FICO: stands for Fair Isaac Company and is the group that gathers credit information about consumers, uses formulas regarding debt to credit ratios, payment history and other factors, and assigns a credit “score”.

PITI: Stands for “Principal, Interest, Taxes & Insurance”. These are the common components of most mortgage payments. The principle and interest are what you’re paying back to the bank (the principle being the original purchase price and the interest being what the bank gets for allowing you to use their money). The taxes are the property taxes and the insurance refers to the homeowners insurance - not to be confused with mortgage insurance. These last two are collected at 1/12 of the annual bill. The lender collects throughout the year and then pays the tax and insurance bills when due.

LTV: Stands for “Loan to Value” and means the amount of money borrowed in relation to the purchase price of a property. It’s the inverse of the down payment amount. i.e., If you put down 5%, you will have a 95% LTV; 10% down is a 90% LTV; 20% down is 80% LTV.

MIP (or PMI): Mortgage insurance - different than homeowner’s insurance - is a premium required when a borrower has less than 20% equity in their home. The mortgage insurance is used to protect the bank in case of the borrower’s default on the loan. You pay to cover them. It ain’t pretty, but it’s their money we use so they get to make the rules.

APPRAISAL: This is a report that shows the value of a property and is required by a lender when a mortgage is involved. The bank requires it but the buyer generally pays for it. The reason for the appraisal is for the lender to know that the property is worth what they’re lending. And appraisal is NOT a home inspection and won’t point out flaws or things that need to be fixed or repaired. An appraisal compares the subject property to others of similar size, age and location that have closed. (NOT what the neighbors or your uncle think its worth!)

Tax Value: Municipalities generally collect revenue by taxing real property, among other ways! And the way the tax is figured is by multiplying the tax value by the tax rate. The way the community determines the tax value varies from place to place. Some places assign the tax value based on the most recent sale of that property. That is, if the house sold for $200,000, that’s the tax value. But most places - and Guilford County, NC is one - assign tax value to all properties at predetermined intervals. That’s every 8 years here. So, after much number crunching by those in the county who do such things, tax values are assigned. (And you can count on many homeowners here have sticker shock when they find out what the county thinks their houses are worth!) That number is then multiplied by the tax rate. (see below…)

Tax Rate: This is the number by which tax values are multiplied to determine your annual tax bill. Unlike the tax value (see above), tax rates are usually determined every year after counties approve their budgets. That is, the commissioners figure out how much money is needed to cover expenses and then they figure out how much the tax rate needs to be to cover those costs. In Guilford County the rates are determined in the summer and the bills go out soon after. The rate almost always changes a bit and usually goes up. But I have seen it go down. Once. A really, really long time ago.

Short Sale: This is a phrase that was not often heard in general real estate terms until recently. What it means is that a lender who holds a mortgage on a property agrees to accept less money than is owed. Example: The seller of a house owes $150,000 on their mortgage. For whatever reason (bankruptcy, declining property values) the seller can’t sell the house for that amount. Say the best offer they get is for $145,000. If the bank agrees to accept $5000 less than the balance of the loan -that’s a short sale. And sometimes the bank has already taken possession of the house in foreclosure and will actually advertise they’ll accept a short sale. It’s not an easy situation for anyone - even for the buyer as the process can take a long time for the bank to get all the appropriate paperwork approved through the many layers of management - but it can result in a deal for the buyer. Often a short sale will mean the buyer is getting a property at below market value.