Glossary

Your Real Estate Resource Helping home buyers and sellers in the Chicagoland area with all their real estate needs! Home Buying Process One-Stop Resource PadScouts' Real Estate Resource is here to tell you about all of the steps involved in the home buying and selling process. Our goal is to give you information about the processes so you can make informed choices for your real estate decisions. Personalized Consultation Home Buying Process Learn every step of the home buying process from start to finish. There are a lot of steps and many people involved. We want to make sure you're fully informed! Lease-To-Own Opportunities Not ready to buy a home? There are resources available that can help you secure the property before you can buy. Home Selling Process Learn every step of the home selling process and all of the costs associated so that you can make the best decisions when selling your home. Glossary There is a lot of terminology in real estate. Look them up here to learn about them before a real estate transaction. Reviews Our real estate experts are here to help you if the site doesn't have the answers you're looking for. See how they've helped others who've requested a free consultation. “This was a great resource to look up information about selling my home! I had a complex inheritance deal so I scheduled a personal consultation and spoke with Robin. He was amazing to work with and helped us navigate the resources available to help us buy the property! ” Gloria M. Contact

Meet The Team Helping You Navigate Your Next Real Estate Decision Daniel Walus Designated Managing Broker (E) Daniel@PadScouts.com (P) 773-551-4990 ​ Lic. 471.019463 Aneta Korzec Buyer & Seller Specialist Lic. 475.124896 Miguel Aranda Buyer & Seller Specialist Lic. 475.181657 Robin Cerna Buyer & Seller Specialist Lic. 475.184736 Timothy Dancy Buyer & Seller Specialist Lic. 475.185225 What We Do We understand that buying or selling a home is more than just a transaction: it’s a life-changing experience. That’s why our team of highly-seasoned real estate professionals is dedicated to providing exceptional, personalized service for all of our clients. We take great pride in the relationships we build and always work relentlessly on the client’s behalf to help them achieve their real estate goals. We also diligently work to educate everyone on the home buying and selling process. We understand that buying or selling a home is unlike the day-to-day transactions we are used to. We pride ourselves in educating our clients to make sure the whole process is transparent so there are no surprises. Lastly, there is never an obligation to work with us. You can always contact us to learn more without committing to working with our team. We believe in educating everyone regardless if they are our client. We wish you the best on your next real estate decision!

Dual Agency Dual Agency is when a licensed Realtor represents both the Buyer and the Seller in a transaction. This is not legal in all States so it is important to ask check your State laws to see if it is legal, if your Realtor finds themselves in that situation. ​ In Illinois, Dual Agency is legal as long as both the Buyer and the Seller consents to the dual representation. This is performed through Dual Agency disclosures. An example of such a disclosure can be seen in this Listing Agreement . ​ Complexities with Dual Agency ​ Communication Dual agents are restricted in releasing confidential information about either client, and they cannot give preferential treatment to either party to the transaction. Client’s of dual agents sometimes become frustrated that the agent will not communicate with them beyond relaying information to and from the other client ​ Pricing Advice Real estate agents often have a better idea of a property’s true market value than the seller or buyer. In most cases, they also know the lowest price a seller is willing to accept or the highest the buyer is willing to offer. However, a dual agent is restricted in using this knowledge to complete the transaction. Discussions with either client about the price to offer or accept can lead to violations of the dual agency agreement and possibly result in the revocation of the agent’s license. For this reason, their knowledge of the market and experience in selling property is of limited value to either party.

