No…this is not every possible term you might hear. Just some of the most commonly used “real estate speak.”
Acceptance: The point at which both parties agree to terms and consent to enter into a contract.
Amortization: The gradual repayment of a loan by installments. For example, purchasing a home for $120,000 with a 20-year mortgage means you amortize the loan over 20 years.
Adjustable rate mortgage (ARM): A mortgage with interest rates that may fluctuate based on market conditions. The lender is permitted to adjust the interest rate periodically, though most ARMs are limited in the amount the interest rate can vary.
As-is: A property for which the seller will not make repairs. Buyers may have inspections done, but the seller is not liable for any repairs. Typically, the buyer has a limit to what they will accept as needed repairs, protecting the buyer from having to go forward with a sale when a home needs too much work.
Balloon mortgage: A mortgage with level monthly payments over a stated period of time, but which requires a lump sum payment due in full at the end of an earlier specified time. For example, a $100,000 mortgage with level payments over the term of 20 years requiring $10,000 initial down payment and an additional $10,000 due at the end of three years.
Bridge loan: A temporary mortgage using the borrower’s present home (even if it is on the market) in a manner which allows proceeds from that home to be used in closing on a new house before the present home is sold. Also known as a “swing” loan.
Clear title: A title that is free of liens or legal questions as to ownership of the property.
Closing: A meeting or date at which the sale of a property is finalized. All documents are signed by both parties and funds have changed hands. At this time, ownership and possession of the property are transferred to the buyer.
Closing costs: Expenses over and above the price of the property incurred by buyers or sellers. These costs include items such as loan origination fees, taxes, and title insurance costs.
Closing statement: Also called HUD statement, this document itemizes all the expenses and credits for both buyer and seller.
Commitment letter: Formal offer by a lender stating the terms under which it will lend the money. Also known as a “loan commitment.”
Common areas: Portions of buildings, land, and amenities owned or managed by a development. For example, the clubhouse, swimming pool, and other recreational facilities of a community.
Comparables: Also called “comparable properties.” Properties most like the property under consideration which have sold or are currently on the market. Comparables help buyers, sellers, brokers, and appraisers evaluate the fair market value for a property.
Contingency: A condition which must be met before a contract becomes legally binding. For example, a home being purchased contingent on the buyer obtaining financing.
Conventional mortgage: A mortgage not insured or guaranteed by the federal government (in contrast to an FHA or VA loan). Typically requires 20% down and financing of the remaining 80% of the purchase.
Credit history: Record of open and fully repaid debts of a potential borrower. Helps a lender determine if a potential borrower has a history of repaying debts in a timely manner.
Deed: The legal document conveying title to a property.
Deed restriction: Clauses in a deed for property, typically within a specific community or subdivision, limiting the use of a property or controlling other aspects of that property. For example, a deed restricted community may prohibit the use of privacy fences or limit structures to specific architectural requirements.
Deposit: A sum of money given to bind the sale of real estate. Also called “escrow,” earnest money,” or “money down.”
Down payment: The part of the purchase price paid in cash and not included in a mortgage amount.
Earnest money: Funds deposited by a potential buyer to show they are serious about the purchase.
Fair market value: The highest price that a buyer will pay and the lowest price that a seller will accept, assuming neither party is compelled to agree to the terms and accepts the terms willingly.
Government mortgage: A mortgage insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veteran Affairs (VA) or by the Rural Housing Service (RHS) in contrast to conventional mortgages.
Hazard insurance: Insurance coverage for physical damage to a property from fire, vandalism, or other hazards. Also called “homeowner’s insurance.”
Home equity line of credit (HELOC): Borrowing against the equity in a property. Often a “second mortgage” on a home.
Home inspection: Thorough inspection of structure and mechanical condition of a property.
Homeowners’ association: Manages the common areas of a development or condominium project.
HUD statement: Also called closing statement, this document itemizes all the expenses and credits for both buyer and seller.
Installment: The regular payment that a borrower agrees to pay to their lender.
Insurance binder: A document stating insurance is temporarily in effect. Typically, insurance is “bound” prior to a closing with the start date being that of the closing date.
Interest: The fee, usually expressed in a percentage, charged for borrowing money.
Joint tenancy: Form of co-ownership giving each person equal interest and equal rights to the property, including right of survivorship.
Lien: A legal claim against a property which must be paid off prior to changing ownership.
Mortgage: The legal document pledging a property to a lender as security for the debt.
Mortgage insurance: Insures the lender against loss if the borrower defaults on the mortgage.
Origination fee: Fee paid to the lender by a buyer for processing the loan application.
Personal property: Items involved with a sale which are not real property, such as furniture or other belongings.
PITI: Principal, interest, taxes, and insurance. A monthly loan payment may be just PI (principal and interest) or may include escrowed funds for taxes and insurance (PITI).
Prequalification: Determining how much a buyer is eligible to borrow prior to applying for a loan.
Principal: The amount borrowed and not yet repaid. A portion of a monthly loan payment is principal, applied directly to reducing the amount owed.
Private mortgage insurance (PMI): Insurance provided by a private mortgage insurance company to protect lenders if a borrower defaults. Most lenders require PMI on mortgages with a loan-to-value ratio in excess of 80%.
Real estate agent: A person licensed to negotiate and transact the sale of real estate on behalf of the property owner.
Real property: Land and attachments, including anything of a permanent nature such as structures and trees.
Realtor®: A real estate broker or associate holding active membership in a local real estate board affiliated with the National Association of Realtors®.
Settlement: See closing.
Settlement sheet: See HUD or closing statement.
Survey: A drawing or “map” showing precise boundaries of a property, location of improvements, easements, rights of way, encroachments, or other physical features.
Title: A legal document showing a person’s right to or ownership of a property.
Title company: A company specializing in examining and insuring titles to real estate.
Title insurance: Insurance that protects the lender or the buyer against loss arising from disputes over the ownership of a property. Consider as “guaranteeing free and clear title.”
Title search: A check of the title records to ensure the seller is the legal owner of the property and there are no liens or claims outstanding.
Truth-in-Lending: A federal law requiring lenders to fully disclose, in writing, all terms and conditions of a mortgage including the annual interest rate and all loan charges.
Underwriting: Evaluating a loan application to determine the risk involved for the lender. Underwriting looks closely at the borrower’s creditworthiness as well as the quality of the property involved. |
