Real Estate Glossary
Understanding real estate jargon can be hard, it may seem like a whole other language. We offer this real estate glossary to help you figure it all out. We try to keep our real estate glossary up-to-date, but if there is a term here that we missed and you’d like to learn more about, please call us. We’ll gladly clarify it for you and add it to our real estate glossary. We like to think of this real estate glossary as a living tool.
Acceleration Clause A provision in a loan agreement that allows a lender the right to declare the unpaid balance of a loan due if a borrower misses a payment or commits some other contractual breach.
Adjustable-Rate Mortgage (ARM) A mortgage loan with an interest rate that is tied to a economic index and fluctuates with the market.
Adjustment Period The timeframe between changes in the interest rate on an ARM (see above). For example, an ARM that changes its rate once per year has a one-year adjustment.
Agreement of Sale A written signed agreement in which a buyer agrees to buy a specific property and a seller agrees to sell based on certain conditions, including the price and terms of the transaction.
Amortization The process of paying the principal and interest on a loan through regularly scheduled installments, instead of interest only payments.
Annual Percentage Rate (APR) The sum of all finance charges on a loan (interest, loan fees, points) expressed as a yearly rate on the balance of the loan.
Application A document required by lenders prior to loan approval that details a potential borrower’s personal financial situation, including income, debt and other financial obligations.
Application Fee A fee charged by lenders to process a loan application.
Application Fee A fee charged by lenders to process a loan application.
Appreciation An increase in the value of a home or other asset due to changes in market conditions or other causes.
Assessment A determination of a property’s value for the purpose of taxation.
Assignment The written transfer of an asset or mortgage from one person to another.
Balloon Loan A mortgage in which the monthly payment is not large enough to repay the loan by the end of the term. The final payment is a large lump sum of the remaining balance.
Balloon Payment The final lump sum payment due at the maturity date of a balloon mortgage.
Basis Point One one-hundredth of a percentage point, or .01%. For example, if the bank rate decreased from 5.45% to 5.35%, it went down 10 basis points.
Bidding War Multiple offers to purchase a piece of property.
Bill of Sale A written document that transfers ownership of personal property.
Bridge Loan A type of mortgage loan that is collateralized by the borrower’s present home and that allows the homeowner to use the funds to make a down payment and pay closing costs on a new home before the present home is sold.
Buy-Down Mortgage A mortgage loan in which the lender receives a premium as an incentive to reduce the interest rate during the early years of the mortgage.
Call Option A provision in a loan agreement that allows a lender to call the mortgage due and payable in full at the end of a specified period.
Cap A provision in an adjustable-rate mortgage (ARM) agreement that limits the amount the interest rate or monthly payment can increase.
Cash-Out Refinance A refinance transaction in which the money received from the new loan is greater than the amount due on the old loan. The borrower can use the additional funds in any manner.
Certificate of Occupancy A document issued by a local government which states that the building is legally ready to be occupied.
Chain of Title A history of all documents that transfer title to a piece of property, starting with the original existing document and ending with the most recent.
Closing The final procedure in a real estate transaction in which a sale of a property is finalized by the buyer signing the mortgage documents and paying closing costs. At this event, the property is transferred from the seller to the buyer.
Closing Costs Expenses (beyond the price of the property) incurred by buyers and sellers when transferring ownership of a property. Closing costs may include an origination fee, attorney’s fees, taxes, an amount placed in escrow, and charges for obtaining title insurance and a survey.
Closing Statement A written statement which details the amounts of debits and credits to which each party in a real estate transaction is entitled to upon closing.
CMA (Comparable Market Analysis) An estimated current market price of a property based on an analysis of prices paid for similar properties.
Condominium A form of property ownership in which owners hold title to their individual units and share ownership of common areas such as the grounds, the parking facilities and the tennis courts.
Cooperative Corporation (co-op) A form of property ownership in which an apartment building or a group of dwellings are owned by a corporation, the stockholders of which are the residents of the dwellings. In a co-op, the corporation or association owns the title to the real estate and the residents purchases stock which entitles them to occupy a unit in the building.
Deed A legal document that conveys title to a property.
Deed of Trust The document used in some states instead of a mortgage; title is conveyed to a trustee (lender) who has the right to foreclose on a piece of property if the borrower defaults on the loan.
Deposit A sum of money paid in advance to ensure completion of a real estate transaction; or an advance of funds in the processing of a loan.
Depreciation The decline in the value of a property.
Disclosure A statement to a potential buyer of a property, including all of the relevant information about such property, such as the presence of radon or lead paint.
Down Payment A portion of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage loan.
Duplex A structure which has separate but complete units to accommodate two families, either adjacent to or one on top of the other
Easement Access rights given to a third party to use a portion of the property for a specific purpose (such as a power line easement to a utility company).
Equity The difference between the value of a property and the amount of mortgage owed.
Escrow A transaction in which an impartial third party holds the documents and money involved in a real estate transaction and ensures that all conditions of a sale are met.
Examination of Title A report on the title of a property from public records or an abstract of the title which details the chain of ownership of a property.
Fee Simple The maximum form of property ownership, giving the owner the right to use the property in any manner they see fit, in accordance with state and local laws.
Firm Commitment A lenderís agreement to loan money to a specific borrower for a specific property.
First Mortgage A mortgage that is the primary lien against a property and which has priority over all other voluntary liens.
Fixed Installment The monthly payment due on home mortgage loan.
Fixed-Rate Mortgage A mortgage loan in which the interest rate does not change during the entire term of the loan.
Forbearance An action a lender may take of refraining from pursuing legal action against a delinquent borrower of a mortgage loan.
Foreclosure The legal process by which a borrower in default under a mortgage loses his or her interest in the mortgaged property. Usually, a forced sale of the property at public auction occurs and proceeds of the sale are applied to the mortgage debt.
