planning your home remodeling project.

1. Estimate home renovation costs

As a general rule of thumb, you should spend no more on each room than the value of that room as a percentage of your overall house value. (Get an approximate value of your home to start with.)

For example, a kitchen generally accounts for 10 to 15 percent of the property value, so spend no more than this on kitchen renovation costs. If your home is worth $200,000, for example, you’ll want to spend $30,000 or less.

Something else to keep in mind: Contrary to popular belief, kitchen renovations offer among the lowest return on investment. Every dollar you spend on a kitchen remodel increases the value of your home by approximately 50 cents.

The highest return on investment? A mid-range bathroom remodel.

2. Consider home remodeling loan options

If you plan on borrowing money to fund your home renovations, there are a number of loans out there to help with just that.

  • Refinancing. Depending on your current interest rate, you might be able to refinance your mortgage at a lower rate and/or for a longer loan term, which could lower your monthly payments and help you save up for your renovations.
  • Cash-out refinance. If you have enough equity, you could also consider a cash-out refinance, which means refinancing your existing loan for an amount that’s higher than what you owe. Going this route, you pay off your original mortgage and have cash left over. Use a refinance calculator to see if refinancing makes sense for you.
  • HELOC. If refinancing sounds like too big of a leap, a home equity line of credit (HELOC) might work better. A HELOC works a lot like a credit card in the sense that it has a set limit that you can borrow against.
  • Home equity loan. Although it sounds similar to a HELOC, a home equity loan is a bit different. This loan requires you to take out all the cash at one time. They’re often referred to as “second mortgages” because homeowners get them in addition to their first mortgage.

Refinancing, getting a HELOC or taking out a home equity loan are all big decisions, and it can be tough to know which one makes the most sense for you. As with any new loan, consult with a lender to see which option is best for your situation.

3. Get home renovation quotes from contractors

Some contractors will give you an estimate based on what they think you want done, and work completed under these circumstances is almost guaranteed to cost more. You have to be very specific about what you want done, and spell it out in the contract — right down to the materials you’d like used.

Get quotes from several contractors, but don’t necessarily go for the the lowest estimate. A bid that comes in much lower than the others could be a sign of a contractor who cuts corners — which can lead to extra costs in the long run.

4. Stick to the home remodeling plan

As the renovation moves along, you might be tempted to add on another “small” project or incorporate the newest design trend at the last minute. But know that every time you change your mind, there’s a change order, and even minor changes can be costly. Strive to stick to the original agreement, if possible.

5. Account for hidden home renovation costs

Your home may look perfect on the outside, but there could be issues lurking beneath the surface. In fact, hidden imperfections are one of the reasons renovation projects often end up costing more than anticipated.

Rather than scramble to come up with extra money after the fact, give yourself a cushion upfront. Factor in 10 to 20 percent (or more) of your contracted budget for unforeseen expenses, as they can — and do — occur. In fact, it’s rare that any project goes completely smoothly.

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Originally published June 2015.

Source: zillow.com

Real Estate Market 2020 Recap & 2021 Forecast Greater Phoenix Metro Area, AZ

One year ago, as 2019 came to a close, experts were predicting a highly competitive Arizona housing market for 2020. A few months into the year, however, there was some doubt cast on those predictions as the COVID-19 pandemic created uncertainty as to whether or not the housing market would stay strong.

Those doubts proved to be unnecessary, however, as the Arizona market performed even better than expected throughout 2020.

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Hot Competition in the 2020 Market

Average sale price trended steadily higher throughout 2020, ending with a year-over-year increase of 18%. Monthly sales trended higher and higher throughout the year, as well. After a slight dip in during April and May, June jumped right back up with a 38.6% increase from previous months.

The average number of days homes spent on the market also dropped down to 41, compared to the 2019 year-end number of 60. Homes in Arizona continue to sell faster and faster.

2021 Forecast, Higher Prices & Continued Demand

A Strong Sellers’ Market

According to the National Association of Realtors, the Phoenix Metro Area is expected to be in the top 10 U.S. housing markets in 2021. This is great news for sellers in the area as homes will likely sell quickly and for good prices.

When a housing market is especially beneficial to home sellers, it’s called a sellers’ market. This is often caused by decreasing inventory and increasing demand, which is what we’re seeing in the Phoenix metro area.

In fact, the final months of 2020 saw record-low numbers of homes listed for sale, and yet the number of homes selling is at record-highs. This creates a limited supply of homes for prospective buyers, causing homes to sell faster and home values to rise. This sellers’ market is expected to continue throughout the upcoming year.

Increasing Home Prices and Home Sales

Realtor.com predicts Arizona home values will increase by 7% during 2021. The number of home sales in Arizona is also expected to rise in 2021. With an 11.4% predicted increase, you can expect this housing market to stay hot.

A hot market like this one has benefits for both buyers and sellers. Homeowners can expect home values to increase, which allows for greater profits during a sale. On the other hand, prospective homebuyers can be confident that their new home’s value will appreciate sooner rather than later.

Why Work With an Agent?

