House Hunting: Decisions, Decisions, Decisions

Choices – it’s great to have them but challenging to narrow them down. Whether choosing between where to have dinner, which movie to see or something as important as where to live, making up our minds is sometimes quite difficult.

House hunting is either feast or famine: sometimes there are no homes that you like, other times, there may be too many that offer exactly what you want. So, how do you “say yes to one and let the other one ride,” as the Lovin’ Spoonful so aptly put it back in 1966?

Here are some factors to consider when weighing one choice against the other.

Mortgage Costs and Financial Considerations

One of the biggest mistakes people make when buying a home is assuming their monthly mortgage payment is the only financial outlay required when owning a home. The cost of homeownership includes more than the payment – sometimes much more. Consider these additional costs:

  • Association, neighborhood or condo fees
  • Electricity, water and other utilities
  • Homeowner insurance
  • Repair costs
  • Maintenance, such as landscaping, pool service, etc.

TIP: Compare the real costs of owning the houses in question. One may just price itself out of the decision-making process.

The Basics: Location, Structure and Design

Think back to when you first decided to buy a home. While price was most likely your biggest concern, location may have factored into your concerns as well. Many homebuyers end up compromising on location, veering away from their original intent.

TIP: Compare the locations of the houses in question. Which one fits your original intent? Are you compromising on location when you don’t have to? Go over this list and remind yourself of which aspects of location are most important to you:

  • Commuting distance
  • Future nearby development projects
  • Local crime
  • Local economy
  • Neighborhood age and cleanliness
  • Neighborhood traffic noise
  • Property values
  • Proximity to shops, hospitals and schools
  • Nearby features that may drag down property values, such as a landfill

The structural integrity of the house is also extremely important when you choose a home. While it may seem beautiful, if it isn’t well built, home maintenance costs could cripple a new owner’s finances. Here’s another opportunity to compare houses. Which one is more structurally sound?

Something has equally attracted you to more than one home and typically, that something is design.

TIP: What design elements do the two homes have in common and which house presents those elements better? Look at the floor plans and picture yourself using them. Is one more functional than the other? Are there odd shaped rooms that may end up driving you crazy?

Don’t Go Changin’. . .

Still stuck? Ask yourself what you would change about each house, if finances were not a consideration. Allow your imagination free reign on this one and you may find that one house edges out the other.

While we don’t advise you to go with your gut or flip a coin when deciding which house to buy, in the end, it may come down to emotion.

On one level you’re making an investment decision — but you’re also choosing something very emotional ― a home. When all the priorities are examined, and all the pros and cons of each choice are considered, whether or not a house feels like home is an important consideration.

We’re happy to help you find the perfect home in the ideal location.

Mortgage terms every first-time homebuyer needs to know

Like anything you do for the first time, you’re about to encounter a whole new vocabulary when you purchase a home.

Sure, you’ve likely heard some of these terms, but whether or not you know what they mean is an entirely different matter. We’ve broken down some of the most commonly confused terms you’ll encounter when pursuing a mortgage.

Closing Costs

Closing costs are just what they sound like – the cost to close the purchase process.

These fees range from origination fees, notary fees, local taxes and others and some are negotiable.

Your lender will send you a form, known as a Loan Estimate, within three days of receiving your application. This form contains important information, including estimated closing costs. Use this form to compare this lender’s costs to other lenders when shopping for a mortgage.

Down payment

Most first-time homebuyers understand that unless they’re paying cash for a home they will need a down payment. The confusion centers around who is making this requirement.

Hint: it’s not the home seller.

Indeed, this is a lender requirement and the amount you’ll need to pay varies according to the risk factor you present to the lender. USDA Rural Development and the Veterans Administration require no down payment for the loans they guarantee.

FHA offers low down payment options to certain borrowers.

You may also find that you qualify for municipal, state and federal down payment assistance programs. Work closely with your lender to find all the help you’re entitled to.


Think of “escrow” as a special type of account administered by a disinterested third party (typically an escrow officer) in which all the documents and monies pertaining to the real estate transaction are kept until closing.

Some of the items kept in an escrow account include the buyer’s earnest money deposit and the deed. There is also commonly a second escrow account in which the lender keeps your tax and insurance payments until they are due.


