Glossary of Terms Related to Equity Sharing
Adjustable-rate mortgage (ARM)
A mortgage in which the interest changes periodically, according to corresponding fluctuations in an index. All ARMs are tied to indexes.
Appreciation
The increase in the value of a property due to changes in market conditions, inflation, or other causes.
Cash-out refinance
When a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a "cash out refinance."
Closing costs
Buyer's costs that usually include lender's fees, points, appraisal as well as escrow and title fees. Seller's closing costs are typically transfer tax, commission, expenses or any reports ordered on property, and pro-rated taxes accordingly.
Deed
The legal document conveying title to a property.
DIPSARs
An acronym describing the growing number of people who cannot afford to purchase a home in the city of their choice. Stands for: "Double Income Professionals, Stuck Always Renting"
Down payment
The part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage. Our equity sharing arrangements typically require the Investor partner to provide these funds.
Equity Sharing agreement
A free document provided to our customers that defines parties’ rights, roles, and responsbilities as they acquire, manage, and sell a property together. The document is fair, comprehensive, and flexible. Customers can use it as is, or modify it to fit their particular preferences and circumstances.
Fixed-rate mortgage
A mortgage in which the interest rate does not change during the entire term of the loan.
Foreclosure
The legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.
Home Warranty
Sometimes called a "homeowner’s warranty", this is a type of insurance often purchased by homebuyers that will cover repairs to certain items, such as heating or air conditioning, should they break down within the coverage period. The buyer often requests the seller to pay for this coverage as a condition of the sale, but either party can pay. Realtors increasingly offer to pay for the first year’s coverage.
Homeowner's insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
Interest-only payment
A monthly mortgage payment representing the amount charged for use of the money, i.e. the "interest" on the larger loan. Home buyers sometimes opt for interest-only payments if they are unlikely to own the house for the long-term, rather than make higher monthly payments that include the principal.
Mortgage
A legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.
Pencil
Used as a verb, this real estate term describes a situation in which the monthly rent received from a rental property matches or exceeds the owner’s monthly expenses associated with that property. If the rent on a given property is as much as the mortgage payment, then the property is said to "pencil".
Pre-approval
Generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which a bank underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is made, as well as estimates for the amount that will be paid for property taxes, insurance and others. Not to be confused with "pre-qualification" (see below)
Pre-qualification
This usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.
Principal
The amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.
Private mortgage insurance (PMI or MI)
Mortgage insurance that is provided by a private mortgage insurance company to protect lenders against loss if a borrower defaults. Most lenders generally require MI for a loan with a loan-to-value (LTV) percentage in excess of 80 percent. Mortgages above 80% LTV that call themselves "No MI" are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.
Prospective Partner Profile
A brief set of data on an individual who is interested in exploring the possibility of buying a house using our proven system Includes information on where the individual would like to purchase a house, and how to reach that person by phone or email. Submitting a Prospective Partner Profile creates absolutely no obligation, even if a matching person is found in the database.
Purchase agreement
A written contract signed by the buyer and seller stating the terms and conditions under which a property will be sold.
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 well as all other monthly debt.
Real estate agent
A person licensed to negotiate and transact the sale of real estate.
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.
Right of first refusal
A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others.
Sweat equity
Contribution to the construction or rehabilitation of a property in the form of labor or services rather than cash. In our proven system, Home Buyer partners often increase the home’s value through sweat equity.
Title
A legal document evidencing a person's right to or ownership of a property.
YUPCAP
An acronym we created to describe the growing number of people who have been priced out of the real estate market where they would like to live. It stands for: "Young Urban Professional, Can’t Afford Property"
