Adjustable-Rate Mortgage: A less predictable loan than the traditional fixed-rate mortgage, the adjustable-rate mortgage (ARM) is subject to change based on the interest-rate index it’s tied to. This can result in either lower or higher interest during the life of the loan.
Appraisal: A necessary step in purchasing a home, the appraisal is the estimated value of the home and the land it sits on for the mortgage lender to determine whether or not the real estate is worth the proposed price.
Attorney Review: Attorney review is the three business-day period in which a contract to purchase a home is reviewed, modified, and approved by both the buyer and seller’s real estate attorneys. Both parties can cancel the contract at any time during attorney review, however once the three business days are up and the contract is approved, the contract is legally binding.
Closing Costs: Closing costs are the costs incurred at the time of the closing of a real estate transaction, and can include anything from lender and title fees, attorney fees, and insurance to real estate agent fees and HOA fees.
Due diligence: The time frame provided to the buyer after an offer is accepted in order to fully examine a house prior to closing. This usually entails hiring experts to inspect the house to understand what they’re buying, and often the buyer is given the opportunity to renegotiate the contract based on findings during due diligence.
Earnest Money Deposit (EMD): The EMD, also referred to as a “good faith deposit,” is the small percentage of a deposit that is put down once an offer is accepted to show the buyer’s intent to purchase is legit. The EMD is often held by an escrow company.
Equity: Equity is the amount a homeowner has invested in their home. To calculate equity, you subtract the total amount of outstanding mortgages or liens against the property from the market value of the house.
Fixed-Rate Mortgages: The more traditional alternative to ARMs, fixed-rate mortgages lock a buyer into an interest rate for 10, 15, 20, or 30 year periods.
Home Sale Contingency: Often submitted by buyers to sellers to let them know that the purchase of a home is contingent on the buyer’s current property being sold in a timely manner. This can be negotiated in a contract.
Mortgage Contingency Date (MCD): The MCD is a clause in the contract that is set by the seller, and indicates the date by which the buyer must have an approved loan in writing from a lender. The date can be negotiated, but is usually 60-75 days from the date of the offer. If the buyer does not have a fully approved loan in writing by the agreed-upon date, the contract is void and the seller is free to choose an offer from a different buyer.
Multiple Listing Service (MLS): An MLS is a database that allows real estate agents and brokers to view what’s currently on the market. It contains information about comparable properties in the area, and enables sellers’ agents to add their own listings.
Proof of Funds: Sellers will require buyers to submit proof of funds when an offer is made to prove that the buyer has the cash available to make a down payment and complete closing costs. Proof of funds can be an online bank statement, a copy of a money market account with bank letterhead, certified financial statements, or an open equity line of credit.
Purchase & Sale Agreement (PSA): The PSA, simply called the contract in New Jersey, is the written contract in place between the buyer and seller that outlines the terms of the potential sale in place to purchase and sell a piece of property. When a house is “under contract,” it means the contract has been signed by both parties and the contract has gone through attorney review.
REALTOR®: A real estate agent isn’t necessarily a REALTOR®. In order to become a REALTOR®, you need to become a member of the National Association of REALTORS®.
Scheduled Closing Date (SCD): SCD is the date that the sale is scheduled to close and the property transfers from seller to buyer. Generally speaking, it is an estimated date and the sale may close before or after that date.
Seller Concession: In order to expedite the process, a seller may offer a concession, which incentivizes buyers to act quickly. These are usually contributions towards the buyers’ closing costs on behalf of the seller.
Seller’s Property Disclosure: A seller’s property disclosure is a legal document that requires the seller of a home to disclose anything about the property’s condition that potential buyers may find unfavorable. This is to protect buyers from unknowingly purchasing a property that has problems which wouldn’t show up in a home inspection.
Title Search: The title search is the process by which a title examiner examines public records for the history of the home, including sales and any outstanding liens against the property. Findings of the title search are listed in the preliminary report.
VA Loan: A VA loan is a low-cost, competitive-rate loan guaranteed by the government and offered to active and retired military members and their families.