Janis Peterson, GRI, ABR, CSP Realtor®
Philadelphia Main Line Homes and Real Estate
Montgomery, Delaware, and Chester Counties
Relocation Specialist
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Subject: Avoid Acronym Confusion - Common Real Estate Terms It Pays To Know

We use acronyms everyday. IOU, TGIF, NASA and others have become a part of our language because they simplify communication by shortening lengthy phrases or titles. As you go through the home buying or selling process, you'll run across acronyms commonly used in the real estate industry such as MLS, FSBO, PITI. However, unless you are familiar with the terms, they are just letters with no meaning. In this column, I have provided an explanation of some of the more commonly abbreviated words you may see or hear.

FSBO—For Sale By Owner. This term is commonly used in the real estate industry when referring to a property in which the homeowner decides to sell it independent of a real estate professional.

MLS—Multiple Listing Service. Whether you are selling or buying your home, your real estate professional will more than likely use this service. A Multiple Listing Service (MLS) is comprised of a group of real estate brokers who have agreed to share their property listings. This listing is then provided to the group through a database or directory. If you are buying your home, this is the service that your sales professional will use to search for potential homes for you to purchase. If you are selling your property, your real estate professional can list your home through the MLS. For-Sale-By-Owner (FSBO) properties are typically not listed through a MLS.

RESPA—Real Estate Settlement Procedures Act. This act was designed to protect consumers from abuses by lending institutions. It requires lenders to disclose information to potential customers throughout the mortgage process. Borrowers are to be fully informed about all closing costs, lender servicing and escrow account practices, and business relationships between closing service providers and other parties to the transaction. For example, at the time you apply for a loan, the lender is required to give you a Good Faith Estimate of settlement (closing) service charges you will likely have to pay. Another disclosure is the HUD-1 Settlement Statement that you receive at least one business day before the closing. This itemized statement provides a listing of the funds that were paid at closing including real estate commissions, loan fees, points, and initial escrow amounts.

PITI—Principal, Interest, Taxes and Insurance. When you apply for a home loan, one point taken into consideration is your debt to income ratio. PITI is one of the numbers on which the ratio is based. This number is the maximum percentage of your monthly gross income that the lender allows for housing expenses. The total includes payments on the loan principal and interest, private mortgage insurance, hazard insurance, property taxes, and homeowner's association dues.

ARMAdjustable rate mortgages. These loans start out with an interest rate significantly below the prevailing market rates for mortgage loans. Their interest rates are designed to move up or down over time, in response to key economic indicators to which individual loans such as these are tied.

CMAComparative Marketing Analysis. This analysis is an informal assessment of a property's market value. This is one of the tools your real estate professional can use to help you determine a reasonable listing price. Usually, the CMA compares your property with similar properties that have sold in your area within a certain time frame. Besides purchase price, some of the information typically listed is the number of bedrooms and baths, approximate square footage, size of major rooms, amenities such as fireplaces and pools, age of the home, and property taxes.

PMI—Private Mortgage Insurance or Insurers. If your down payment for your home is less than 20 percent, more than likely, you will be required to carry PMI insurance which protects the lender against losses due to defaults on the home loan. Privately owned companies provide this coverage, which you pay for at the closing. The cost is then added to your monthly mortgage payment.

The real estate process is complex, and you will most likely come across more terms that you are unfamiliar with. Make sure that you are an informed consumer. I recommend that you talk with your real estate professional whenever you are unclear about any part of the real estate process.

"Real Service in Real Estate." For a personal consultation on buying or selling real estate, Janis Peterson, GRI, ABR, CSP Realtor® can be reached at (610) 642-3744, e-mail: jp4re@pahomes.com. Prudential Fox & Roach Realtors® is an independently owned and operated member of The Prudential Real Estate Affiliates, Inc.

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