CMA? DTI? CMHC? NOF? What does any of it mean? You might need a guide to real estate acronyms.
If you’re new to real estate because you’re buying or selling for the first time, you might be curious as to what some commonly used acronyms stand for.
Since we get these questions from clients all the time, we thought we’d break down the top common terms you’ll hear when you’re in the process of buying or selling for the first time!
What it means: Annual Percentage Rate
The Annual Percentage rate usually pertains to your mortgage and it is the annual interest rate you can expect to pay for the calendar year.
For example, a typical APR right now is quite low, anywhere from 2.99% or less! It’s a great time to be getting a mortgage in terms of interest rates.
What it means: Agreement of Purchase and Sale
An Agreement of Purchase and Sale is the document in which your offer to purchase a property and all corresponding conditions are outlined on for the selling party to review.
Your realtor would submit and APS to the selling party if you were putting an offer in on a home.
What it means: Canadian Mortgage Housing Corporation
This term isn’t something you’ll have to worry about too much if you’re not a first time buyer.
If you are a first time buyer utilizing the 5% down first time home buyers plan, you may need to purchase mandatory CMHC mortgage insurance when you buy. While there are two other Canadian lenders who can offer this type of insurance for first time buyers, CMHC is the most commonly known/used one.
What it means: Comparative Market Analysis
The Comparative Market Analysis is a very important tool used to help establish the price of a home based on a selection of similar, comparable properties in the area.
Typically, a realtor would perform a CMA when listing a home in order to achieve a fair market listing price.
In addition, a CMA can be helpful in determining a buying price in some cases for the same reasons.
What it means: Debt to Income Ratio
Debt to income ratio is an important tool that lenders will use to help establish what your pre-approval amount for a mortgage might look like.
Basically, this ratio compares your current debts (car, loans, credit, etc) to your total income. According to CMHC’s recent regulations, your total debt should not exceed 40% of your gross household income.
What it means: Notice of Fulfillment
You likely will not see a Notice of Fulfillment until after you buy or sell.
The Notice of Fulfillment is used to indicate that any conditions for an Agreement of Purchase and Sale (inspections, financing, etc.) has been fulfilled and the party whom the condition is meant for is indicating that fulfillment to the other party.
For example, if you have a condition of inspection, a notice of fulfillment would be completed once the inspection is complete (assuming it is completed to the inspecting party’s satisfaction).
What it means: Return On Investment
If you’re buying real estate, it’s probably also because real estate is a fantastic way to invest your money in hopes of a strong Return On Invest later on – see what we did there?
A Return On Investment is the amount you’ll (hopefully) make back when you choose to sell. Usually, this amount is equity gained on the home after all fees (broker, lawyer, etc) are distributed in the case of a real estate transaction.
Still looking for real estate guidance? We have even more know-how we can share with you! Let us help!