REAL ESTATE GLOSSARY

Real Estate Glossary

Learn to talk the talk.

Buying or selling a home is an exciting and sometimes overwhelming experience, and you will likely hear words you’ve never heard before. These common real estate terms below will give you the confidence to talk the talk alongside your realtor, lender and every other professional who will help you along your journey!

Adjustable-Rate Mortgage (ARM)
A mortgage whose interest rate changes periodically based on the changes in a specified index.
Adjustment Date
The date on which the interest rate changes for an adjustable-rate mortgage (ARM).
Adjustment Period
The period that elapses between the adjustment dates for an adjustable-rate mortgage (ARM).
Amortization
The repayment of a mortgage loan by installments with regular payments to cover the principal and interest.
Amortization Term
The amount of time required to amortize the mortgage loan, expressed as a number of months. For example, for a 30-year fixed-rate mortgage, the amortization term is 360 months.
Annual Percentage Rate (APR)
The cost of a mortgage stated as a yearly rate; includes such items as interest, mortgage insurance, and loan origination fee (points).
Appreciation
An increase in the value of a property due to changes in market conditions or other causes. The opposite of depreciation.
Assessed Value
Typically the value placed on property for the purpose of taxation.
Asset
Anything of monetary value that is owned by a person. Assets include real property, personal property, and enforceable claims against others (such as bank accounts, stocks, and mutual funds).
Assignment
The transfer of a mortgage from one person to another.
Assumable Mortgage
A mortgage that can be taken over ("assumed") by the buyer when a home is sold.
Assumption
The transfer of the seller's existing mortgage to the buyer.
Assumption Clause
A provision in an assumable mortgage that allows a buyer to assume responsibility for the mortgage from the seller, avoiding the need for the original borrower to pay off the loan upon sale.
Assumption Fee
The fee paid to a lender (usually by the purchaser of real property) resulting from the assumption of an existing mortgage.
Balance Sheet
A financial statement that shows assets, liabilities, and net worth as of a specific date.
Balloon Mortgage
A mortgage that has level monthly payments that will amortize it over a stated term but that provides for a lump sum payment to be due at the end of an earlier specified term.
Balloon Payment
The final lump sum payment that is made at the maturity date of a balloon mortgage.
Basis Point
A basis point is 1/100th of a percentage point. For example, a fee calculated as 50 basis points of a loan amount of $100,000 would be 0.50% or $500.
Binder
A preliminary agreement, secured by the payment of an earnest money deposit, under which a buyer offers to purchase real estate.
Biweekly Payment Mortgage
A mortgage that requires payments every two weeks instead of monthly. Typically, 26 biweekly payments are made each year, resulting in interest savings over the life of the loan.
Blanket Mortgage
A mortgage that is secured by a cooperative project, as opposed to the share loans on individual units within the project.
Breach
A violation of any legal obligation.
Bridge Loan
A form of second trust that is collateralized by the borrower's current home, allowing the proceeds to be used to purchase a new home before the current home is sold. Also known as a "swing loan."
Broker
A person who, for a commission or fee, brings parties together and assists in negotiating contracts between them.
Buydown Mortgage
A mortgage on which an initial lump sum payment is made to reduce the borrower's monthly payments for a temporary period or over the entire life of the loan.
Call Option
A provision in the mortgage that gives the mortgagee the right to demand the full payment of the loan at the end of a specified period.
Cap
A provision in an adjustable-rate mortgage (ARM) that limits how much the interest rate or mortgage payments can increase or decrease.
Capital Improvement
A permanent improvement to real property that enhances its value and useful life.
Cash-Out Refinance
A refinance transaction in which the new loan amount exceeds the sum of the existing mortgage, closing costs, and any outstanding subordinate liens, providing the borrower with additional cash.
Certificate of Deposit (CD)
A financial instrument bearing a maturity date and specified interest rate. Penalties may apply for early withdrawal.
Certificate of Eligibility
A document issued by the federal government that certifies a veteran's eligibility for a VA mortgage.
Certificate of Reasonable Value (CRV)
A document issued by the Department of Veterans Affairs (VA) that establishes the maximum value and loan amount for a VA mortgage.
Certificate of Title
A statement from an abstract company, title company, or attorney verifying that the current owner legally holds the title to a property.
Chain of Title
The history of all documents transferring title to a piece of real property, from the earliest existing record to the most recent.
Change Frequency
The interval, in months, at which the interest rate or payment changes occur in an adjustable-rate mortgage (ARM).
Clear Title
A title free of liens or legal questions regarding the ownership of the property.
