Real Estate Glossary

Simple definitions for common real estate and mortgage terms. Have a question? Just ask!

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203(b): An FHA-insured mortgage for buying or refinancing a one- to four-unit home. It can allow a lower down payment, but it must meet FHA loan limits and rules.
203(k): An FHA-insured loan that can cover buying or refinancing a home and approved repairs. Repair funds are held and released as the work is completed.

A

Active: A listing status that usually means the home is for sale and the seller is accepting offers.
Agency: The legal relationship between a real estate professional and a client. It sets duties such as loyalty, care, and disclosure.
Amenity: A feature that adds comfort, use, or value to a home or neighborhood, such as a pool, patio, view, park, or nearby transit.
Amortization: The process of paying off a loan over time through scheduled payments. Each payment usually covers interest and part of the loan balance.
Annual Percentage Rate (APR): The yearly cost of borrowing money, shown as a percentage. APR includes the interest rate and certain loan costs, so it is often higher than the interest rate.
Application: The form and documents a borrower gives a lender when asking for a loan. The lender uses them to review income, credit, debts, and the property.
Appraisal: An opinion of a property's market value, usually prepared for a lender by a licensed or certified appraiser.
Appraisal contingency: A contract term that may let a buyer cancel or renegotiate if the appraisal is lower than the agreed price.
Appraisal gap: The difference between the agreed purchase price and a lower appraised value.
Appraiser: A trained professional who estimates the value of a property based on its condition, location, features, and recent comparable sales.
ARM: An adjustable-rate mortgage. The interest rate can change after an initial period, based on a market index plus a margin. Rate caps may limit how much it can change.
As-is: A sale term that means the seller does not plan to make repairs. Buyers may still inspect the property unless the contract says otherwise.
Assessor: A local government official or office that sets a property's taxable value for property tax purposes.
Assumable mortgage: A mortgage that a buyer may be allowed to take over from the seller. The lender or loan program must approve the assumption.

B

Balloon mortgage: A loan with a larger-than-usual payment due at the end of the loan term. If the borrower cannot pay it, they may need to refinance or sell.
Bankruptcy: A legal process for people or businesses that cannot pay their debts. A court may help reduce, repay, or reorganize the debt.
Borrower: A person who receives a loan and must repay it under the loan terms.
Broker: A licensed real estate professional who may supervise agents and handle real estate transactions under state law.
Building code: Local rules for how buildings must be built, repaired, and maintained for safety and health.
Budget: A plan that tracks income, expenses, and savings over a set period of time.
Buyer agent: A real estate professional who represents the buyer in a purchase, subject to the written agreement and state law.
Buyer representation agreement: A written agreement between a buyer and a real estate professional. It explains services, duties, and how compensation will be handled.

C

Cap: A limit on how much an adjustable mortgage rate or payment can rise or fall during a set time or over the life of the loan.
Cash to close: The total amount a buyer needs to bring to closing. It includes the down payment, closing costs, and other credits or adjustments.
Cash reserves: Money a borrower has left after closing. A lender may require reserves to show the borrower can cover future payments.
Certificate of title: A document or opinion that shows who owns a property and lists known liens or claims against it.
Clear title: A title with no known ownership problems, unpaid liens, or claims that would block a sale.
Closing: The final step in a real estate sale. The buyer and seller sign documents, money is paid, and ownership transfers.
Closing costs: Fees and charges paid at closing, such as lender fees, title fees, recording fees, prepaid taxes, and insurance costs.
Closing Disclosure: A required form for many mortgages that shows final loan terms, monthly payments, closing costs, and cash to close.
Commission: A fee paid to a real estate broker or agent for services in a sale or lease. It is often based on the sale price or a written agreement.
Comparative Market Analysis (CMA): An estimate of a home's value based on similar homes that recently sold, are for sale, or did not sell.
Compensation: Payment to a real estate professional for services. The amount and source should be stated in the written agreement or other required disclosure.
Condominium: A property where a person owns one unit and shares ownership or responsibility for common areas with other owners.
Conforming loan: A mortgage that meets Fannie Mae or Freddie Mac rules, including loan limits set for the year and area.
Contingency: A contract condition that must be met for the sale to move forward, unless the party protected by it waives the condition.
Contingent: A listing status that usually means the seller accepted an offer, but one or more contract conditions still need to be met.
Conventional loan: A mortgage that is not insured or guaranteed by a government agency, such as FHA, VA, or USDA.
Cooperative (Co-op): A housing arrangement where residents own shares in a corporation that owns the building. The shares give them the right to live in a specific unit.
Credit history: A record of how a person has borrowed and repaid money over time.
Credit report: A report from a credit bureau that lists credit accounts, payment history, debts, and certain public records.
Credit score: A number based on credit history that helps lenders estimate how likely a borrower is to repay debt.

