Real estate can be confusing without having to learn a new language. On top of contract language, hard deadlines, and a seeming mountain of paperwork, knowing what your lender, real estate agent, and inspectors are saying can be very helpful. While by no means comprehensive, here is a brief glossary of real estate terms that you will likely run into while searching for, and purchasing, your Ann Arbor Home.
Appraisal
A statement of value on the market value of a specific property. Most often used in conjunction with a mortgaged purchase.
Bridge Loan
A short term loan that helps home purchasers use the frozen equity in their current home, to purchase a new home. The bridge loan is paid off, once the current home is sold.
Closing Costs
Costs paid at closing, above the cost of the property, to finalize the purchase and transfer of the property from one owner to the next. These include administrative and legal fees to complete the purchase.
Debt to Income Ratio
The ratio used by lenders to determine a buyer’s debt, compared to their income. This ratio has a large impact on the purchaser’s buying power.
Equity
With regards to real estate, equity is the difference in value between the market value of the property and any amount left on the mortgage for that property.
Fixture
An item that is fixed to the property. Consider a light switch plate, or wall sconce. Unless specifically excluded, all fixtures remain with the property upon closing.
Government Loan
A loan program, backed and run by the government, that assists first time and other specifically qualified buyers in entering the real estate market. Federal Housing Administration (FHA) and Veteran’s Administration (VA) loans are two examples.
Homeowner’s Association (HOA)
A formal organization of homeowners within a development. This organization is responsible for the management of common elements within a development. This is also the organization that may exercise community standards on things such as fences, architectural control on the exterior of homes, etc.
Insurance
A needed item for any home purchaser, the cost of lender required coverage and insurance should be obtained by all purchasers prior to buying a home.
Jumbo Loan
A non-conforming loan (loans that are outside the guidelines laid down by Fannie Mae and Freddie Mac) where the loan exceeds current FNMA and FNMC loan limits. In 2016, the conforming loan limit is $417,000.
Knob & Tube
More than a few homes in Ann Arbor will built before 1950. Knob and tube wiring was used up to the 1950’s as a way to run electrical wiring in a home. Knob and tube wiring gets its name from the porcelain knobs that hold tubes of wiring in place. If a home has active knob and tube wiring, you may find it difficult to get home owner’s insurance.
Lien
A form of security to be held for the payment of a debt. A bank gives a mortgage to a purchaser. In return, the purchaser gives the bank a lien on the home.
Mortgage
This is the financial instrument, a loan, that allows buyers to purchase a home while spreading the repayment of the loan over many years.
Note
The legal document that obligates the borrower to repay the loan amount, with any interest, during a specified period of time.
Owner Financing
Not seen too often in purchasing Ann Arbor homes, but owner financing is where the owner finances all or a portion of the purchase.
Principal
In real estate terminology, principal is the amount left owed on a mortgage that is not interest.
Quitclaim Deed
A deed that transfers ownership with no warranty regardless of the interest or title the grantor may have at the time of transfer (conveyance).
Real Property
Private property are things such as books, tables, chairs, dishes. Real property is what is typically called real estate. That is, a piece of property with a home on it, or a condominium space inside a larger building.
Setback
If you purchased a home that did not have a garage, but you wanted to build one, you would need to inquire with the city of Ann Arbor what the setbacks are for your lot. Setbacks are those distances from the property lines in which nothing may be constructed or standing.
Taxes
Fees paid to the municipalities within which the property resides. These fees cover things from road maintenance, to funding the public schools, to maintaining municipal services.
Utilities
In Ann Arbor, there are three main utilities: gas, electric, and water. Gas and electric utilities are provided via Consumers Energy and DTE. Water is provided through the City of Ann Arbor.
Veterans Administration (VA)
Agency of the federal government that administers
Well & Septic Inspection
While not prevalent inside the city of Ann Arbor, portions of Ann Arbor Township and the surrounding towns in Washtenaw county may have wells for the water supply, and a septic system for waste disposal. The county requires a Time of Sale report on these systems, before a property may transfer ownership. As a purchaser, you should still hire your own Well and Septic inspector to give you a report on the health and sustainability of these systems.
Yippee
Your reaction to hearing that you successfully won the bidding war for that Old West Side home!
Z (Regulation Z)
A principal portion of the Truth in Lending Act that requires disclosure about the terms and costs of obtaining a mortgage.
Note: we couldn’t find a term for the letter X. If you can think of a real estate term for X, we’ll feature it here.
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