This is your monthly loan payment and it stands for what is included in your payment: principal, interest, taxes and insurance.


You may hear people refer to “buying down” their mortgage rate. What they are referring to is the payment of points, or percentage points of the loan amount.

If you plan on living in the home for a long time, paying a point up front will save you money.


You may hear this referred to as “collateral,” and the words mean the same thing but “security” is more often used in mortgage transactions. The home you are purchasing is the security for the loan.

In other words, if you go upside down in your mortgage payments, the lender reserves the right to take the security (your home).

Title insurance

Since the home is the security for the loan, the lender will want to ensure that nobody else has a claim on it.

A title insurance company will research the chain of title to make sure there are no liens or heirs that may pop up down the line with a claim to the title. The title insurance policy is a guarantee against this occurring.

We aren’t lenders, so if you’re confused about any mortgage terms, don’t be afraid to ask your lender for an explanation. Most are happy to help.

3 Ways to get your credit ready for buying a home

Probably the least fun part of buying a house are those first steps. Shopping for a lender, applying for a mortgage and waiting to find out how much you can afford to spend on that new house is tedious – especially when all you really want to do is look at houses for sale.

Unfortunately, this is a task that must be taken care of upfront, before looking at what’s on the market. If your credit is ready before taking the step, you’ll be far more successful in obtaining a mortgage with an attractive rate, saving you money on your house payment.

Take the following steps as soon as you decide you’d like to buy a home.

1. Make bill payments on time

One of the worst things you can do is pay bills late or, even more disastrous, not at all. Both will impact your credit score and thus your ability to obtain a mortgage.

“Your FICO Score considers late payments using these general criteria; how recent the late payments are, how severe the late payments are, and how frequently the late payments occur,” caution the experts at

Don’t allow any bills to be sent to a collection agency; “… it is considered a significant event with regard to your score and will likely have a severe negative impact.”

If an unexpected financial emergency comes up, contact the creditor. Let them know your situation and ask if there is a way you can avoid a late payment on your credit.

Your payment history accounts for 35% of your FICO score, so be diligent in paying your bills.

2. Don’t apply for new credit

Keep credit card balances low and pay all credit card bills before they’re due. If you can, make additional payments to bring down the balances.

Avoid applying for a new credit card. Why? Lenders are wary of borrowers who take on additional debt and if you apply for credit, the signal that you’re sending is that you will use it and, thus, rack up additional debt.

While FICO only considers new credit applications for the past 12 months, they account for 10% of your credit score.

New accounts also have an impact on “… your length of credit history.” FICO uses your “… oldest account and the average of all your accounts.” Opening a new account decreases the average age.

The exception to this rule is for the consumer with a spotty credit record. “If you can prove to lenders that you can pay your bills on time, this will help increase your score in the long run,” claim the experts.

And, by the way, credit inquiries remain on your credit record for two years.

3. Lower your debt-to-income ratio

When your mortgage application gets to the underwriter, he or she will examine your debt-to-income ratio (DTI).

Simply, this is a calculation of your income and debt that tells the underwriter how much money comes in and how much goes out every month. Borrowers with a high DTI (more than 43%) present a bigger risk to lenders.

Calculate yours with these tips from the Consumer Financial Protection Bureau. To lower your DTI, either decrease your debt, raise your income or do both. Find some additional tips on how to lower your DTI at

Selling a Home is NOT a DIY Project

No, I’m not going to tell you that “You’ll never be able to sell your home without a real estate agent.”

And, yes, the topic of this blog post may seem self-serving. After all, helping homeowners sell their properties is what I do for a living.

What I will explain is what goes into a home sale—especially its unique qualities that, unlike selling a car or anything else—make it entirely unsuitable for a DIY project.

The DIY process is tainted

If you’ve ever purchased a used car from the owner, instead of from an automobile dealership, you are familiar with some of the same fears many of your potential buyers will have. Especially if you refuse to pay a buyer’s agent commission, homebuyers will be reluctant to work with you.

Their fears are that because you aren’t a professional, but a complete stranger, you lack the ethics that a REALTOR is bound by.

Is the home a “lemon?” They’ll wonder if you’re disclosing everything you know about the home and the neighborhood.

Your inexperience may frighten off some of the best buyers for your home.

