Homebuying is complicated, like really complicated. The vocabulary itself is enough to make you want to scream. Here at HOME, Inc., we try to simplify it for you and provide simple terms and definitions that you can understand. And if you are still looking for support, we’ve got some homeowner experts just a call away.
As we continue our homebuyer alphabet, we stop on the letter E to understand some more terms:
- Earnest Money: Earnest money is a deposit you pay to the seller of real property to show your good faith and intentions of getting a mortgage to buy the property. Depending on circumstances, you may or may not be able to get this money back if you decide not to complete the purchase.
- Encumbrance: An encumbrance is anything that affects or limits the fee simple title to the property, such as mortgages, leases, easements, or restrictions. (Something that burdens your access to the title of the property)
- Equal Credit Opportunity Act (ECOA): The ECOA is a federal law that requires lenders and other creditors to make credit equally available without discrimination based on race, color, religion, national origin, age, sex, marital status, or receipt of income from public assistance programs. It is also called “Regulation B.”
- Equity: Equity is net ownership. In other words, it’s the difference between how much your property is worth and how much you still owe on your mortgage (Market value – Mortgage balance = Equity). Equity is also sometimes called “owner’s interest”.
- Escrow: Escrow is money placed with a third party for “safekeeping.” During a real estate purchase, the buyer is typically required to place a portion of their down payment in an escrow account where it is held until the closing. After the home is purchased, a portion of each mortgage payment is typically held in an “escrow” account to pay for the property’s taxes and insurance.