Buying Lingo

Houses for sale in sarnia Sarnia Real Estate

Sarnia real estate is full of terms that any first-time homebuyer may find difficult to keep straight. There are some key terms and lingo you need to know as a buyer when looking at the houses for sale in Sarnia. Here is a glossary of terms to read through to gain some extra knowledge about real estate.

Appraisal: An informed, impartial and well-documented opinion of the value of a home, prepared by a licensed and certified appraiser and based on data about comparable homes in the area, as well as the appraiser’s own walkthrough.

Buyers market: Market conditions that exist when homes for sale outnumber buyers. During this time, houses for sale in Sarnia sit on the market longer, and sometimes require price drops.

Capacity: The amount of money a home buyer can afford to borrow.

Closing: A time in which ownership of a home is transferred from seller to buyer. The date is set on the original offer of purchase.

Closing costs: Fees associated with the purchase of a home that are due at the end of the sales transaction. Fees may include the appraisal, the home inspection, a title search, a pest inspection and more. Buyers should budget for an amount that is 1% to 3% of the home’s purchase price.

Closing escrow: The final and official transfer of property from seller to buyer and delivery of appropriate paperwork to each party. Closing of escrow is the responsibility of the escrow agent.

Comparative market analysis (CMA): An in-depth analysis, prepared by a Sarnia real estate agent, that determines the estimated value of a home, based on recently sold homes of similar condition, size, features and age that are located in the same area.

Comps: Or comparable sales, are homes in a given area that have sold within the past six months that a Sarnia real estate agent uses to determine a home’s value.

Condo insurance: Homeowners insurance that covers personal property and the interior of a condo unit should damage occur.

Contingencies: Conditions written into a home purchase contract that protect the buyer should issues arise with financing, the home inspection, etc.

Days on market (DOM): The number of days a property listing is considered active.

Down payment: A certain portion of the home’s purchase price that a buyer must pay. A minimum requirement is often dictated by the loan type. When looking at houses for sale in Sarnia, at least 5% is typical for first-time buyers, while others pay 10% or 20%.

Debt-to-income ratio (DTI): A ratio that compares a home buyer’s expenses to gross income.

Earnest money: A security deposit made by the buyer to assure the seller of his or her intent to purchase.

Equity: A percentage of the home’s value owned by the homeowner.

Foreclosure: A property repossessed by a bank when the owner fails to make mortgage payments.

Gentrification: The process of rehabilitation and renewal that occurs in an urban area as the demographic changes. Rents and property values increase, culture changes and lower-income residents are often displaced.

Homeowners Association (HOA): The governing body of a housing development, condo or townhome complex that sets rules and regulations and charges dues and special assessments used to maintain common areas and cover unexpected expenses respectively.

Home equity loan: A lump-sum loan that allows the homeowner to use the equity in their home as collateral. The loan places a lien against the property and reduces home equity.

Home inspection: A nondestructive visual look at the systems in a building. Inspection occurs when the home is under contract or in escrow.

Homeowners insurance: A policy that protects the structure of the home, its contents, injury to others and living expenses should damage occur.

Housing ratio: One of two debt-to-income ratios that a lender analyzes to determine a borrower’s eligibility for a home loan. The ratio compares total housing cost (principal, homeowners insurance, taxes and private mortgage insurance) to gross income.

In escrow: A period of time (30 days or longer) after a buyer has made an offer on a home and a seller has accepted. During this time, the home is inspected and appraised, and the title searched for liens, etc.

Listing price: The price of a home, as set by the seller.

Loan-to-value ratio (LTV): The amount of the loan divided by the price of the house. Lenders reward lower LTV ratios.

Mortgage broker: A licensed professional who works on behalf of the buyer to secure financing through a bank or other lending institution.

Mortgage companies: Lenders who underwrite loans in-house and fund loans from a line of credit before selling them off to a loan buyer.

Mortgage interest rate: The price of borrowing money. The base rate is set by the Federal Reserve and then customized per borrower, based on credit score, down payment, property type and points the buyer pays to lower the rate.

Multiple listing service (MLS): A database where Sarnia real estate agents list properties for sale.

Principal, interest, property taxes and homeowners insurance (PITI): The components of a monthly mortgage payment.

Pre-approval: A thorough assessment of a borrower’s income, assets and other data to determine a loan amount they would qualify for. A Sarnia Realtor will request a pre-approval or pre-qualification letter before showing a buyer a home.

Pre-qualification: A basic assessment of income, assets and credit score to determine what, if any, loan programs a borrower might qualify for. A Sarnia Realtor will request a pre-approval or pre-qualification letter before showing a buyer a home.

Sellers market: Market conditions that exist when buyers outnumber the houses for sale in Sarnia. Bidding wars are common.

Short sale: The sale of a home by an owner who owes more on the home than it’s worth (i.e., “underwater” or “upside down”). The owner’s bank must approve a lower listing price before the home can be sold.

Special assessment: A fee charged by a condo complex HOA when cash on reserve is not enough to cover unexpected expenses.

Tax lien: The government’s legal claim against a property when the homeowner neglects or fails to pay a tax debt.

Title insurance: Insurance that protects the buyer and lender should an individual or entity step forward with a claim that was attached to the property before the seller transferred legal ownership of the property or “title” to the buyer.

Underwater or upside down: A situation in which a homeowner owes more for a property than it’s worth.

Underwriting: A process a lender follows to assess a home loan applicant’s income, assets and credit, and the risk involved in offering the applicant a mortgage.

Walkthrough: A buyer’s final inspection of a home before closing.