DIY home evaluation

There are two critical aspects of every home sale, presentation (how your home is presented to potential homebuyers) and price. Do you know how the market value of a home is determined? And, if so, where will you get the data required to figure out how much your home is worth?

Many homeowners mistakenly turn to the large online real estate portals, which is a big mistake. Sites such as Zillow and Trulia don’t have access to all MLS listings.

Instead, they rely on the use of public records fed into an algorithm that spits out results that have a median error rate of about 8 percent, according to Zillow’s CEO.

That doesn’t sound too bad, right? Consider this: March’s median sale price, nationwide, was $344,625. Suppose you list your home for that but the real estate portal is telling your potential homebuyers that your home is worth 8 percent less.

That’s more than $27,000

Imagine how many people won’t even look at your home, assuming it’s overpriced. Or, worse, the lowball offers you’ll get because of it. It happens all the time.

One economist, by the way, found the error rate of Zillow’s “Zestimates” to be much higher—as much as 20 percent too high or too low.

To determine the current market value of a home requires access to information about recently sold homes near yours. The MLS has this data and one must be a member to access it.

DIY marketing

Unless you work in advertising or marketing, how your home is presented to potential buyers is better left to a professional.

How will your description of the home and your photographs compare to the competition, being marketed by professional real estate agents with all of the tools and expertise they possess?

Since we do this for a living, we are able to analyze your property to determine who your likely buyer will be and focus our marketing to that pool of buyers. We also know which advertising and marketing platforms work best for each type of buyer.

A multitude of details

Do you know how to pick a closing date that meshes with your current financial or homebuying objectives? Especially if you are aiming to close on another home simultaneously, some days, and some parts of the month are better for the seller. This is yet another of the many details to be aware of.

As real estate agents, we juggle what seems like a million and one details for every transaction. Everything from keeping track to when contingencies are supposed to be removed, to scheduling the home inspection and ensuring the appraiser gets his or her work done in a timely manner, we make sure nothing falls through the cracks.

Doing it by yourself means you don’t have anyone in your corner

If the homeowner who goes it alone decides to pay a small commission to the buyer’s agent, the playing field is lopsided.

The buyer has professional representation and the seller doesn’t. And, no, the buyers’ agent will not help the seller with the paperwork or anything else.

How will you hold up in negotiations against someone who negotiates for a living?

We understand that it’s tempting to try to go it alone when you sell your home and we’re happy to offer you advice. But we would be remiss in our duties to not explain to you the many things that can, and often do, go wrong.

Is spring the BEST Time to List My Home for Sale?

Have you noticed that there’s a study for just about anything you can think of?

In 2004, for instance, a Swedish study determined that “Chickens Prefer Beautiful Humans.” A study out of the UK let us know that yawning isn’t contagious among red-footed tortoises.

And, an online real estate portal swears that the best months to list a home for sale are from the middle of March to the middle of April.

But they dug deeper into the data and added a caveat: in regions where it remains chilly into early spring, “waiting until mid- to late-April is your best bet.”

Then, along came a super-hot sellers’ market and upended that study’s findings. The truth is, at least right now, there should be plenty of buyers for your home in this spring and summer real estate market.

That’s not all

According to a Wall Street Journal study, the day of the week you list your home can have an impact on not only the eventual selling price, but the time your home spends on the market as well.

The best day? Friday. Not surprising when one considers that homes that hit the market on Friday show up as fresh MLS listings for eager weekend homebuyers to view.

Friday listings sell for more than 99 percent of the original list price, while those listed on Sunday garner only 98.4 percent, on average, at least according to that study.

In other words, if you listed your home at $375,000 on Friday instead of Sunday, the statistics say you’ll have a good chance of walking away with an additional $2,625.

People must be in a hurry on Fridays as well, because homes listed then sold faster than homes listed on other days.

Coming in right behind Friday, however, is Tuesday – a head scratcher for sure. Why Tuesday?

According to the report, Tuesday-listed homes are the most attractive for home tours, getting almost 2.5 requests for a tour, on average, on that day.

Remember, all real estate is local and this was a nationwide study, so our mileage may vary.

That’s not to say that if you decide on a Thursday that you want to list your home, we shouldn’t wait until Friday to put the listing in the MLS. It might be a tactic to try, especially if you need to sell your home quickly.

