When venturing into Los Angeles real estate, you might come across unfamiliar property law terms that are commonly used in these transactions.
While you don’t need to be a real estate lawyer to deal with transactions and terms like these, it would be best for you to familiarize yourself with Los Angeles property law terms. Even as a layman, understanding these terms will provide you with the advantage of knowing what you’re dealing with.
Venturing into real estate is a learning experience. Here are a few common real estate and property law terms you should know when dealing with real estate in Los Angeles:
Annual Percentage Rate (APR): A percentage of the loan amount that consists of the interest rate and loan fees charged by the lender. The best way to gauge the total cost of a loan.
Appraisal: Conducted by a qualified individual, it is a detailed written analysis of a property’s estimated value.
Adjustable Rate Mortgage: A mortgage that works using variable interest rates that fluctuate throughout the loan duration according to the lender. It is based on changes of a specified index.
Binder: Also known as an earnest money request or offer to purchase. It is a brief written agreement that acknowledges a deposit made to enter into a contract of sale for a particular property.
Broker: A broker is someone who works on a commission-basis to connect interested parties together and assist in real estate transactions between them.
Buyer’s agent: A buyer’s agent is an individual who is authorized to negotiate and participate in the sale of a property on a buyer’s behalf. A buyer’s agent does not have a relationship with sellers and works for the buyer alone.
Contingencies: Requirements that must be met before the closing of a sale. Contingencies can include obtaining a mortgage to purchase the property, the repair and renovation of a property, or conducting a house appraisal equal or higher than a sale price.
Closing costs: These are additional fees that are required to transfer a property to a buyer that are not included in the purchase price. Examples of closing costs might be escrow fees, title search fees, insurance fees, and more. A contract is required to specify which party is responsible for paying of which closing costs.
Debt-to-income Ratio: When applying for a loan, it is the amount of debt relative to your income, including your already accrued debt and your upcoming mortgage.
Default: A borrower defaults on their mortgage when they are unable to pay two or more monthly mortgage payments on time. While a concern, it does not automatically mean forfeiting your home. Often, lenders will assist you in finding a solution to avoid foreclosure.
Escrow: The procedure where a third party acts out both instructions from both the buyer and seller as a stakeholder. Handling paperwork and fund distribution also falls under escrow.
Equity: Defined as a homeowners financial interest in a given property. It is also the difference between a property’s market value and how much is owed on the property.
Foreclosure: The process of a mortgage lender assuming possession of and selling a property in the event that a borrower defaults and cannot pay off their loan.
Fixed Rate Mortgage: A mortgage that works using a fixed interest rate that is not subject to change at any time during the loan term.
Loan to Value Ratio: A percentage of the appraised value of a property, it determines the amount of a property’s value after appraisal.
Refinance: It is the process of taking out a new mortgage loan in order for the borrower to receive more favorable terms. Usually recommended to borrowers who have fixed-rate mortgages that drop below 1 percent of what is currently being paid. Refinancing can be an expensive and time-consuming process and should be considered carefully before attempting it.
Truth in Lending: A federal law that dictates lenders must fully disclose all the terms and conditions stipulated in a mortgage in writing. It was enacted to protect borrowers and ensure that they have a clear picture of their mortgage.
Underwriting: Evaluates a loan application to determine the risk for a lender to approve it.
If you’re looking to work with a real estate lawyer in Los Angeles, consider reaching out to The Law Offices of R. Grace Rodriguez. We are a local probate and estate firm that is happy to work with you to ensure that you are equipped to deal with real estate transactions. Contact 818-734-7223 or 805-364-0884 to learn more.