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Glossary of Real Estate Terms
A-F
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| M-R
| S-Z
Agent--An individual who represents a seller, a buyer or both in the purchase or sale of real
estate. More...
Amortization--The schedule of loan payments that establishes the amount of payment to be applied to
the principal and the amount to be applied to interest, usually on a monthly basis, for the full term of the loan.
Annual Percentage Rate (APR)--The TOTAL interest rate of a mortgage, including the stated loan interest
as well as any upfront interest paid in securing the loan. The APR will invariably differ from the mortgage rate
quoted due to the inclusion of these items.
Appraisal--An estimate of value of a Real Estate property by a professional third party. Virtually
all non-owner financed mortgages will require an appraisal and is generally paid for by the buyer.
Adjustable Rate Mortgage (ARM)--A mortgage in which the Interest rate is adjustable, meaning that the rate
can go up or down according to prevailing financial market conditions. More...
Assessment--The value of a property as determined by the local tax jurisdiction which is used to
determine the amount of your property taxes.
Buyer's Agent--A Real Estate Agent that has made an agreement to represent the buyer exclusively, rather
than the seller. More...
Comparable Market Analysis (CMA)--A comparison of the prices of similar houses in the same general
geographic area. A CMA is used to help determine the value of a property, either for a seller or a buyer. More...
Closing--The process that effects the final transfer of the deed from the seller
to the buyer, as well as finalize all aspects of the mortgage of the property. More...
Closing Costs--Funds needed at the time of closing (separate from and in addition to the down payment).
Loan origination fees, discount points, Attorney fees, recording fees and pre-paids are some items that may be
included. They often will total from 3% to 5% of the price of the home, payable in cash.
Contingencies--These are conditions--or "safety valves" written into Real Estate offers and
contracts to prevent a buyer from being forced to buy a house that is unsatisfactory--either structurally or financially.
Examples of contingencies are "This contract is subject to the buyer obtaining a satisfactory whole house
inspection." or "Subject to the buyer being able to obtain a mortgage."
Condominium--Housing where the owner owns only the unit in which the live--from the interior walls
inward, generally--as well as a portion of the common area. More...
Debt to Income Ratio--The ratio of a borrowers total of debt as a percentage of their total gross income.
Deed--The
document that, when recorded with your local government, determines ownership of a property. Transferred from seller
to buyer at closing.
Earnest Money--Money that is submitted with an offer to purchase which indicates a buyer's seriousness
and good faith. In virtually all cases, earnest money will need to be submitted at the time of the offer and remains
in escrow until the time of closing, at which time it becomes part of the downpayment.
Equity--The
difference between the value of a property and the total of any outstanding mortgages or loans against it.
Escrow--Funds
held in reserve both prior to closing (for example the earnest money and deposit) by a third party and after closing
by the mortgage company to pay future taxes and homeowners insurance. In some areas, "escrow" also refers
to the closing process.
Fixed Rate Mortgage--A mortgage loan where the interest rate is established at its origination and continues
unchanged through the life of the loan. More...
FSBO (For Sale By Owner)--Real Estate that is sold without the assistance of an Agent. FSBO can refer
to both the individual selling the property "They are a FSBO," or the property itself "that house
is a FSBO." More...
Foreclosure--The process through which a lender takes back property from a defaulting owner and re-sells
it.
Homeowner's Association--An owners group, whether in a condominium, townhouse or single
family subdivision that establishes general guidelines for the operation of the community, as well as its standards.
More...
Inspection--A whole house inspection of a home being considered for purchase which looks for defects
in the property. More...
Interest--That portion of a mortgage payment that is the "charge"
for using the lender's funds.
Lien--
A legal claim against a piece of property that can prevent it from being sold unless the lien is satisfied (paid
off). Liens can be filed by unpaid contractors or other debtors in a legal process so that they will be paid when
a property is sold.
Listing--A
property for sale by a Real Estate Brokerage and Agent.
Loan Origination Fee--A charge imposed by the lender, payable at closing, for processing
the loan. See Points.
Lock-in--An
agreement by the lender at the time of mortgage application or shortly thereafter, to write the mortgage at a specific
interest rate, whether rates rise or fall up to the date of closing. Obviously a good move if rates are rising,
not so good if they are falling. Lock-ins have specific expiration dates, such as 30, 60 or 90 days in the future.
LTV (Loan to Value)--The ratio of the amount of the mortgage as a percentage of the value of the property.
MLS (Multiple Listing Service)--A listing (almost always computerized) of all the properties for
sale by Real Estate Brokerages in a given geographical area.
PMI (Private Mortgage Insurance)--Required on virtually all conventional loans with less than 20%
downpayment. Although the payments for PMI are included in your mortgage payment, it protects the lender should
you default on the loan. On FHA loans, you will pay a MIP (Mortgage Insurance Premium) which accomplishes the same
purpose.
Points--1 point is equal to 1% of the loan value, paid at closing. Points can be
loan origination fees or "discount points" which reduce the interest rate of the loan (you are actually
paying a finance charge up front). When a lender, for example, quotes a rate of 8 1/2% with 1 + 1 points, 1 point
is for the origination fee and 1 point is for the discount fee.
Prequalification--The first stage of a mortgage application where the lender will run a basic credit report
and determine your debt to income ratio in order to see how much mortgage you qualify for. More...
Pre-paids--Paid for (in cash) at closing for such items as homeowners insurance for one year and
real estate taxes for several months.
Principal--The amount borrowed for a mortgage loan. Your monthly mortgage
payment will be applied to both the interest and the principal (be assured, though, that the lions share will go
to the interest portion in the first years of the loan).
Property Tax--An annual or semi-annual tax paid to one or more governmental
jurisdictions based on the amount of the property assessment. Generally paid as part of the mortgage payment.
Recording--The act of entering deed and/or mortgage information into public record with your local
government jurisdiction.
Sub-Agent--A Real Estate Agent who is working with a buyer but who represents the
seller in the transaction. More...
Title Insurance--Protects your title--your ownership rights--from claims against it. Paid at closing,
title insurance may be the responsibility of the buyer, the seller, or both, depending on what is traditional in
your locality.
Warranty--Covers either most of the house in a new home, or selected items (for example the heating
and air conditioning system or the water heater) in a used home. Warranties can vary widely and are optional in
used homes (paid for by either the buyer or the seller).
Zoning--Laws
that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential,
condominiums, commerical or retail, or a mix of two or more uses.
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