Common Financial Real Estate Transaction Terms

When you start looking at buying or selling a house, you are bombarded with various terms or buzzwords of Real Estate Industry. No need to get overwhelmed. Lets look at those terms here. These terms are also explained in this video – How monthly mortgage payment is calculated. What is Asking Price or listing price, or listed price?Asking price is the price, at which seller wishes to sell their house. For example, seller lists their house on $100,000, then asking price is $100,000.What is purchase price or selling price?Purchase price or home price or selling price is the amount, which buyer agrees to pay to the seller, in order to buy a house. For example asking price is $100,000, and buyer-seller agrees on $105,000 then $105,000 is purchase price. What is appraised value of a house?Appraised value is the market value of a house. It is also known as current value or market value of a house. It is an opinion value of the house according the current market conditions. It is typically given by a certified appraiser. Banks depend on this value to calculate the loan that they can give on a given house. Loan to value is calculated based on appraised value of house. Most of the houses are sold on appraised value of a house. This could be different from Asking Price and Purchase Price. For example a house was listed for $100,000, the purchase price could be $105,000 and appraised value could be $110,000. Purchase price and Appraise value could also be less than asking price.What is Loan Amount?Loan Amount is the amount that is given by bank to a borrower to buy a house. For example, if a house is worth $100,000, and bank gives a loan of $80,000, then the loan amount is $80,000.What is Loan to Value Ratio or LTV?Loan to value ratio is Loan Amount divided by current market value of the house. If bank is given a loan of $80,000 on house whose market value is $100,000, the loan to value ratio is 80%. What is Mortgage Interest rate and how it is decided by bank?Interest rate is a rate at which bank lending money to a borrower on a given house. It is affected by various factors such as Loan to Value Ratio (LTV), Type of house (Single Family or Detached condominium or a condominium), credit score of a borrower, market conditions, Fed Rate and more factors etc. For example bank can give 4% rate. A borrower needs to talk to a bank loan officer or mortgage broker to find what rate they would be offered. What is Loan Term?Loan term is the time in which a borrower plans to pay off the mortgage loan.What is Down Payment?Down Payment is the amount, that buyer agrees to pay at the closing out of their own pocket. It is typically said as percentage of purchase price, such as 4%, 5%, 7%, 10%, 15%, 20% etc. For example, if purchase price is $100,000 and down payment is 20% then down payment amount is $20,000.What is Monthly Mortgage Payment?This is the amount borrower agrees to pay each month to bank in order to keep the loan on time. This is the installment amount to repay the money to bank that was borrowed by a borrower to buy a house.At Cali Homes Realty, we try to explain all of these terms to our clients so they can make informed decision. Feel free to contact us via chat, email or phone. Disclosure:We will be adding more terms with practical meanings here. These meanings are for information purpose only and they do not represent official meaning from any organization.