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Housing 101

Posted July 16, 2014 in Advice Column

Whether you’re preparing to rent or buy, WCF Financial Bank encourages you to be familiar with the following housing terms:

Before buying
APR: Short for annual percentage rate, this is how much your loan will cost over the course of a year. This figure is almost always higher than the interest rate because it takes into account the interest charged as well as fees or additional costs associated with the loan. Since all lenders use the same formula, it can be a more effective way of comparing mortgages rather than just the interest rate.

Closing costs/settlement fees: The costs, in addition to the price of the property, that buyers and sellers are charged to complete a real estate transaction. Costs include loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees and credit report charges.

Escrow: Escrow accounts are usually required by lenders to cover property taxes and mortgage insurance. After an initial deposit, borrowers pay into the escrow monthly — usually as part of the mortgage payment.

Good Faith Estimate (GFE): An accurate estimate of fees associated with a loan provided to the customer by a mortgage lender or broker. A GFE is required by law under the Real Estate Settlement Procedures Act (RESPA). The estimate must be provided within three business days of applying for a loan.

Points: Borrowers can pay a lender points to reduce the interest rate on the loan, resulting in a lower monthly payment. The cost of one point is equal to 1 percent of the loan amount. Depending on the borrower, each point lowers your interest rate by one-eighth to one one-quarter of a percent.

Before renting
Lease: A legal document detailing the terms under which the lessee (the renter) agrees to rent property from the lessor (the property owner). A lease guarantees use of an asset and guarantees regular payments from the lessee for a specified number of months or years.

Notice to vacate: Notification from the landlord to the tenant ordering the tenant of vacate the property. In most cases, the notification is given because the tenant either broke one of the terms of the lease or is not following through with payment of rent. The tenant is typically given 30 days to vacate the premises. Similarly, a notice to intend to vacate may be required under the lease for the tenant to notify the landlord before vacating the property.

Security deposit: Funds, in addition to rent, that a landlord requires a tenant to pay to be kept separately in a fund for use should the tenant cause damage to the premises or otherwise violate terms of the lease.

Information provided by WCF Financial Bank, 820 Des Moines St., Webster City, www.wcfbank.com.





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