What to expect when you list your home in this market

As mentioned earlier, the market is red-hot for sellers right now. With schools expected to reopen nationwide in the fall, folks are trying to get settled into their new homes before then, so there are lots of buyers in the market.

In fact, now may be the only time in the foreseeable future when you may have a chance to receive multiple offers on your home.

Homes are selling quickly as well. According to the National Association of REALTORS®, the nationwide average amount of time that a home is on the market (from listing to accepting an offer) is currently 20 days.

Furthermore, the median home price has increased more than 14% over this time last year. Homeowners are sitting on an amazing amount of equity right now.

Now, all of this good news for sellers will vanish if mortgage rates rise significantly or if there is a sudden downturn in the housing market, as we unfortunately learned during the housing crisis.

These are all good reasons to consider selling your home this spring or summer. Questions? Reach out to us. Advice is always free.

A Guide to Buying Your First Home

Buying real estate, while once touted as a wise investment toward your future wealth, has become somewhat of a scary prospect to first-time buyers. The market, right now, is moving at warp speed.

Home buying is a process and, like any other, there are steps you should take to get you to your goal. While it’s natural to be anxious about becoming a homeowner, take the time to follow the steps and, before you know it, you’ll be in your own home.


One of the unpleasant tasks in the home buying process is figuring out how much money you can spend on a house and then locating a lender to give you that money at an attractive rate and good terms.

You’ll need cash for the down payment and, unless you find a seller that is willing to help with them, you’ll also need some cash for the closing costs.

If you’re on a tight budget, consider some of the government programs. The United States Department of Housing and Urban Development (HUD) backs low-cost, first-time buyer loans through the Federal Housing Administration (FHA). Learn more at

No matter which route you decide to take you’ll need to shop for a loan. Take your time when looking for a loan, as rates and terms may vary widely between lenders.

Shopping for Your First Home

Real estate buyer’s agents will tell you that making a wish list is one of the most important steps to take before looking at houses. You’ll actually make the list and then edit it several times. If you’re half of a couple, you should both make your own lists.

Your original list should be an exercise in dreaming. Write down everything your ideal home would have – even if you think these items may be too expensive.

Let your imagination run wild. After it’s complete, go back over it with a more realistic eye. If you’re on a tight budget you may wish to cross off the stables and tennis courts.

Once you’ve whittled the list down so that it fits your real world, choose one or two items on which you will not compromise. Then, compare your list with your partner’s.

Anything that shows up on both lists is a “must have.” That, along with your top must have and your partner’s can’t-live-without, gives your agent a clear idea on which types of homes to show you and which to exclude.

Next, you’ll need to decide on a neighborhood. If you have children, proximity to your chosen schools may be the deciding factor.

Perhaps a location that provides for a quicker commute to work is your ideal. Decide on several areas and do a quick check of prices in the areas ensure you can afford to live there.

Now you’re ready to choose an agent. Ask friends, family, co-workers and neighbors for recommendations.

You’ve Found a Home – Now What?

Finding a house you wish to purchase is the first step toward what may be smooth sailing or an absolute nightmare. Prepare yourself for the worst and, if all goes well, consider yourself lucky.

First you’ll make an offer. Determine what you want to offer on the house and then follow your agent’s advice as to how appropriate the offer is. When the housing market is moving fast, with multiple offers on houses, make your highest and best offer at the outset, as you don’t have time to bargain.

Once the offer is accepted it’s important to adhere to the time limits in the contract. Order your home inspection and shop for homeowner’s insurance immediately.

You hold the key to a smooth real estate transaction. By preparing adequately and choosing the right professionals to help you along the way, you guarantee your success.

How to declutter and depersonalize your home for sale

Congratulations on making the decision to sell your home. You couldn’t have chosen a better real estate market in which to do so.

Now, the journey begins. There’s a lot to do, and it starts with getting your home ready for the market.

Deep cleaning is critical but before you break out the Lysol and Dust Buster, you will need to declutter and depersonalize the home.

The reasons behind decluttering

Did you know that there are actually studies on the effects of clutter on our psyches? The University of California at Los Angeles (UCLA) spent four years studying the topic and found that clutter makes us stressed.

