Glossary of Real Estate Terms

Glossary of Real Estate Terms

ARM – Adjustable-Rate-Mortgage – A loan that allows the interest rate to be changed periodically.

Agency – A legal relationship in which an owner-principal engages a broker-agent in the sale of property or buyer-principal engages a broker-agent in the purchase of property.

APR – Annual Percentage Rate – The total finance charge (interest, loan fees, points) expressed as a percentage of the loan amount.

Amortization – The gradual repayment of a mortgage by periodic installments.

Appraisal – An estimate of the value of a property.

Assessed Value – The valuation placed on property by a public tax assessor as the basis of property taxes.

Assumption of Mortgage – Agreement by the buyer to assume responsibility for a mortgage owned by the seller; the seller remains liable to the lender unless the lender agrees to release hem or her.

Balloon Mortgage – A mortgage that has a substantial amount of the principal due at the maturity of the note.

Broker – A person licensed by a state real estate commission to act independently in conduction a real estate brokerage business. Although the requirements for a broker’s license vary from state to state, an individual usually must have one or more years of experience in the industry and pass an examination.

Buydown – A payment to the lender from the seller, buyer, or third party, causing the lender to reduce the interest rate during the early years of the loan.

Cap – A maximum amount of interest that can be charged.

Closing – The final step in transferring ownership of a property from seller to buyer.

Closing Costs – Fees and expenses, not including the price of the home, payable by the seller and the buyer at the time of closing (e.g., brokerage commissions, title insurance premiums, inspections, and appraisal fees.)

Condominium – Ownership which involves a separation of property into individual ownership elements and common ownership elements.

Contingency – A condition that must be satisfied before a contract is binding.

Conventional Loan – A fixed-rate, fixed-term loan that is made without government insurance.

Co-op – A buyer purchases shares in a co-op corporation, made up of the resident in the co-op property. The buyer owns shares rather than owning the real property. In exchange, the buyer has the right to occupy a co-op unit.

Deed – A legal document conveying title to a property.

Earnest Money – A payment given to the seller by a potential buyer indicating the buyer’s intent to complete the purchase of the property.

Equity – The owner’s value or interest in a property.

Escrow – The placement of money or documents with a third party for safekeeping pending the fulfillment or performance of a specific act or condition.

FHA Mortgage – A mortgage loan insured by the Federal Housing Administration, permitting lenders to offer better terms.

Fixed-Rate-Mortgage – A loan that has only one stated interest rate.

HUD – Housing and Urban Development – A U.S. government agency established to implement certain federal housing and community development programs.

Lien – A legal claim against a property that must be paid when a property is sold.

Loan Origination Fee – The charge you must pay to the lender for processing your mortgage.

Market Value – The highest price a ready, willing and able buyer will pay and the lowest price a seller will accept.

Mortgage – A lien on real estate given by the buyer as security for money borrowed from a lender.

Mortgage Insurance – A policy that provides protection for the lender in case of default and guarantees repayment of the loan in the event of death or disability of the borrower.

MLS – Multiple Listing Service

Points – A dollar amount, expressed as a percentage of the mortgage amount, which is paid to a lender as a consideration for making a loan. A point is 1% of the amount of the mortgage loan; also called discount points.

P&I – Principal & Interest Payment – A periodic (usually monthly) payment that includes the interest charges for the period plus an amount applied to amortization of the principal balance.

PITI – Principal, Interest, Taxes and Insurance Payment – The periodic payment that includes the principal and interest payment plus a contribution to the escrow account set up by the lender to pay insurance premiums and property taxes on the mortgage property.

REALTOR® – and REALTOR® ASSOCIATE – Registered collective membership marks that identify real estate professionals who are members of the NATIONAL ASSOCIATION OF REALTORS® and subscribe to its strict Code of Ethics.

Title – A document that is evidence of ownership.

Title Insurance – Protection for lenders and homeowners against financial loss resulting from legal defects in the title.

Title Search – A check of the title records to identify liens, encumbrances, and ownership rights to the property.

VA Mortgage – A mortgage loan guaranteed by the Veterans Administration, an agency of the federal government that provides services for eligible veterans.