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Big Bear Real Estate Basics

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Big Bear real estate is experiencing a buyers market, but unfortunately (or fortunately) it won’t last forever. Very few people saw the market correction coming and when the sellers market returns many people will be unprepared. It’s time to build your vocabulary and communicate your desire to invest in Big Bear real estate to the professionals at The Tim Wood Group. Here are a few of the more popular terms and their meanings.

Amortization

The loan payment consists of a portion which will be applied to pay the accruing interest portion decreases as the loan balance decreases, and the amount applied to principal increases so that the loan is paid off (amortized) in the specified time.

Broker

Broker has several meanings in different situations. Most Realtors are “agents” who work under a “broker.” Some agents are brokers as well, either working form themselves or under another broker.

Closing Costs

Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance.

Deed of Trust

Some states, like California, do not record mortgages. Instead, they record a deed of trust which is essentially the same thing.

Escrow

An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the earnest money deposit is put into escrow until delivered to the seller when the transaction is closed.

Fannie Mae (FNMA)

The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds.

Government Loan (Mortgage)

A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA). Mortgages that are not government loans are classified as conventional loans.

Home Inspection

A thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

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Jumbo loan

A loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits, currently at $500,000 (down to $417,000 on Oct 1). It’s also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

Lien

A legal claim against a property that must be paid off when the property is sold. A mortgage or first trust deed is considered a lien.

Modification

Occasionally, a lender will agree to modify the terms of your mortgage without requiring you to refinance. If any changes are made, it is called a modification.

Notice of Default

A formal written notice to a borrower that a default has occurred and that legal action may be taken.

Origination Fee

On a government loan the loan origination fee is one percent of the loan amount, but additional points may be charged which are called discount points. One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.

PITI

This stands for principal, interest, taxes and insurance. If you have an “impounded” loan, then your monthly payment to the lender includes all of these and probably includes mortgage insurance as well. If you do not have an impounded account, then the lender still calculates this amount and uses it as part of determining your debt-to-income ratio.

Qualifying Ratios

Calculations that are used in determining whether a borrower can qualify for a mortgage. There are two ratios. The “top” or “front” ratio is a calculation of the borrower’s monthly housing costs (principle, taxes, insurance, mortgage insurance, homeowner’s association fees) as a percentage of monthly income. The “back” or “bottom” ratio includes housing costs as will as all other monthly debt.

Realtor®

A real estate agent, broker or an associate who holds active membership in a local real estate board that is affiliated with the National Association of Realtors.

Secondary Market

The buying and selling of existing mortgages, usually as part of a “pool” of mortgages.

Title Insurance

Insurance that protects the lender (lender’s policy) or the buyer (owner’s policy) against loss arising from disputes over ownership of a property.

Now is the time to use your new vocabulary and take advantage of the current buyers market in Big Bear real estate. Contact the professionals at The Tim Wood Group today and find out how easy it is to communicate your dream of Big Bear homeownership.

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