Since a stressed-out buyer is one who won’t spend much time in your home, getting rid of clutter is critical.

And depersonalizing?

There are several reasons behind the advice to depersonalize your home before putting it on the market.

The first is that buyers want to be able to see themselves living in your home. They can’t do that while staring at strangers peering out of photographs, awards on walls given to someone else and evidence that strangers brush their teeth in the bathrooms.

Personal items can be distracting, especially the very personal items we sometimes leave on bathroom counters.

Let’s get started

Grab some boxes. Since you’ll need them for the moving process later on, they’ll do double duty.

Depending on how cluttered your home is, you may need several boxes in some rooms (hello children!). Grab some cushioning material (newspaper, bubble wrap, etc.) for fragile items.

Choose a room in which to start. Some organizing experts recommend that you choose to start to the right or left of the front door and work your way around the home.

Pack up anything of a personal nature in the boxes you’ve gathered.

Bedroom decluttering and depersonalizing

Think about your favorite hotel room; that is how you want your bedrooms to look. The master bedroom is especially important and most homebuyers say that it’s their number one priority, according to the National Association of REALTORS®.

Remove family photos and replace them with something generic. Since the bed is typically the focal point, think back, again, to that hotel room and splurge on some new bedding and extra pillows.

Clear off the nightstands, leaving a lamp, a small photo in an attractive frame and a plant or floral arrangement.

Need ideas? Check out

Tips for the bathrooms

Since bathrooms are, by their very nature, personal, depersonalizing them can be a challenge.

Start by removing everything of a personal nature from the counters and storing these items out of site. This includes toothbrushes, toothpaste, mouthwash, cosmetics and other toiletries.

The rule of thumb for countertops: If it isn’t decorative, stash it.

Extra toilet paper next to the toilet? Stash that too.

Next, check out the shower/tub. Yes, homebuyers will sneak a peek behind the curtain.

Remove razors, body wash and soap, hair products, back scrubbers and whatever else you keep in there. Everything.

Living Room and Family Room

Refresh your memory on that gorgeous hotel room and get to work on the living and family rooms.

Pack up:

  • Souvenirs
  • CD and DVD collections
  • Family photos
  • Framed awards, degrees, diplomas
  • Magazines, newspapers
  • Anything of a religious or political nature
  • Toys and other kid and pet paraphernalia

Time to tackle the kitchen

Kitchens can hold a lot of clutter, both in the cupboards and drawers and on the counters.

Remember what we said about the bathroom counters? The same holds true for those in the kitchen. When countertops are cluttered, they appear smaller and buyers love lots of counter space.

Clear them off and replace only decorative items. No toaster, food processor or waffle iron.

Get ideas on how to declutter and stage kitchen counters at:

The spring real estate market is upon us and, although homes are selling quickly, they sell for more if they’re decluttered and depersonalized.

Selling your home? Avoid these 3 popular renovation projects

Seven point nine five.

That’s how many years the average American homeowner lives in their home, according to the number crunchers at Attom Data.

Whether you are at the beginning, middle or end of this nearly eight-year period, some day you will sell your home. While it’s great to renovate for your comfort and enjoyment, keep in mind that what you do to the home now may have an impact on both how long the home takes to sell and how much money you’ll walk away with.

In other words, investing $25,000 in remodeling will not necessarily mean you can tack on an extra $25,000 to the asking price when you sell the home.

Let’s take a look at some of the worst renovations you can make if you hope to get a payoff when you sell.

Installing wall-to-wall carpeting or hardwood flooring

Yes, there was a time when new wall-to-wall carpeting or hardwood flooring would boost a home’s value. Those days are long gone.

The fact that flooring-giant Armstrong sold off its hardwood line is a tip that Americans are officially out-of-love with hardwood floors. And carpet?

Lowe’s had such a hard time selling carpet that they decided to offer free installation. To no avail; they still saw a nearly 8% decrease in carpet sales.

Today, homebuyers prefer luxury vinyl and will discount a home’s perceived value if they will need to replace flooring after they move in.

Converting the garage

Garage conversions are far more popular in some areas than they are in others. They are especially popular in older neighborhoods with small homes.

Hey, who can blame someone for converting a garage into a bedroom when they need the space?

Just don’t expect that the conversion will translate into more money when the home is sold.