Lease-To-Own Many people want the benefits of living in a single family home. However, whether you're a first-time homebuyer who's cautious about making such a large financial investment, you recently relocated and are unsure of which neighborhood to live in, or you would like to one day own a home and are creditworthy but cannot currently obtain a mortgage. ​ There are companies that offer leasing and rent-to-own programs that allow you to find a home that you want to rent initially, but may also like to buy in the next three to five years. There are many households who may be thinking about buying a home, but for whatever reason would like to rent at the current time. You can lease the home for three to five one-year terms, depending on the state, and you may purchase the home from us at any time at a predetermined price. ​ Let us know if you're interested in Lease-To-Own programs. We're happy to direct you to the right programs. Contact us for more information. Apply and Get Approved Prospective residents start the process by filling out a Pre-Qualification Application that checks key issues. ​ ​ Find A Home Prospective residents will work with a REALTOR® to find a home in an approved community. ​ ​ ​ Housing Program Buys the Home, You Lease from The Housing Program Prospective residents will be required to sign a one year Lease for the home as well as a Right to Purchase Agreement. Buy from Housing Program The Housing Program buys the home. You lease it and have the right to buy it later if you want to. ​ ​ ​

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Mortgage Loan A home mortgage is a loan given by a financial institution for the purchase of a residence—either a primary residence, a secondary residence, or an investment residence—in contrast to a piece of commercial or industrial property. Depending on the State where the property resides, in a home mortgage, either a mortgage lien is placed on the title of the property OR the owner of the property (the borrower) transfers the title to the lender on the condition that the title will be transferred back to the owner once the final loan payment has been made and other terms of the mortgage have been met or a mortgage lien will be placed on the title. ​ A mortgage payment is composed of 4 components, simply known as PITI - which is the Principal , Interest , Taxes , and Interest . ​ Principal The principal of your mortgage is the amount that you owe before any interest is added. For example, if you buy a home worth $250,000 with a 20% down payment, your principal amount would be $200,000. However, throughout the life of the loan, you pay more than your original $200,000 because of interest. Most lenders look at your principal balance and debt-to-income (DTI) ratio when they consider whether they should extend you a loan. Your debt to income (DTI) ratio is a calculation of your ability to make payments toward money you’ve borrowed. Your DTI ratio is comprised of your total minimum monthly debt divided by your gross monthly income and is expressed as a percentage. A mortgage company will evaluate two ratios: Front Ratio = monthly housing payments/gross monthly income (should be <30%) Back Ratio = total monthly debt obligations/gross monthly income (should be <40%) ​ Interest An interest rate is a percentage that shows how much you’ll pay your lender each month as a fee for borrowing money. Your mortgage lender calculates interest as a percentage of your principal over time. For example, if your principal loan is worth $200,000 and your lender charges you an interest rate of 4%, this means that you pay $8,000 (4% of $200,000) for the first year of your mortgage in interest. ​ Taxes You must pay taxes on your property. Taxes are one of the often-overlooked costs of homeownership. It’s important to consider them when you think about how much home you can afford. The most expensive tax most homeowners pay is property tax, which may vary by location. Property taxes support the local community and pay for things like libraries, local fire departments, public schools, road and park maintenance and community development projects. It’s difficult to say exactly how much you can expect to pay in taxes because they depend upon your home’s value and your local property tax rate. Taxes can vary from year to year. As a general rule, anticipate paying $1 for every $1,000 of your home’s value every month in property taxes. For example, if your home is worth $250,000, you pay around $250 per month in property taxes or about $3,000 per year. ​ Insurance Home Owners Insurance Though homeowners insurance is not required by law in most states, most mortgage lenders require that you maintain at least a certain level of property insurance as a condition of your loan. Homeowners insurance covers your property if a fire, lightning storm or break-in occurs. Some homeowners insurance policies include additional coverage for damage from flooding and earthquakes as add-ons. If you have something very valuable in your home, like a piece of artwork, an expensive piece of jewelry or a musical instrument, you may purchase a high-value layer of protection called a rider in addition to your standard policy. If you live in a condominium, you’ll usually pay a homeowners association fee in lieu of individual insurance that covers your dwelling. Like property insurance, it’s difficult to say exactly how