Hazard Insurance A type of insurance coverage that covers physical damage to a property from fire, wind, vandalism, or other disasters.
Home Equity Loan A mortgage loan that allows owners to borrow against the equity in their homes, usually for the purpose of making home improvements or debt consolidation.
Home Inspection A thorough examination that evaluates the structural and mechanical condition of a property by an inspector or contractor prior to purchase.
Guarantee Mortgage A mortgage that is guaranteed by a third party, such as a government institution.
Interest The fee for borrowing money; usually based a percentage of the amount borrowed.
Interest Accrual Rate The rate at which interest accrues on a mortgage, usually also used to also calculate the monthly payments.
Interest Rate Caps A written promise by a borrower to pay a sum of money, at a specified interest rate, at a stated time to a named payee.
Investment Property Real estate owned with the intent of generating income, such as an apartment building or a rental house.
Joint Liability Two or more people sharing the responsibility of fulfilling the terms of a home loan or debt.
Jumbo Mortgage A mortgage loan larger than the maximum eligible for purchase by the two Federal agencies, Fannie Mae and Freddie Mac.
Junior Mortgage A mortgage loan subordinate to the primary mortgage. In the case of a foreclosure the primary mortgage will be paid prior to a junior mortgage.
Letter of Intent A formal statement that a buyer intends to purchase property for a certain price and on a specific date.
Liability Insurance A type of insurance that covers owners against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party.
Loan Application A document that details personal and financial information required to apply for a loan.
Loan Application Fee A fee charged by lenders to make a loan application.
Lock-In A written agreement guaranteeing a buyer a specified interest rate provided the loan is closed within a set period of time.
Maintenance Fee Monthly assessment by homeowner’s association on owners for maintenance and repair of common areas.
Market Conditions Factors that affect the sale and purchase of a home at a specific point in time.
Market Value The highest price that a buyer would pay and the lowest price a seller would accept on a property, at a specific point in time.
Mortgage Life Insurance A type of term life insurance where the amount of coverage decreases as the mortgage balance declines. In the event that the borrower dies while the policy is in effect, the insurance policy automatically pays off the debt.
Multiple Offers More than one purchase offer made on a property
No Cash-Out Refinance A refinance transaction in which the mortgage amount is limited to the sum of the unpaid principal balance of any existing mortgages plus closing costs.
No-Documentation Loan A loan application that does not require verification of income but typically is granted when a borrower puts down a large down payment.
Note A written promise by a borrower to pay a sum of money, at a specified interest rate, at a stated time to a named payee.
Original Principal Balance The total amount of principal owed on a mortgage loan before any payments are made.
Owner Financing A property purchase transaction in which the seller of a property agrees to finance all or part of the purchase.
Payment Cap A limit on the amount that can be charged to the monthly payment of an adjustable-rate mortgage during a specific time period.
Per-Diem Interest Interest that accrues daily.
Pre-Approval Letter A letter from a lender detailing the amount of money that a potential borrower may obtain, subject to conditions.
Pre-Qualification The process of determining how much money a prospective home buyer will be eligible to borrow before a mortgage loan is applied for.
Private Mortgage Insurance (PMI) A type of insurance policy written by a private company protecting the mortgage lender against loss resulting from a mortgage default; typically used if the borrower’s down payment is less than 20 percent of the home’s purchase price.
Purchase Agreement A written contract signed by the buyer and seller detailing the purchase price and conditions of the transaction.
Quit-Claim Deed A document releasing a person from any ownership interest in a piece of real estate.
Rate-Improvement Mortgage A type of loan that entitles a borrower to a one-time cut in the interest rate without going through refinancing.
Real Estate Glossary A real estate glossary is a list of real estate terms and their definitions.
Restructured Loan A mortgage with newly negotiated terms.
Sales Contract A written contract signed by the buyer and seller detailing the purchase price and conditions of the transaction.
Special Assessment A special tax imposed on property, individual lots or all property to pay for improvements.
Subordinate Loan A second or third mortgage.
Title Insurance A type of insurance policy that protects a policyholder from any losses because of a dispute over the ownership of a piece of property.
Third-Party Origination A process by which a lender uses another party to completely or partially originate, process, underwrite, close, fund, or package a mortgage.
Title Search An examination of public title records to ensure that a seller is the legal owner and that there are no claims or liens against the property.
Transfer of Ownership Any means by which the ownership of a real estate property changes hands.
Transfer Tax Tax paid when ownership of a property passes from one person to another.
Trust Account A separate bank account used by brokers and escrow agents to safeguard funds for a buyer or a seller.
Underwriting The process of evaluating a loan application to evaluate the risk involved for the lender.
Unsecured Loan A loan that is not backed by collateral.
Variable Interest Rate An interest rate that fluctuates based on certain economic factors. In mortgages, there are usually maximums as to the frequency and amount of fluctuation. Also called, Flexible Interest Rate.
Variable Rate Mortgage A loan with an interest rate that adjusts based on certain economic factors.
Verification of Deposit A document signed by the borrower’s financial institution verifying the status and balance of specified financial accounts.
Wraparound Mortgage A second mortgage which leaves the original mortgage in place. The wraparound mortgage is held by the lending institution as security for the total mortgage debt. The borrower makes payments on both loans to the wraparound lender, who in turn makes payments on the original primary mortgage.
About our real estate glossary: We hope you’ve found this real estate glossary useful. We try to keep our real estate glossary up-to-date, but if there is a term here that we missed and you’d like to learn more about, please call us. We’ll gladly clarify it for you and add it to our real estate glossary.We like to think of this real estate glossary as a living tool. We like to think of this real estate glossary as a living tool.