10 Real Estate Abbreviations All Homebuyers Should Know- By: Jamie Mathwig
As a homebuyer, it's very possible you feel overwhelmed and confused about all the jargon you have to wade through just to communicate with your real estate professional. Despite appearances, REA, PMDT and SEM are not rare neurological disorders. This article outlines ten abbreviations you might find in your search for a new home.
ASHI- American Society of Home Inspectors. This is a non-profit professional society that governs ethics and best practices for inspectors. It is the largest society of its kind in North America and is recognized in the buyer-protection legislation of many states.
DIM- Deferred Interest Mortgage. Fairly straightforward, the DIM is a mortgage option wherein buyers pay no interest for a pre-determined period. After that time, the accrued interest is added to the original loan. There are several different ways to calculate the deferred mortgage payment. Depending on the market, this can be either be a great deal or a very expensive mortgage type.
DS- Due On Sale clause, also known as an acceleration clause or an alienation clause. This clause gives the lender the right to call the entire balance of a loan due. This usually happens when the property is transferred to the buyer subject to the mortgage, without the lender being notified. Oftentimes, a bank or other lender acting on a DS can result in foreclosure.
HOA- Home Owners' Association. Many condos and planned communities benefit from governance by an HOA. It enables those with a shared vision for their community to make decisions about such things as the usage of common areas, the design and architecture of homes in the neighborhood, community services, operating costs, maintenance, and repairs.
PMDT- Purchase Money Deed of Trust. When a buyer does not qualify for a bank loan, she will sometimes enter into a PMDT or a Purchase Money Trust, wherein the buyer borrows from the seller, instead of borrowing from a bank. This can be risky if the bank forecloses the property.
PMI- Private Mortgage Insurance. Usually, buyers must pay mortgage insurance if their down payment is 20 percent or less. Primarily a protective measure for lenders, PMI mitigates lenders' loss if a homeowner defaults on a loan. It is also a benefit to homeowners in that it allows them to buy a home without waiting to save up a down payment.
PV/PW- Present Value or Present Worth. There are quite a few factors that go into the calculation of present value, most notably the time value of money and investment risk. Present value/worth calculations have an impact on the value of a home as well as the terms of the mortgage.
REA- Reciprocal Easement Agreement. Put simply, an REA is a written contract between a pair of homeowners that allows them access to, or use of, a common area. An example of an area that would fall under this kind of agreement is a shared driveway or a privately-owned lane between two houses.
SEM- Shared Equity Mortgage. A shared equity mortgage is one in which family members invest in the property purchase of another family member and make money from. For example, Jill would like to buy a $200,000 house, but cannot afford the 25% down payment. Her mother contributes the $50,000 and will make it back, with interest, either when Jill refinances or sells her home. Equity-sharing allows buyers to purchase outside of their financial means without taking big risks.
PITI- Principal, Interest, Taxes and Insurance. To be succinct, this refers to all the factors that come into play when calculating mortgage payments. It could be thought of as the "bottom line", or the sum of all costs associated with one's mortgage payment.
When your REALTORŪ is talking to you about DS, HOA and PMI, you don't have to be confused. The above definitions should help you keep your head above the murky waters of jargon that are likely to flood your negotiation process, mortgage, and purchase agreement. Now all you have to worry about is keeping track of your packing boxes when you move into your new home.
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