In fact, “If it’s not permitted, they’ll have a problem selling,” cautions George Holmes of Eagle Appraisal of Las Vegas.  And, it if is permitted?

“It depends on the price class of the home,” Holmes said. “If it’s a cookie cutter home and it lacks a 2-car garage, we’ll deduct $8,000 to $10,000 from the value. It’s not cut and dry, however,” he cautions.

You can almost count on your home appraising for less than similar homes that have garages.

Permanent Conversion of a Bedroom

Bedrooms add value to a home. Often, however, homeowners permanently convert a third bedroom into an office, a gym or a family room.

While there is nothing inherently wrong with adding any of these conversions, if you can’t change the room back to a bedroom when you sell the home, the value of the home diminishes.

Since you now have only two bedrooms, the appraiser will compare your home to other two-bedroom homes.

Better Ways to Spend the Money

No matter how much you renovate or remodel a home, if deferred maintenance rears its ugly head, you will lose money on the sale of it.

Put your home renovation dollars toward the less sexy projects: new heating, plumbing and electrical upgrades and anything that boosts the home’s curb appeal.

Real Estate Glossary for the First Time Homebuyer

Every industry has its “inside” jargon and the real estate industry is no exception. Some of the lingo, such as “location, location, location” are a snap to decipher, while other terms are downright incomprehensible.

Real estate agents sometimes have a tendency to roll this stuff off their tongues assuming their clients understand when, in reality, they may as well be speaking a different language.

Here is a glossary of some of the most common terms you will hear during your real estate transaction:

Adjustable-rate mortgage (ARM) – A mortgage with a fluctuating interest rate. ARMs tend to have lower initial interest rates for a set period of time, and then begin adjusting according to an index. They may adjust monthly, quarterly, annually or longer.

Addendum – A form describing a change or addition to the purchase agreement. Anything added in addendum should be looked at very carefully. Addendums are used for many changes, such as the extension of the closing date.

Appraisal – In a real estate transaction, the appraisal is a determination of the value of a house. The evaluation is required by the lender and prepared by the lender’s choice of an objective and impartial professional appraiser.

Certificate of title: The title certificate is a document that ensures the property being sold is legally owned by the seller(s) and that no other party owns any part of it or has any claims, such as liens, against it.

Closing – This is where the term “closing table” comes into play, and the process is also known as “settlement.” In the past, all parties would sit around a table to sign the closing documents. Today, there are a number of variants, including virtual closings.

Closing costs – All the additional expenses incurred in financing and purchasing the home. These expenses typically include attorney’s fees, a loan origination fee, escrow impounds, and other miscellaneous charges. There is no set cost but the ballpark range is between 2% to 7% of the sales price of the house.

CMA (Comparative Market Analysis) – A determination of a home’s market value for the purposes of determining a fair asking price. Real estate agents compile the CMA by comparing the subject house to those that have recently sold within close proximity. Although the CMA is similar to an appraisal, it will not replace a lender-required appraisal.

Comps – Properties that are comparable to the property being analyzed.

Contingency – A section of the purchase agreement that specifies certain conditions that must be met in order for the sale to proceed. Common contingencies in purchase agreements include those for inspections and loan approval.

Counter offer – A form that requests the addition or elimination of parts of the original purchase agreement.

CC&Rs – Covenants, conditions and restrictions. This is where you find out that, no, you can’t paint your front door blue. These documents set out the rules that homeowners must obey in a managed community.

Disclosures – Information about the home that a seller must provide, by law, to a buyer. The number and types of disclosures provided to the buyer depend on region. In California, for instance, the lengthy Transfer Disclosure Statement provides the buyer with information from the seller regarding the condition of the property and any repairs or modifications performed.

Deed – The deed is the legal document that provides proof of the transfer of ownership of real property.

Down payment – The down payment is the percentage of the purchase price that the buyer pays in cash. Depending upon lender and loan program, this percentage generally ranges from 3 to 20 percent. The down payment is a lender requirement.

Due Diligence – The responsibility of the buyer to exercise the appropriate care before closing on the purchase. Due diligence includes verifying all of the seller’s representations and uncovering any other pertinent facts that have not been disclosed but have a bearing on whether or not you want to purchase the property.