Closing
The meeting at which the sale of a property is finalized. The buyer signs the mortgage documents, pays closing costs, and receives the keys. Also known as "settlement."
Closing Cost Item
A fee or amount paid at closing for a single service, tax, or product. Closing costs may include origination fees, attorney's fees, taxes, escrow deposits, and charges for title insurance or surveys.
Closing Statement
Also referred to as the HUD-1. The final statement of costs incurred to close on a loan or to purchase a home.
Cloud on Title
Any conditions revealed by a title search that adversely affect the title to real estate. Clouds on title typically must be removed by a quitclaim deed, release, or court action.
Collateral
An asset (such as a car or a home) that guarantees the repayment of a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan contract.
Collection
The efforts used to bring a delinquent mortgage current and to file the necessary notices to proceed with foreclosure when necessary.
Combination Loan
A loan arrangement where the borrower receives a first mortgage for 80% of the loan amount and a second mortgage at the same time for the remainder, potentially allowing the borrower to avoid mortgage insurance. Often referred to as 80/10/10 loans or 80/20s.
Combined Loan-to-Value (CLTV)
The unpaid principal balances of all mortgages on a property (first and second) divided by the property's appraised value.
Co-Maker
A person who signs a promissory note along with the borrower, equally responsible for repayment. Also see "endorser."
Commission
The fee charged by a broker or agent for negotiating a real estate or loan transaction, typically a percentage of the property or loan amount.
Commitment Letter
A formal offer by a lender stating the terms under which it agrees to lend money to a homebuyer, also known as a "loan commitment."
Common Areas
Portions of a building, land, and amenities owned or managed by a homeowners' association or cooperative corporation and used by all unit owners. Examples include hallways, parking areas, recreational facilities, and green spaces.
Community Home Improvement Mortgage Loan
An alternative financing option allowing low- and moderate-income buyers to obtain up to 95% financing for a home purchase and improvement, with repairs accounting for up to 30% of the appraised value.
Community Property
A form of ownership (in some western and southwestern states) under which property acquired during a marriage is jointly owned unless specifically acquired as separate property.
Comparables
Properties similar in size, location, and amenities to the property being appraised, which have recently sold. They help determine the fair market value of the subject property.
Compound Interest
E-LOAN CDs and savings accounts compound interest daily. This means interest is earned on both the principal balance and any previously earned interest.
Condominium Conversion
The process of changing the ownership of an existing building (usually a rental property) to the condominium form of ownership.
Concession
Something given up or agreed to during the negotiation of a home sale, such as a seller agreeing to pay a portion of closing costs.
Conforming Loan
A mortgage that meets the requirements to be purchased by Fannie Mae or Freddie Mac. These are the most common types of home loans. Conforming loan limits can change annually.
Construction Loan
A short-term, interim loan to finance the cost of building a home. The lender typically makes periodic payments to the builder as construction progresses.
Consumer Reporting Agency (or Bureau)
An organization that prepares credit reports used by lenders to determine a potential borrower's credit history. They gather data from credit repositories and other sources.
Contingency
A condition that must be met before a contract is legally binding. For example, a home purchase contract may be contingent on a satisfactory home inspection.
Conventional Mortgage
A mortgage not insured or guaranteed by the federal government.
Convertibility Clause
A provision in some adjustable-rate mortgages (ARMs) that allows the borrower to convert the ARM to a fixed-rate mortgage at certain intervals.
Convertible ARM
An adjustable-rate mortgage (ARM) that can be converted to a fixed-rate mortgage under specified conditions.
Cooperative (co-op)
A form of multiple ownership in which residents own shares in a corporation that owns the property. Each shareholder receives the right to occupy a specific unit.
Corporate Relocation
Arrangements under which an employer moves an employee to another area as part of business operations, or transfers much of its operations and employees to another area.
Cost of Funds Index (COFI)
An index used to determine interest rate changes for certain ARMs. It reflects the weighted-average cost of funds for 11th District members of the Federal Home Loan Bank of San Francisco.
Covenant
A clause in a mortgage that obligates or restricts the borrower. Violation of a covenant can result in foreclosure.
Credit Repository
An organization that collects, records, updates, and stores financial and public record information about the payment histories of individuals considered for credit.
Debt-to-Income Ratio
The percentage of a borrower's gross monthly income that goes toward paying monthly housing expenses, alimony, child support, car payments, and other debts.
Deed
The legal document conveying title to property.
Deed in Lieu
A deed given by a mortgagor to the mortgagee to satisfy a debt and avoid foreclosure.