D

Debt-to-income ratio: The share of gross monthly income used to pay monthly debts. Lenders use it to help decide whether a borrower can afford a loan.
Days on market (DOM): The number of days a property has been listed for sale. Local MLS rules decide exactly how it is counted.
Deed: A legal document that transfers ownership of real estate from one party to another.
Deed-in-lieu: An agreement where a borrower gives the property back to the lender to avoid foreclosure. It may not erase every debt unless the lender agrees.
Default: Failure to meet the terms of a loan, such as missing payments or not keeping required insurance.
Delinquency: A late or missed loan payment.
Discount point: A fee paid to a lender, often at closing, to lower the interest rate. One point equals one percent of the loan amount.
Down payment: The part of the purchase price the buyer pays upfront instead of borrowing.
Down payment assistance: A program that may help qualified buyers cover part of a down payment or closing costs.
Dual agency: A situation where one agent or brokerage represents both the buyer and seller in the same sale. Rules vary by state.

E

Earnest money: A deposit a buyer makes to show serious intent to buy. The contract controls whether it is credited, refunded, or forfeited.
EEM: An energy efficient mortgage. It lets a borrower finance approved energy-saving improvements as part of a purchase or refinance loan.
Easement: A legal right for someone to use part of another person's property for a specific purpose, such as access or utilities.
Equity: The property's current value minus the amount owed on mortgages and other liens.
Escrow account: An account managed by a lender or servicer to pay property costs, such as taxes and homeowners insurance, from part of the monthly payment.

F

Fair Housing Act: A federal law that bans housing discrimination based on race, color, national origin, religion, sex, familial status, or disability.
Fair market value: The price a willing buyer and seller would agree to when both know the facts and neither is forced to act.
Fannie Mae: A government-sponsored enterprise that buys and guarantees mortgages from lenders to help keep mortgage money available.
FHA: The Federal Housing Administration. FHA insures approved loans, which helps lenders offer mortgages to qualified borrowers.
Financing contingency: A contract term that may let a buyer cancel if they cannot get the loan described in the purchase agreement.
Fixed-rate mortgage: A mortgage with an interest rate that stays the same for the life of the loan. Taxes, insurance, or other escrow items may still change.
Flood insurance: Insurance that covers certain flood damage. Lenders usually require it for homes in high-risk flood areas.
Foreclosure: A legal process that allows a lender to take and sell a property when the borrower does not meet the loan terms.
Freddie Mac: A government-sponsored enterprise that buys mortgages from lenders and helps provide funds for more home loans.

G

Ginnie Mae: A government-owned corporation that guarantees securities backed by federally insured or guaranteed loans, such as FHA and VA loans.
Good Faith Estimate: An older form that estimated mortgage costs. For most mortgages, the Loan Estimate has replaced it.

