Whether you’re preparing to rent or buy, it’s a good idea to be familiar with the language…
APR: Short for annual percentage rate, APR is how much your loan will cost over the course of a year. This figure is almost always higher than the interest rate because it takes into account the interest charged as well as fees or additional costs associated with the loan. Since all lenders use the same formula, it can be a more effective way of comparing mortgages rather than just the interest rate.
Closing costs/settlement fees: The costs that buyers and sellers are charged to complete a real estate transaction. Costs include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees, and credit report charges. The closing costs are usually around two and six percent of the mortgage amount (loan amount).
Closing Disclosure (CD): A written five-page document provided to the consumer at least three days before the closing of their home purchase. The CD provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs).
Escrow: An escrow is a contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties (seller, buyer, Lender) or, a trust account held in the borrower’s name to pay obligations such as property taxes and insurance premiums. After an initial deposit, borrowers pay into the escrow monthly – usually as part of the mortgage payment. The Lender/Servicer pays the property taxes and insurance premiums on behalf of the borrower.
Loan Estimate Disclosure (LE): A written estimate of fees and /or closing costs associated with a loan provided to the customer by a mortgage lender or broker. An LE is required by law under the TILA-RESPA Rule (TRID). The estimate must be provided to the consumer within 3 business days of the receipt of the consumer’s loan application.
Intent to Proceed: A consumer must indicate to the lender or broker their intent to proceed (willingness to proceed with the loan transaction). The consumer can communicate in any manner that they wish to proceed after the Loan Estimate has been delivered.
Mortgage broker: An individual or company who connects borrowers and lenders for the purpose of facilitating a mortgage loan. Unlike a mortgage lender, a broker does not make the loan or service the mortgage. A mortgage broker may represent various lenders or may offer loans from one single source.
Points: Borrowers can pay a lender points to reduce the interest rate on the loan, resulting in a lower monthly payment. The cost of one point is equal to 1 percent of the loan amount. Depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of a percent.
Lease: A legal document detailing the terms under which the lessee (the renter) agrees to rent property from the lessor (the property owner). A lease guarantees use of an asset and guarantees regular payments from the lessee for a specified number of months or years.
Rental application: Filled out by a prospective tenant, which typically authorizes the landlord to conduct a credit check to determine the suitably of the individual. Often, there can be a non-refundable fee associated with the rental application.
Security deposit: Funds, in addition to rent, that a landlord requires a tenant to pay to be kept separately in a fund for use should the tenant cause damage to the premises or otherwise violate terms of the lease.
Notice to vacate: Notification from the landlord to the tenant ordering the tenant of vacate the property. In most cases, the notification is given because the tenant either broke one of the terms of the lease or is not following through with payment of rent. The tenant is typically given 30 days to vacate the premises. Similarly, a notice to intend to vacate may be required under the lease for the tenant to notify the landlord before vacating the property.