Buying a home can be an exciting time. Once you find the house, get ready for the mountains of paper you will sign at your real estate closing. Unfortunately, real estate loves acronyms, and sometimes the language used at closing can make you feel like people speak a foreign language. There are terms you need to know to understand what you are signing. Here are a few terms you may encounter.
1. HOA
If your home is in a subdivision, there is a good chance you may see HOA fees in your documentation. HOAs, or Home Owner Associations, are governing authorities in many neighborhoods. The committee sets up and enforces the rules for the properties within the community. You automatically become an associate member when you purchase a home in an HOA-controlled neighborhood.
HOA fees may occur monthly, quarterly, or annually, ranging from a few dollars per month to several hundred dollars. Your fees typically cover some or all of the amenities in your neighborhood. Some of these include:
Usually, the more amenities and services your fee covers, the higher your fee is.
2. DTI
Before your lender approves your financing, they perform calculations to determine your Debt-to-income, or DTI, ratio. Your lender calculates this by taking your monthly debt expenses plus your house payment, dividing by your monthly income, and multiplying it by 100.
Your DTI helps your loan officer determine how much of a house payment you can afford based on available loan programs. The lower your DTI is, the more attractive you are to lenders.
3. EMD
By the time you get to closing, your realtor will have already asked you for an earnest money deposit or EMD. Some realtors may call it a good-faith deposit. An EMD is made up of money you put down to ensure the seller that you had good intentions to purchase the property.
The amount of EMD you pay can vary based on the seller and the property's location. Once you pay it, an escrow company holds the money. Your EMD should reflect on your purchase and sales agreement.
4. PSA
A PSA is a purchase and sales agreement outlining the terms, conditions, and contingencies agreed upon between you and the seller. Your real estate agent or attorney draws up the PSA when you make an offer the seller accepts on the property.
A PSA is not to be confused with the purchase agreement. You sign the purchase agreement at closing, and it finalizes the sale.
To learn more about real estate closing, contact an attorney in your area such as Cornelius F Sullivan Attorney.
Share6 December 2022
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