H

HELP: An older FHA homebuyer education program name. Buyers who need help today can look for a HUD-approved housing counseling agency.
Home inspection: A review of a home's condition, structure, and systems. It helps buyers understand needed repairs and possible safety issues.
Home warranty: A service contract that may help pay to repair or replace certain home systems and appliances. It is not the same as homeowners insurance.
Homeowners insurance: Insurance that helps cover damage to a home and belongings. It may also cover certain liability claims.
HELOC: A home equity line of credit. It lets a homeowner borrow against home equity up to a set limit.
HOA: A homeowners association. It manages rules, fees, and shared areas for some neighborhoods, condos, or planned communities.
Housing counseling agency: An agency that helps people with homebuying, renting, foreclosure prevention, fair housing, and other housing questions.
HUD: The U.S. Department of Housing and Urban Development. HUD supports housing programs and enforces federal fair housing laws.
HUD-1 Statement: An older settlement statement that lists closing costs. For many mortgages, the Closing Disclosure has replaced it, but it is still used for some loans.
HVAC: Heating, ventilation, and air conditioning. It refers to a home's heating and cooling system.

I

Index: A published rate used to help set the interest rate on an adjustable-rate mortgage.
Inflation: A rise in prices over time, which lowers the buying power of money.
Inspection contingency: A contract term that may let a buyer inspect the property and ask for repairs, credits, or cancellation.
Interest: The cost of borrowing money.
Interest rate: The percentage a lender charges each year to borrow money. It does not include all loan fees.
Insurance: Protection against certain losses in exchange for payment of a premium.

J

Jumbo loan: A mortgage that is larger than the conforming loan limit for the area. It may have stricter lender rules.
Judgment: A court's decision. A money judgment may become a lien against property if the law allows it.

L

Lease purchase: An agreement that lets a tenant lease a home with an option or duty to buy it later, depending on the contract.
Lien: A legal claim against property that may need to be paid before the property can be sold or refinanced.
Listing agent: A real estate professional who represents the seller in a sale, subject to the listing agreement and state law.
Loan: Money borrowed and usually repaid with interest.
Loan Estimate: A required form for many mortgages that shows loan terms, estimated payments, closing costs, and other key costs.
Loan fraud: Giving false or misleading information on a loan application. It can lead to civil or criminal penalties.
Loan-to-value (LTV) ratio: The loan amount divided by the property's price or appraised value. Lenders use it to measure risk.
Lock-in: A lender's promise to hold a certain interest rate for a set time, if the loan closes under the agreed terms.
Loss mitigation: Options a lender or servicer may offer to help a borrower avoid foreclosure, such as a repayment plan, forbearance, or modification.

M

Margin: The number of percentage points a lender adds to an index to set the rate on an adjustable-rate mortgage.
MLS: A multiple listing service. It is a database real estate professionals use to share property listing information.
Mortgage: A legal document that pledges real estate as security for a loan. In common use, it can also mean the home loan itself.
Mortgage banker: A company that makes mortgage loans, often using its own funds or credit lines, and may sell the loans later.
Mortgage broker: A person or company that helps borrowers find mortgage loans from lenders. A broker does not usually lend its own money.
Mortgage insurance: Insurance that protects the lender if the borrower does not repay the loan. It is often required with a small down payment.
Mortgage insurance premium (MIP): The mortgage insurance cost paid by a borrower on many FHA loans. It may include an upfront cost and a regular premium.
Mortgage modification: A change to loan terms, such as the rate, term, or payment, often used to help a borrower keep the home.

N

Note: A written promise to repay a loan. It states key loan terms, such as the amount, interest rate, and payment schedule.

O

Offer: A buyer's proposal to buy a property at certain terms, usually made in writing.
Origination: The process of creating and reviewing a mortgage loan application.
Origination fee: A fee a lender charges for making a mortgage loan. It may cover processing, underwriting, and funding.