Deed of Trust
The document used in some states instead of a mortgage; title is conveyed to a trustee.
Default
Failure to make mortgage payments on time or to comply with other mortgage requirements.
Delinquency
Failure to make mortgage payments when they are due.
Depreciation
A decline in the value of property, the opposite of appreciation.
Discount Point
A fee paid at closing to reduce the interest rate on a mortgage. One point equals one percent of the loan amount.
Down Payment
The portion of a home's purchase price paid upfront and not financed. Typically 3-20%, though some loans allow for zero down payment.
Due-On-Sale Provision
A mortgage provision that allows the lender to require full repayment if the borrower sells the property securing the mortgage.
Earnest Money Deposit (EMD)
A deposit made by a potential home buyer to show serious intent to purchase the property.
Easement
A right of way allowing others access to or across a property.
Effective Age
An appraiser's estimate of a building's physical condition, which may differ from its actual age.
Effective Gross Income
Normal annual income including overtime that is regular or guaranteed, potentially from multiple sources.
Electronic Funds Transfer (EFT)
A secure, efficient, and easy method of transferring funds electronically between accounts.
Encroachment
An intrusion onto another person's property without right or permission.
Encumbrance
Anything that affects or limits fee simple title to a property, such as mortgages, leases, easements, or restrictions.
Endorser
A person who signs over their ownership interest to another party, differing from a co-maker who shares responsibility for repayment.
Equal Credit Opportunity Act (ECOA)
A federal law requiring that credit be made available without discrimination based on race, color, religion, national origin, age, sex, marital status, or income from public assistance.
Equity
A homeowner's financial interest in a property, calculated as the difference between the property's fair market value and the amount owed on its mortgage.
Escrow
An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. Common examples include funds to pay taxes and insurance, or funds held by an attorney until closing.
Escrow Account
An account in which a mortgage servicer holds the borrower’s escrow payments before using them to pay property expenses such as taxes and insurance.
Escrow Analysis
The periodic review of escrow accounts to ensure that the monthly deposits will cover taxes, insurance, and other bills when due.
Escrow Collections
Funds collected by the servicer and set aside in an escrow account to pay property taxes, mortgage insurance, hazard insurance, and other related expenses.
Escrow Disbursements
The use of escrow funds to pay property expenses such as real estate taxes, hazard insurance, and mortgage insurance when they become due.
Escrow Payment
The portion of a mortgagor’s monthly payment held by the servicer to pay taxes, hazard insurance, mortgage insurance, and other items as they become due. Also known as "impounds" or "reserves" in some states.
Estate
The ownership interest of an individual in real property. It also refers to the total of all real and personal property owned by an individual at the time of their death.
Eviction
The lawful removal of an occupant from real property.
Examination of Title
A review of the public records and title history of a property to ensure that the seller has clear title and the property is free of liens and encumbrances.
Executor
A person named in a will and appointed by a probate court to carry out the directions of the will.
Fair Credit Reporting Act
A federal law regulating the disclosure of consumer credit reports and establishing procedures for correcting credit report errors.
Fair Market Value
The highest price a willing, non-compelled buyer would pay and the lowest price a willing, non-compelled seller would accept for a property.
Fannie Mae
A congressionally chartered, shareholder-owned company and the nation’s largest supplier of home mortgage funds.
Fannie Mae’s Community Home Buyer’s Program
An income-based community lending program offering flexible underwriting guidelines for low- or moderate-income buyers. Participants must attend home-buyer education sessions.
Fee Simple
The highest and most complete form of property ownership, giving the owner full control and use of the land and buildings.
Federal Housing Administration (FHA)
An agency of HUD that insures residential mortgage loans made by private lenders, sets construction and underwriting standards, but does not lend money itself.
FHA Mortgage
A mortgage insured by the FHA. Also known as a government mortgage.
Finder’s Fee
A fee or commission paid to a mortgage broker or other intermediary for locating a mortgage loan for a prospective borrower.
First Adjustment
The initial date on which the interest rate of an Adjustable-Rate Mortgage (ARM) can change.
First Mortgage
The primary lien against a property that must be paid first in the event of foreclosure.
Float Down Option
An option allowing a borrower to lock in a lower interest rate if it becomes available within a set period (often 30 days) before closing.
Fixed-Rate Mortgage (FRM)
A mortgage with an interest rate that remains constant throughout the entire term of the loan.
Fixed Second Mortgage
See "Home Equity Loan."
Flood Insurance
Insurance protecting against damage caused by flooding, required for properties in federally designated flood areas.
Foreclosure
The legal process by which a lender takes possession of a property securing a loan when the borrower fails to meet loan obligations.