Earnest Money Deposit – The earnest money deposit is money provided by the homebuyer to the seller to prove her earnest intent to purchase the property. The amount varies, and the check is typically submitted with the purchase agreement. If the sale goes through, the earnest money deposit is applied to the down payment. If the buyer walks away from the sale, through no fault of the seller, he may forfeit his earnest money deposit.

Escrow – The escrow process assures that the purchase funds are released and that the transfer of the house is completed. The escrow company is a neutral third party to the process and uses the purchase agreement and other associated documents as instructions.

Escrow Impounds – The lender requires a deposit, as prepayment of taxes and insurance, at the close of escrow. This deposit goes into an escrow account and protects the lender in the event that you allow your insurance to lapse or don’t pay your property taxes. By law, the lender can only request an amount that is equal to no more than two months’ payments.

FHA Loan – This is a loan tendered by a traditional lender but insured by the Department of Housing and Urban Development and administered by the Federal Housing Administration. FHA offers several home loan programs, some offering low down payments, others to assist buyers of fixer-upper properties. FHA does not provide loans — it provides insurance for loans.

FICO Score: Your FICO score is a compilation of information from the three major credit reporting agencies and calculated by the Fair Isaac Corporation. Your FICO score reflects your debt payment history, amounts owed, length of credit history, new credit and the types of credit you use. The FICO score range is between 300 and 850. The higher your FICO score, the less of a credit risk you present to lenders.

Fiduciary duty – The broker under which your real estate agent works is your fiduciary. She is held to specific duties, outlined by state law, to her principal (you). Some of these duties include disclosure, confidentiality, reasonable care and diligence and loyalty.

Final Walk-Through – The buyer is allowed one last chance to walk through the home prior to the close of escrow. This inspection is not to turn up newly-discovered defects, but to ensure that the home is in the same condition as when the offer was tendered.

Fixed-rate mortgage – A type of mortgage in which the interest rate does not fluctuate over the life of the loan.

HOA Docs: Homeowner’s Association Documents. When purchasing a condo or a home in a managed community, you have a right to view recent HOA meeting minutes, a copy of their current budget, CC&Rs and other equally fascinating documents. Think boring, and you’ve got an idea of what’s included in the HOA docs. They’re important, though, so set aside an hour or two to go over them.

Loan-to-value (LTV) ratio – The LTV is a ratio that lenders use to assess risk when providing a mortgage loan. The LTV represents the amount of the mortgage divided by the appraised value of the property. Lenders consider higher LTV ratios as high-risk loans.

Mortgage – A legal document that pledges the house to the lender as security for the loan to purchase the house.

Mortgage insurance – An insurance policy that compensates the lender in the event a borrower defaults on the loan.

PITI (Principal, Interest, Taxes and Insurance) – Your monthly mortgage payment. Principal is the part of the payment that pays down the loan, the interest is the part of the payment that pays the lender for loaning you the money to buy the home, taxes and insurance are the necessary evils that must be paid for, typically into an escrow account each month.

PMI (Private Mortgage Insurance) – Like mortgage insurance, this policy protects the lender against a buyer’s loan default. Lenders on high-risk loans – typically when the LTV exceeds 80 percent — require PMI. When the homeowner’s LTV falls below the specified rate, PMI may often be discontinued.

Point – A one-time charge by the lender for originating a loan. A point is one percent of the amount of the loan.

Pre-qualification – The process of determining if a borrower qualifies for a loan and the approximate amount of money she may qualify to receive.

Title Insurance – An insurance policy that protects against damages due to defects in the chain of title.

VA Loans – These loans are offered by the Department of Veterans Affairs exclusively to members of the military. Veterans, those on active-duty and reservists are all considered as eligible to apply for VA loans, which typically require no down payment.

Homeowner Insurance Policy Definitions for Homebuyers

If you feel like you’re reading a foreign language when you look over your homeowner’s insurance policy, you aren’t alone.

Where simple language that’s easy for the layperson to understand will suffice, the typical homeowner’s insurance policy is loaded with industry jargon. Grab a cup of coffee to keep yourself awake while we pick that policy apart and see if we can come to grips with some of the terms.

Deciphering Insurance-ese

Pay very close attention to the Conditions clause of the policy. This sets forth your obligations and duties. It may be the most important clause in the entire contract, for if these conditions are not met, your claim may be denied.