Real estate agents are your number one resource when it comes to buying or selling a home. Agents, like the pros at Homie, know all the ins and outs of the market. They have experience recognizing details that other people may not see.

Whether you’re looking for your perfect starter home or you’re selling in preparation for a big move, your agent can help you get the best deal possible. You won’t want to navigate the red hot Arizona real estate market without one!

Talk to A Homie in 2021

If you’re looking to make the most of the strong sellers’ market in 2021 by selling your home, click here to get in touch with us and start your listing.

If your 2021 plans include finding an awesome deal on a new home, let one of our buyer’s agents help you find the home that’s perfect for you. Click here to start the process!

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Source: homie.com

Quiz: Should You Renovate Your Home or Sell?

Fix it up or give it up? See where you really stand with this quiz.

Most homeowners have that one thing about their home that they wish were different.

For some, the home’s fatal flaw exists outside the four walls. Maybe the house backs up to a creek that floods whenever it rains, resulting in a squishy backyard and mosquitoes. Or perhaps the home is located on a busy street that generates too much traffic noise. It could just be that the house is too far from the homeowner’s job, and the long commute has gotten old.

If you’re feeling discontent with your home, you may be thinking about renovating … or getting out entirely. But before you knock down walls or put your home on the market, check out our quiz — it could help you think differently about your situation.

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Originally published March 2018.

Source: zillow.com

Avoid These Commercial Real Estate Acquisition Snafus

Depending on property and tenant data from the broker or seller without verifying it independently is No. 1 on the list of the top 20 blunders to avoid when acquiring commercial real estate assets. So reports GlobeSt.com.

On commercial properties, not reading and abstracting all tenant leases is No. 2.

Not getting tenant estoppel letters is another common mistake to avoid. Read the full list here.

Read the full article from GlobeSt.com.

Source: themortgageleader.com

5 Tips for Moving During COVID-19

By taking extra safety precautions and minimizing social contact, you can still move safely.

Amid travel bans, widespread stay-at-home orders and social-distancing mandates, millions of Americans have adapted to the changes brought about by COVID-19. Countless events have been rescheduled or cancelled, but for a few people — including those who already made plans to move — staying put is simply not an option. 

If you are about to move, you can still pull it off with a little extra planning and a few precautionary steps.

Here are some tips for making your move as safe, seamless and stress-free as possible. 

DIY if possible

Even though most states have designated moving services as “essential” and therefore still able to operate, many smaller companies have reduced hours or have paused business altogether. If you can, try to manage the move on your own.

If you need help, do your homework on the companies operating in your area. Call to ask about sanitation procedures, whether the movers have necessary supplies (like masks, gloves and booties), and confirm there is a reasonable cancellation policy in the event that you need to change your plans.  

Minimize contact

If you’re working with a moving company, ask for a virtual quote and see if the company offers fully contactless service. 

Forgo handshakes, for obvious reasons. A smile and a generous tip (sent through Venmo, PayPal or another contactless digital platform) are a welcome substitute. 

Take extra sanitary precautions

  • Wear masks, gloves and booties. If you’re hiring a moving company, they’ll likely bring similar supplies for their workers, but consider having additional hygiene products available.
  • Disinfect frequently touched objects and surfaces, paying particular attention to door knobs and handles.
  • Place soap and paper towels next to sinks and hand sanitizer by doors.
  • Buy new boxes: The coronavirus has been found to live on cardboard for up to 24 hours, so this might not be the time to pick up used moving supplies from stores that are recycling them. You can also use boxes that you already have in your home. 

Be transparent and flexible

In advance of your move, reach out to your neighbors — especially if you live in an apartment building — and share the date and time you plan to move. This gives everyone in your direct vicinity an opportunity to avoid unnecessary contact and let you know if your timing is a problem.

If you or any family members are experiencing coronavirus symptoms, postpone your moving plans. Though rescheduling is a pain, the health and safety of your community comes first. 

Help those in need and lighten your load

Even in the best of circumstances, nearly 40 million Americans are unable to afford groceries. As COVID-19 forces school closures, soup kitchen shutdowns and a surge of layoffs, the need for anti-hunger provisions is greater than ever. Donate your shelf-stable items to a local food bank or to Move for Hunger, a national organization that works with professional moving companies and their customers to feed those in need.

Moving is hard work no matter what, and it’s especially challenging right now. But by taking extra precautions, you can — and will — get past this hurdle.  

Additional resources:

See below for a roundup of popular moving companies that are continuing service during coronavirus. The list is not exhaustive or provided as a recommendation of their services, and we encourage you to check the company websites for up-to-date information. 

Source: zillow.com

SoFi Is Now Offering Investment Property Loans

Online bank SoFi, in the headlines recently for its plan to go public, has also quietly begun making its mortgage loans available to investors. So reports The Motley Fool.

Like other digital platforms, SoFi’s mortgage application procedure is fully online, with the ability to link up with other financial institutions to access the proper documents.

A difference from other platforms is that SoFi offers conventional mortgages only, not VA or FHA loans, though the latter don’t apply to investors regardless.

Read the full article from The Motley Fool.

Source: themortgageleader.com