Curious about buying a home in Grand Ledge MI or Eaton County Michigan within Greater Lansing but feel out-of-place and not sure where to start? As a first time home buyer or seller, there are 8 real estate terms that you should become familiar with during the home buying process. Agents and mortgage lenders do not have a ‘cheat sheet’ for you on terminology. For this reason, it’s very important to educate yourself and learn words often used in the real estate world! Here are a few basic terms to learn:
An encumbrance denotes a claim against a property that affects its title, value, and use, but not ownership. Liens, easements, and profits are examples of encumbrances.
Equity is what makes purchasing a home an investment — it means you have an ownership interest. Your equity is equal to your assets minus your liabilities. For homes, the owner’s equity is equal to the house’s market value — not necessarily what it was purchased for — minus any outstanding loans or liens against the property. With owning, equity helps you recoup some of your monthly costs, whereas with renting, you’ll never see that money again.
Simply put, escrow is money held by a third party. When you’re buying a house, escrow is a way for you to demonstrate good faith while you negotiate a transaction with the seller. The money that a buyer puts into an escrow account is only released to the seller when the deal is final. Escrow accounts are also an important part of the mortgage process. Typically, part of your monthly payments will go toward paying down your principal. Part is deposited into an escrow account so your mortgage lender can withdraw funds to pay insurance and property taxes as needed.
In a homebuying scenario, the previous owners are the grantors, transferring ownership to you, the grantee, through a deed.
A lien is a type of encumbrance that allows a property to act as security for the repayment of a debt. It grants the lender ownership rights upon default. Technically, a mortgage is a loan with a lien attached.
A loan is an amount of money granted by a lender to a borrower with the expectation of future repayment.
Loan Origination Fee
A loan origination fee is charged by the lender for financing the deal.
Loan to Value Ratio
A loan to value ratio, or LTV, helps determine the maximum amount of money a lender will loan you through a mortgage. It’s typically calculated by dividing the potential mortgage amount divided by the home’s value or the purchase price — whichever is lower.
Questions? Call our RE/MAX Dewitt Real Estate Pros Office at 1-517-669-8118. We’ll get you connected with our award winning top realtors!