Advantages of Home Ownership

Escrow account

(reserve account) a fund where money is held to pay amounts that will come during the year. It will include property insurance and property taxes.

FHA loan

a government backed loan that carries mortgage insurance. The borrower in addition to monthly loan payment also pays an insurance premium. The loan is then backed by the FHA making it less risky for banks. May require as little as 3 percent down and is often available fo the first buyer, veterans and low-income buyers.

mortgage

a loan to purchase real estate. Monthly loan payments include interest and principal.

discount points

are used to lower the mortgage rate of interest. One point equals one percent of the loan amount. 3 points =200,000 loan = $6,000. Points are extra interest to be paid at the time of closing. Lender usually offered lower rates for higher points. Pints paid are tax deductible.

Property Taxes

based on the assessed value of land and buildings. A home worth $225,000 might have an assessed value (90%) of $202,500. If the property tax rate (millage rate) is $15 per thousand, the tax would by $3030.

Market Value

the highest price the property will bring on the markt. It generally means the agreed upon price.

tax savings

the interest that you pay on your home loan, along with property taxes is tax deductible. Owning all estate is said to be a tax shelter.

Closing Costs or Settlement Costs

Are the expenses incurred in transferring ownership from buyer to sellers in a real estate transaction. May add $3,000- $5,000 to the purchase price of your home. The buyers usually pays for a title search to make sure the seller is the legal owner and that no one else has a claim on the property.

Assessed Value

for the purpose of computing property taxes owned against your home, the city or county in which you live sets an assessed value. It based on the cost to build, to improve and the cost of similar properties. It is usually a fraction of the market value, based on a millage rate.

trust deed

is a debt security instrument that shows a lien against a property payments on both range over an extended period such as 15 or 30 years.

Equity

is the difference between the market value of the property and the amount owed on it.

down payment

lenders require that borrowers pay a certain amount down upon the purchase price. They then provide a loan for the balance of the loan.

conventional loan

offed from a commercial leaning institution. Requires 10 to 30 per cent as a down payment.

Estimated value

real estate agents estimate the value of a home to help sellers establish a selling price. If the price of a home increase in market value it appreciated in value. If it loses market value it is said to depreciate in value.

Appraised Value

real estate appraisers prepare the appraised value based upon the structure, size, features and quality as compared to similar structures in the geographical area.

Mortgage loan fee or loan origination fee

the amount charged by a lender to process the loan.