much you can expect to pay in property insurance because every insurance company uses their own unique formula when they calculate your rates. Some factors that influence your premium include: Your home’s value Whether you live in a rural area or an urban area How close you live to a fire department or police station Whether you have an attractive nuisance on your property, which is something that is likely to injure children who enter your property like a pool, trampoline or aggressive dog How many claims you make each year on average for other types of insurance As a general rule, expect to pay about $3.50 for every $1,000 of your home’s value in homeowner’s insurance per year. In this example, you will pay $875 on a property worth $250,000 per year, or about $73 per month. Private Mortgage Insurance​ PMI — private mortgage insurance — is a type of insurance policy that protects mortgage lenders in case borrowers default on their loans. Here’s how it works: If a borrower defaults on their home loan, it’s assumed the lender will lose about 20 percent of the home’s sales price. 20 percent — sound familiar? That’s the smallest down payment you can make without having to pay mortgage insurance. If you put down 20 percent, that makes up for the lender’s potential loss if your loan defaults. But if you put down less than 20 percent, the lender will usually require mortgage insurance. Mortgage insurance covers that extra loss margin for the lender. If you ever default on your loan, it’s the lender that will receive a mortgage insurance check to cover its losses. How much is mortgage insurance?​ Mortgage insurance costs vary by loan program. But in general, mortgage insurance is about 0.5-1.5% of the loan amount per year. So for a $250,000 loan, mortgage insurance would cost around $1,250-$3,750 annually — or $100-315 per month.​​ ​ ​ Mortgage Products Terms ​ Mortgages are provided by mortgage companies . Most mortgage companies are able to help you facilitate the application for a Conventional Loan, FHA Loan, USDA Loan, or a VA Loan . Each of these types of loans also come in a variety of terms. Below are some examples of what you product terms you may encounter: ​ ​ Long-Term Fixed Mortgages (30-year) This is a mortgage loan where you will make monthly payments for 30 years. It is called a "fixed" mortgage because the interest rates are "fixed" meaning they remain the same for the duration of the loan. If you were quoted for a 4% interest rate, you will pay the same annual interest rate for 30 years. ​ The benefit of choosing a 30-year fixed mortgage compared to a short-term fixed mortgage is having lower monthly mortgage payments. The downside is that you will pay a much greater amount of interest over time. The benefit of choosing a fixed mortgage over an adjustable rate mortgage is being able to know your interests will not change over time. Adjustable Rate Mortgages interest change depending on the market rate which means your monthly loan payments may change over time. Short-Term Fixed Mortgages (15-year) This is a mortgage loan where you will make monthly payments for 15 years. It is called a "fixed" mortgage because the interest rates are "fixed" meaning they remain the same for the duration of the loan. If you were quoted for a 4% interest rate, you will pay the same annual interest rate for 15 years.​ Short-Term fixed mortgages come with higher monthly payments compared to long-term fixed mortgages because you will be paying off the principal at a higher rate. The benefit over long-term fixed mortgages is that you pay less interest overall on the loan. Adjustable Rate Mortgages (ARM) An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. With an adjustable-rate mortgage, the initial interest rate is fixed for a period of time. After this initial period of time, the interest rate resets periodically, at yearly or even monthly intervals. ARMs are also called variable-rate mortgages or floating mortgages. ​ With adjustable-rate mortgage caps, there are limits set on how much the interest rates and/or payments can rise per year or over the lifetime of the loan. An ARM can be a smart financial choice for home buyers that are planning to pay off the loan in full within a specific amount of time or those who will not be financially hurt when the rate adjusts. Home Equity Line of Credit (HELOC) ​With a HELOC, you’re borrowing against the available equity in your home and the house is used as collateral for the line of credit. As you repay your outstanding balance, the amount of available credit is replenished – much like a credit card. This means you can borrow against it again if you need to, and you can borrow as little or as much as you need throughout your draw period (typically 10 years) up to the credit limit you establish at closing. At the end of the draw period, the repayment period (typically 20 years) begins. To qualify for a HELOC, you need to have available equity in your home, meaning that the amount you owe on your home must be less than the value of your home. You can typically borrow up to 85% of the value of your home minus the amount you owe. Also, a lender generally looks at your credit score and history, employment history, monthly income and monthly debts, just as when you first got your mortgage. Similar to mortgage loans, HELOCs can come with variable interest rate or fixed interest rate options. ​