Fully Amortized ARM
An Adjustable-Rate Mortgage (ARM) with a monthly payment that covers both principal and interest so that the loan is paid off within the set term.
Gift Letter
A letter from a family member stating that a sum of money given to the borrower is a gift that does not need to be repaid. This money can often be used toward the borrower’s down payment.
Good Faith Estimate
An estimate of the charges a borrower will likely incur at closing, including fees and other settlement costs.
Gross Monthly Income
Income earned in a month before taxes and other deductions. May include salary, rental income, alimony, child support, and more.
Hazard Insurance
Insurance covering property damage caused by events such as fire, vandalism, and certain natural disasters, depending on the policy terms.
Home Equity Line of Credit (HELOC)
A line of credit secured by a second deed of trust on a home, allowing the homeowner to borrow as needed and repay as desired, similar to a credit card.
Home Equity Loan
A loan secured by a second deed of trust on a home, often used for home improvements.
Home Inspection
A professional examination of a property’s condition, including its systems and structure, before purchase.
Homeowners’ Association
An organization of homeowners in a particular area that maintains community facilities and services for the benefit of residents.
Housing Ratio
The ratio of the monthly housing expense (PITI) to gross monthly income. Also called the top ratio or front-end ratio.
HUD
The U.S. Department of Housing and Urban Development, which administers federal housing and urban development programs.
Index
A published interest rate that serves as a baseline for adjusting the interest rate on an ARM. Common indices include the 1-Year Treasury Bill, 6-Month LIBOR, and COFI.
Impound Account
An account established by a lender to hold a portion of a borrower’s monthly payments for taxes and insurance, disbursing funds as bills come due.
Installment
A regular periodic payment that a borrower agrees to make to a lender.
Interest
The cost of borrowing money, expressed as a percentage of the amount borrowed.
Interest-Only Loan Option
A loan option allowing borrowers to pay only the interest for a specified period, reducing initial monthly payments but not paying down principal during that time.
Jumbo Mortgage
A mortgage with a loan amount exceeding the conforming loan limit set by Fannie Mae or Freddie Mac. Jumbo loans often carry higher rates.
Lien
A legal claim against a property for the payment of a debt or other obligation.
Lender
The bank, mortgage company, or mortgage broker providing a loan.
LIBOR
London Inter-Bank Offered Rate, an international interest rate index frequently used with ARMs. It reflects the rate at which banks lend to each other in London’s financial markets.
Lifetime Cap
A limit on how much the interest rate can increase over the life of an ARM.
Loan Origination Fees
Fees charged by a lender or broker to process a loan application, typically expressed as a percentage of the loan amount.
Loan-to-Value Ratio (LTV)
The ratio of the outstanding mortgage balance to the appraised value of the property. Lower LTV often results in more favorable loan terms.
Lock-In
A written agreement guaranteeing the borrower a certain interest rate if the loan closes within a specified period.
Lock Period
The time frame, often 30–60 days, during which a lender will guarantee the interest rate on a loan before closing.
Margin
The number of percentage points added to the index rate to determine the interest rate on an ARM at each adjustment period.
Market Value
The current value of a home, based on what a buyer is willing to pay. Often determined by a professional appraisal.
Maturity Date
The date on which a loan or account term ends, allowing withdrawal of principal without penalty.
Modification
A change to the terms of an existing mortgage loan, such as altering the interest rate, loan balance, or term.
Mortgage
A legal document pledging property as security for the repayment of a loan.
Mortgage Disability Insurance
A policy that will cover mortgage payments if the borrower becomes disabled and cannot work.
Mortgage Insurance (MI)
Insurance that protects the lender against loss if the borrower defaults on the loan. Usually required for loans with an LTV over 80%.
Mortgagee
The lender who receives a mortgage as security for a loan.
Mortgage Insurance Premium (MIP)
A premium paid by the borrower for mortgage insurance, either to a government agency like FHA or to a private insurance company.
Mortgagor
The borrower who pledges property as security for a mortgage loan.
Negative Amortization
When a mortgage payment is not sufficient to cover interest, causing the loan balance to increase rather than decrease.
Non-Conforming Loan
A conventional loan that does not meet Fannie Mae or Freddie Mac guidelines, often due to loan amount or credit requirements. Also known as a jumbo loan.
Origination Fee
A fee charged by the lender to cover the costs of preparing and processing the loan.
Owner Financing
A situation where the property seller provides some or all of the financing for the buyer instead of a traditional lender.
Owner-Occupied Property
A property that serves as the borrower’s primary residence.
