What Does That Mean? Real Estate Terms You Should Know!
1. REO/ Foreclosure
REO stands for Real Estate Owned and is a foreclosed property that goes back to the mortgage company after an unsuccessful foreclosure auction.
2. Short Sale
A short sale occurs when a property is sold and the lender agrees to accept a discounted payoff, meaning the lender will release the lien that is secured to the property upon receipt of less money than is actually owed.
3. BPO (Broker Price Opinion)
A BPO is like a Comparable Market Analysis (CMA). Banks pay local Agents to give their ‘opinion’ on how much a house would sell for, using comparable Sold, Pending, and Active listings.
4. PMI
Private mortgage insurance is required by the mortgage company to protect lenders against loss if a borrower defaults. Most lenders generally require PMI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent.
5. LTV
Loan-to-value is the percentage relationship between the amount of the loan and the appraised value or sales price (whichever is lower). For example: you purchase a home for $100,000 and you get a mortgage for $90,000. Your loan-to-value is 90%, therefore, the mortgage company would require PMI.
7. ARM
Adjustable Rate Mortgage is a mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes. There is usually a cap (ceiling) on the amount to which the interest rate can increase.
6. Negative Amortization
Some adjustable rate mortgages allow the interest rate to fluctuate independently of a required minimum payment. If a borrower makes the minimum payment, it may not cover all of the interest that would normally be due at the current interest rate. In essence, the borrower is deferring the interest payment. The deferred interest is added to the balance of the loan and the loan balance grows larger instead of smaller, which is called negative amortization.