Offer An offer is a purchase agreement that is sent to the Seller with a proposal to purchase the Seller’s property under specific conditions and price. ​ In Illinois, this is the standard document used to submit an offer. See It Here ​ What is generally included in an offer: ​ Your purchase offer, if accepted as it stands, will become a binding sales contract —also known as a purchase agreement, an earnest money agreement or a deposit receipt. It's important, therefore, the offer contain every element needed to serve as a blueprint for the final sale. These purchase offers should include the following: Address and sometimes a legal description of the property Sale price Terms—for example, this is an all-cash transaction, or the deal is subject to you obtaining a mortgage for a given amount. Seller's promise to provide clear title (ownership) Target date for closing (the actual sale) Amount of earnest money deposit accompanying the offer—whether it's a check, cash or a promissory note—and how the earnest money will be returned to you if the offer is rejected (or kept as damages if you back out of the deal for no good reason) Method by which real estate taxes, rents, fuel, water bills and utilities are to be adjusted (prorated) between buyer and seller Provisions about who will pay for title insurance , survey, termite inspections and the like Type of deed that will be granted Other requirements specific to your state, which might include a chance for attorney review of the contract, disclosure of specific environmental hazards or other state-specific clauses A provision the buyer may make a final walk-through inspection of the property just before the closing A time limit (preferably short) after which the offer will expire Contingencies ​ Can you take back/withdraw an offer? In most cases the answer is yes, right up until the moment it is accepted—and in some cases even if you haven't yet been notified of acceptance. If you want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don't want to lose your earnest money deposit or get sued for damages the seller may have suffered by relying on your actions. ​ Learn more about the offer process: Counter Offer​ Accepted Offer Offer Rejection Highest and Best Offer ​ ​​

How to choose a lender? Comparing quotes from several mortgage lenders is a critical part of the homebuying process. According to Freddie Mac data, getting three quotes can save you about $1,500, while five quotes can save you an average of $5,000. ​ So, how do you do this? First, apply with at least three lenders. ​ Head to their websites, fill out their online application forms, and give them a little information about your homebuying plans. You can usually get a quote within a few hours to a day or two. ​ Once you have the quotes in hand (they’ll come in the form of what’s called a “loan estimate”), you should look at the following points to compare your options: ​ Interest Rates Interest rates vary greatly between lenders. So, see how your quotes measure against other lenders. ​ Example of how interest rates can drastically change your monthly payment: Purchase Price: $300,000​ 10% down payment Loan Amount: $270,000 At 4.25% , your monthly interest and principal payment is $1,328.24​ At 4.75% , your monthly interest and principal payment is $1,408.45 APR ​This is your total annual cost to borrow the money, plus any fees or other charges required. Origination, underwriting, and application fees: Do the lenders charge fees for any of their services? If they do, compare the cost of those and see what comes out on top.​ Prepayment penalties Some lenders charge a penalty if you pay off your loan early. Make sure you know which of your options does and doesn’t​. Estimated closing costs and cash-to-close This is what you’re expected to owe for the loan’s closing and on closing day. These can vary greatly as well.​ Private Mortgage Insurance (PMI) Private mortgage insurance (PMI) is a ​ type of insurance policy that protects mortgage lenders in case borrowers default on their loans. This insurance cost will vary depending on the lender and the type of loan that you are seeking (i.e. Conventional, FHA, USDA, VA, etc.) ​ ​ How To Find A Lender? ​ You can find mortgage lenders online, through your real estate agent, or by using a mortgage broker. You can also look to your personal bank or local credit union for a mortgage loan. If you’re in Illinois, here are a few of our trusted partners: ​ Juan Fleitas - Compass Mortgage Direct Line: 630.687.6023 Cell Phone: 708.214.2222 Email Address: juanfleitas@compmort.com State License: NMLS# 219823 ​ Erica Garcia - Compass Mortgage Direct Line: 773.644.2932 Cell Phone: 773.710.1665 Email Address: ericagarcia@compmort.com State License: NMLS #1714772 ​ Amiel Steurman - Cypress Mortgage Direct Line: 312.829.1010 Email Address: amiel@cypressmc.com State License: NMLS #234812 ​ Wendy Aquino - SunWest Mortgage Company Direct Line: 773.946.3650 Email Address: wendy.aquino@swmc.com State License: NMLS #921729 ​ ​