P

Partial claim: A loss mitigation option for some FHA loans. HUD may advance funds to bring the loan current, and the borrower repays that amount when the FHA loan ends.
Pending: A listing status that usually means the seller accepted an offer and the sale is moving toward closing.
PITI: Principal, interest, taxes, and insurance. These are the main parts of many monthly mortgage payments.
PMI: Private mortgage insurance. It protects the lender on many conventional loans when the down payment is less than 20 percent.
Pre-approval: A lender's conditional decision that a borrower may qualify for a loan amount, based on reviewed financial information.
Pre-foreclosure sale: A sale before foreclosure is completed, often used to avoid foreclosure when the borrower cannot keep the loan current.
Pre-qualification: An early estimate of how much a borrower may be able to borrow, usually based on unverified information.
Premium: The amount paid for insurance coverage.
Prepayment: Paying all or part of a loan before it is due. Some loans may charge a prepayment penalty.
Principal: The loan amount that must be repaid, not including interest or fees.
Property tax: A tax charged by local government based on a property's value. It often helps pay for schools, roads, and local services.
Purchase agreement: The written contract between buyer and seller that states the price, terms, deadlines, and duties for the sale.

R

Radon: A naturally occurring radioactive gas that can collect in homes and may raise health risks at high levels.
Rate buydown: An upfront payment that lowers the mortgage interest rate. The lower rate may last for part or all of the loan term.
Real estate agent: A licensed person who helps people buy, sell, or lease real estate, usually under a broker's supervision.
REALTOR: A real estate professional who is a member of the National Association of REALTORS.
Refinancing: Replacing an existing loan with a new loan, often to change the rate, payment, term, or loan amount.
Rehabilitation mortgage: A mortgage that can include money to repair or improve a property. FHA 203(k) is one example.
RESPA: The Real Estate Settlement Procedures Act. It requires certain mortgage and settlement cost disclosures and limits some settlement practices.
Reverse mortgage: A loan for eligible older homeowners that lets them borrow against home equity. The loan is usually repaid when the home is sold or the borrower no longer lives there.
Right of rescission: The right to cancel certain home-secured loans within a short time after signing. It usually does not apply to buying a home.

S

Seller concession: A cost the seller agrees to pay for the buyer, such as part of closing costs, subject to loan and contract limits.
Seller disclosure: A statement where the seller shares known facts about the property's condition, as required by state law or the contract.
Servicer: The company that collects mortgage payments, manages escrow if needed, and handles loan account questions.
Settlement: Another name for closing.
Special forbearance: A temporary plan that may lower, pause, or reschedule payments when a borrower has a hardship.
Subordinate: To make one lien or claim lower in priority than another.
Survey: A drawing or report that shows property boundaries, easements, encroachments, rights of way, and improvements.
Sweat equity: Value added to a property through the owner's labor, such as repairs or improvements.

T

Temporary buydown: A buydown that lowers the mortgage payment for the first part of the loan, often for one to three years.
Title I: An FHA-insured property improvement loan program for certain home repairs or improvements.
Title company: A company that searches title records, handles title insurance, and may help manage closing paperwork and funds.
Title insurance: Insurance that protects against covered losses from title problems, such as ownership disputes or undiscovered liens.
Title search: A review of public records to check ownership and find liens, claims, or other title issues.
Truth-in-Lending: A federal law that requires lenders to disclose key loan costs and terms. Many mortgage disclosures are now combined with RESPA disclosures.

U

Under contract: A listing status that means the seller has accepted an offer, but the sale has not closed yet.
Underwriting: The lender's review of a loan application to decide whether the borrower and property meet loan rules.
USDA loan: A home loan backed by the U.S. Department of Agriculture for eligible buyers and homes, often in rural or smaller communities.

V

VA: The U.S. Department of Veterans Affairs. VA guarantees certain home loans for eligible veterans, service members, and surviving spouses.

W

Walk-through: A buyer's final visit before closing to check that the property is in the expected condition.

Z

Zoning: Local rules that control how land and buildings may be used, such as residential, commercial, or mixed use.

Real Estate Glossary

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