Glossary of Real Estate Terms

Addenda

These are supplemental documents that are part of a purchase agreement.

Adjustable Rate Mortgage, ARM

A loan where the interest rate adjusts to current rates during the duration of the loan.

Annual Percentage Rate, APR

The cost of the loan, including the interest rate, points, origination fee, and other charges.                 

Assessments

When a city makes improvements to city property, homeowners must pay for these improvements through their city taxes.

Association Dues

Payments condominium and townhouse owners make for upkeep and management of the shared property.

Assumable

A loan where a buyer arranges to take over the seller’s original loan.  This does not happen very often anymore.

Buyer’s Broker

A agent who works on behalf of the buyer.

Closing Costs

The costs involved in the transfer of property.

Commitment Letter

A letter from your lender showing qualification of a loan and listing the terms.

Contingency

An addition to a purchase agreement stating that certain terms be met within a time frame for the agreement to be valid.

Contract for Deed

An owner offering the buyer financing, and the buyer makes monthly installments to the owner.

Conventional Loan

Loans without government involvement.

Credit Score

A rating based on your credit history.

Default

Failure of loan payment.

Down Payment

An up-front payment made on a home.

Dual Agency

Occurs when one real estate agent represents both the buyer and the seller or when two agents from the same company represent a party to the transaction.  Both buyer and seller must agree to dual agency for it to occur.

Earnest Money

Money paid to the agent when an offer is made on a property to show good faith.  If the offer is approved, the money is counted toward payment of the property.  If the offer is denied, the money is returned to the buyer.

Equity

The portion of the property that you own that is clear of any mortgage.

Escrow

Money paid in addition to the monthly mortgage payment that is used toward paying property taxes and insurance.

FHA Loans

Loans that are backed by the Federal Housing Administration.

Fixed Rate Loan

A loan that has a constant rate for the duration of the terms.

Gross Income

Your income before taxes.

HUD-1 Form

A settlement statement of all the closing costs.

Homeowner’s Insurance

Insurance which homeowners purchase to protect their investment.

Homestead Taxes

Property taxes paid by owners who actually live in the home.

Interest

Lender’s charge for a loan.

Loan Origination Fees

Fees you pay your lender for handling and processing your loan application.

Loan Processing

An analysis by a lender to determine you qualification for a loan.

Lock-In Agreement

An agreement you make with your lender to lock in at the rate you qualified at.

Long-Term Debt

Debt you will own on for more than six months.

Mortgage Discount Points

Prepaid interest on a loan.

Mortgage Insurance Premium, MIP

Insurance that a lender is required to charge for on an FHA loan.

Multiple Listing Service, MLS

A database used by Realtors® to view all the active listings in a specific area.   

PITI-The Monthly Loan Payment

Principal, interest, taxes, and insurance.

Prepayment Penalty

A penalty fee assigned for early payoff on a loan.

Prime Mortgage

Highest grade of mortgage that you qualify for.

Principal

Total amount you are borrowing for a home.

Private Mortgage Insurance, PMI

Required insurance for a conventional loan if you make less than a 20% down payment.

Property Tax Adjustment

Reimbursement to the seller for taxes already paid for the year.

Purchase Agreement

A legally binding and written agreement between the buyer and the sellers that lists the terms and conditions of the sale of the property.

Realtor

A real estate agent or broker who is member of the National Association of Realtors® and adheres to a stringent Code of Ethics.

Re-Issue Credit

Savings on the cost of homeowner’s insurance for using the same company the previous owner used.

Sub-Prime Mortgage

Has a higher interest rate than a prime mortgage.

Subagent

A seller’s agent that owes their duties to the seller.  A subagent may bring a potential buyer to a property.

Title Insurance

Insurance that you pay to protect the lender from claims on the property title.  It can also protect the homeowner as well.

Truth-In-Housing Inspection Report

An inspection that the seller pays for that stated the condition of the house.  It is required by some cities and is also known as a Point of Sale Report.

Truth-In-Lending Disclosure Statement

A statement from your lender stating all the fees and costs of a loan using the APR.

Underwriting

Risk analysis conducted by a lender to decide whether to approve you for the loan.

VA or DVA Loan

Low-interest, no down payment loans offered to people who served in the U.S. Military and issued from the Veterans Administration.

***Information from MAR 2008 Home Buying Guide***