Your Real Estate Resource Learn everything you need to know before you make a decision to buy or sell a home! Home Buying Process One-Stop Resource Real Estate Resource Online is here to tell you about all of the steps involved in the home buying and selling process. Our goal is to give you information about the processes so you can make informed choices for your real estate decisions. Personalized Consultation Home Buying Process Learn every step of the home buying process from start to finish. There are a lot of steps and many people involved. We want to make sure you're fully informed! Lease-To-Own Opportunities Not ready to buy a home? There are resources available that can help you secure the property before you can buy. Investments I'm a paragraph. Click here to add your own text and edit me. Let your users get to know you. Home Selling Process Learn every step of the home selling process and all of the costs associated so that you can make the best decisions when selling your home. Retirement Planning I'm a paragraph. Click here to add your own text and edit me. Let your users get to know you. Glossary I'm a paragraph. Click here to add your own text and edit me. Let your users get to know you. Reviews I'm a paragraph. Click here to add your own text and edit me. “I'm a testimonial. Click to edit me and add text that says something nice about you and your services. Let your customers review you and tell their friends how great you are.” Lisa, Dina's mom Contact

Mortgage Pre-Approval / Approval Mortgage Pre-Approval is a letter provided by a mortgage professional which shows you what you can afford to spend and what your monthly payment will look like. A pre-approval differs from a pre-qualification because a pre-approval means you have a conditional commitment by a lender for a specific loan amount. ​ A mortgage Pre-Approval letter from a lender assures you, sellers and real estate agents that you have the ability to a complete the purchase of any home that meets the lender’s guidelines. ​ You give your lender information and provide supporting documents as evidence. They will run a credit check and confirm the information you supply to provide an estimate of your borrowing limit. ​ Application - Required Documents - To secure a mortgage pre-approval, you must complete a mortgage application and submit all required documents. These can include (but are not limited to):​​ Social security number Proof of employment Last pay stub(s) W-2, 1099, or other income tax forms Pay stubs and W-2s (typically two years) Tax returns (typically two years if self-employed or you earn commissions or bonuses) Bank, retirement and investment account statements (two to 12 months, depending on loan) Financial statements (if self-employed) Letters of explanation for credit blemishes Divorce decrees, if you pay or receive spousal or child support ​ 3 Factors Influencing Loan Approval - Once you provide a mortgage professional the documents, you might be wondering what they're looking for to approval a loan. These are the 3 Factors they're evaluating from the documents you've submitted: Willingness to pay back the loan Refers to your credit history or a measure of your ability to pay your consumer debt Each individual is given a credit score ranging from 400 to 850 from one of the credit reporting agencies based on this history An individual’s credit score is a key determinant in influencing loan approval Ability to pay back the loan Front Ratio = monthly housing payments/gross monthly income (should be <30%) Back Ratio = total monthly debt obligations/grow monthly income (should be <40%) Appraisal or Appraised value of the property - This part is not part of the pre-approval evaluation. This is the third factor that a mortgage company will evaluate to determine whether they will approve a long for the property you've decided to purchase. An independent appraiser is hired to complete a full appraisal and submit it to the lender for review Appraiser uses a comparable analysis to arrive at the value of the property The appraiser’s evaluation of the property being financed must report a value greater than or equal to the purchase price ​ ​​