Periodic Cap
A limit on the amount that the interest rate on an ARM can change during any one adjustment period.
PITI
Principal, Interest, Taxes, and Insurance – the components of a typical monthly mortgage payment.
Planned Unit Developments (PUD)
A subdivision of individually owned lots and homes, along with common areas owned by a homeowners’ association.
Points
Charges paid at closing to the lender, typically calculated as a percentage of the loan amount. One point equals one percent of the loan.
Power of Attorney
A legal document authorizing someone to act on another person’s behalf.
Pre-Approval
An indication from a lender of how much money a borrower can borrow based on a preliminary review of credit and financial information.
Predatory Lending
Abusive lending practices, such as extending credit to borrowers without the ability to repay or repeatedly refinancing loans with excessive points and fees.
Prepaids
Expenses paid in advance of their due date, such as taxes and insurance, often prorated during a sale.
Pre-Qualification
A preliminary assessment by a lender of the amount a potential homebuyer may be eligible to borrow, without verifying detailed financial information.
Prepayment Penalty
A fee charged if a borrower pays off a loan before its scheduled maturity date.
Principal
The amount of money originally borrowed or deposited. In lending, principal refers to the outstanding loan balance excluding interest.
Private Mortgage Insurance (PMI)
Insurance provided by private companies to protect lenders against loan default when the borrower’s down payment is less than 20% of the property value.
Qualifying Ratios
Ratios of a borrower’s debts to income, used to determine how much they can afford to borrow.
Rate
The interest rate charged on a loan, expressed as an annual percentage.
Rate Cap
A limit on how much the interest rate can change at any one time or over the life of an ARM.
Rate Lock-In
A written agreement guaranteeing a certain interest rate for a specified period.
Ratified Sales Contract
A contract signed by both buyer and seller, making the agreement binding. Often includes contingencies such as financing or inspections.
Rebate
Compensation received from a wholesale lender that can be used to cover closing costs or refunded to the borrower. Typically associated with a higher interest rate.
Recording
The act of entering real estate-related documents into public records to protect the rights of the owner and lender.
Refinancing
Paying off one loan with another loan secured by the same property, often to obtain better loan terms or lower interest rates.
Residential Mortgage Credit Report (RMCR)
A comprehensive credit report drawn from at least two of the three national credit bureaus, used by lenders to evaluate loan applicants.
Right of First Refusal
A contractual right that requires the owner of a property to offer it to a specific party before selling or leasing it to others.
Seller Carry Back
An agreement in which the seller provides financing to the buyer, often in conjunction with an assumed mortgage.
Settlement Statement
A document listing all closing costs in a mortgage transaction, sometimes referred to as the HUD-1.
Simple Interest
Interest calculated only on the principal amount, not on accumulated interest.
Stated/Documented Income
Some loans only require the applicant to state their income, while others require documentation such as pay stubs or tax returns.
Subordination
An arrangement where a second mortgage holder agrees to remain in second lien position when the first mortgage is refinanced.
Survey
A diagram of land showing boundaries, improvements, and sometimes topography, used to verify property size and location.
Taxes and Insurance
Funds paid by the borrower and often held in escrow by the lender to cover property taxes and hazard insurance premiums.
Tenants in Common
Ownership of property by two or more persons, each holding an undivided interest. Upon death, an owner’s share passes to their heirs rather than to co-owners.
Termite Inspection
An inspection to determine if a property is infested with termites. Often required before a property can be sold.
Title Insurance
Insurance against losses resulting from defects in the title to real estate.
Title Search
An examination of public records to verify the ownership and encumbrances on a property.
Total Debt Ratio
The ratio of a borrower’s total monthly debts (including housing) to gross monthly income. Also known as the back-end ratio.
Truth-In-Lending Act (TILA)
A federal law requiring lenders to disclose loan terms and costs, including the Annual Percentage Rate (APR), to borrowers.
Underwriting
The process of evaluating a borrower’s financial information and property details to decide whether to approve a mortgage loan.
Variable Rate
An interest rate that may change over the life of a loan or account.
Veterans Affairs (U.S. Department of Veterans Affairs)
A federal agency providing benefits and services, including guaranteed home loans, to U.S. military veterans and their families.
Walk-Through
A final inspection of a property by the buyer shortly before closing to ensure the property’s condition meets the contract requirements.
Warranties
Written guarantees of a product’s quality and the promise to repair or replace defective parts at no cost.

LEARN REAL ESTATE TERMINOLOGY

NO HASSLE, NO OBLIGATION.

We are here to answer your important Real Estate questions.