One of the common terms found in most homeowner insurance policies is “Actual Cash Value.” This number reflects the amount the company will pay in the event of a disaster.

It is typically equal to what it would cost to replace the house, minus depreciation. Many homeowners confuse Actual Cash Value with Replacement Value, which is the amount the company will pay without the depreciation deduction, yet still subject to policy limits.

You will find a description of how the company arrived at this figure under the “Claim Settlement Provision” portion of the policy. The “Functional Replacement Cost” section of the policy describes the determination of Replacement Value.

We’ll Pay, But So Will You

Coinsurance is a term that confuses not only those in the market for a homeowner’s policy but health insurance as well.

You may find this concept listed as “Insurance to Value” in a homeowner’s policy. The first thing to understand about coinsurance is that it only comes into play in the event of a partial loss.

Described as a percentage, this provision defines the amount of the total damage that the company will cover. For instance, many insurers recommend that, if you don’t want to insure at full value, you should obtain a policy with at least 80 percent coverage.

In this case, the insurance company will pay up to 80 percent of the loss while you are responsible for the remaining 20 percent.

Now, to add even more confusion to the mix, this clause only comes into play when the loss and the policy limit fall below the coinsurance percentage.

Your policy’s deductible is the amount you pay in the event of a disaster. This amount may be listed as a specific dollar amount or a percentage of the home’s insured value. The choice of the deductible amount determines the premium (amount you pay for insurance), with the premium going down as the deductible goes up.

What happens if the home is so damaged that you can’t live in it until it is replaced or repaired? The “Loss of Use” portion of the policy spells this out, explaining how much you will be reimbursed for expenses incurred to find additional shelter during this time.

Endorsements are Only Good in Politics

Attached to your policy are the Endorsements. These forms modify the terms of the policy in some manner.

This is the toughest part of the insurance policy to understand for most homeowners. Some of these endorsements may negate policy clauses, or place conditions on them.

It’s a bit like reading the Internal Revenue tax instructions. If you have any questions on this part of your homeowner’s policy, consult with your insurance rep or attorney.

The Perils in Your Insurance Policy

In going over your insurance policy you may notice references to “perils.” These perils are then classified as either “open” or “named.” and this is where jargon takes a turn toward the ridiculous.

The peril is the event that caused the loss, such as theft or fire. If your policy provides for open perils, it will name which ones are excluded from coverage.

If you own a named perils policy, on the other hand, the policy will list every one of the perils that’s covered.  If you have concern about replacement of your personal possessions in the home, pay close attention to this part of the policy.

You may have an open perils clause for the home and a named perils clause for its contents. This is why updating your coverage as you acquire new possessions is so important.

If you live in earthquake country or in a flood zone you will need to purchase an additional policy. You may not be able to purchase this policy on the open market if you live in a high-risk area, but there are government-mandated insurance plans available. Check with your state’s insurance commissioner for details on these plans.

If you live in an area at high risk for hurricane activity your insurance choices become even more confusing. While most policies cover damage or loss from the hurricane, they won’t cover any damage from the ensuing flood.

The policies offered in hurricane-prone regions are definitely a mixed bag, though, with some offering limited coverage and some requiring a higher deductible.

As with homeowners in regions prone to earthquakes, check with your state’s insurance commissioner about government-mandated insurance plans that provide coverage that can’t be obtained on the open market.

Due Diligence: It’s Critical when Buying Insurance

It’s important to take your time when purchasing a homeowner’s policy and to never make assumptions based on the word of the insurance agent.

Learn how to read your policy and change it immediately if it doesn’t meet your needs.

According to the experts at United Policyholders, when shopping for insurance, make sure that you have enough insurance to replace your home (not the land) at full value, that you are protected against regional risks — such as earthquakes or floods — and that you have shopped around for the best price and have received all the discounts to which you are entitled.

In a nutshell: although not all homeowner insurance policies are the same, and they vary in their coverage, a policy typically covers the house and other structures on the property.

Personal possessions inside the home are covered (although pricier items may require additional coverage), as is your liability in the event someone is injured on your property.

Earthquake and flood damage is usually not covered and you will need to buy separate coverage for these events.