Terms link to related service guides where you can learn more about the professionals and processes involved.
A
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on market conditions. Initial rate is typically lower than fixed-rate mortgages but can increase over time. Understand the rate adjustment schedule and caps before committing. Related: Mortgage LendersAmortization
The process of paying off a loan through regular payments over time. Each payment covers both principal and interest, with early payments weighted toward interest and later payments toward principal.Appraisal
A professional assessment of a property’s market value, required by lenders before approving a mortgage. If the appraisal comes in lower than the purchase price, you may need to renegotiate or bring additional cash. Related: AppraisersAPR (Annual Percentage Rate)
The total cost of borrowing expressed as a yearly rate, including interest and fees. Always compare APR (not just interest rate) when evaluating loan offers, as it shows the true cost. Related: Mortgage LendersAs-Is Condition
Property sold without repairs or warranties. Seller accepts no responsibility for defects. Common in foreclosures and inherited properties, but risky without thorough inspection.Assessment
Property tax valuation by local government. Can increase annually, affecting your monthly payment if you escrow property taxes. Appeal assessments if you believe they’re inflated.B
Balloon Payment
A large lump-sum payment due at the end of a loan term. Risky if you can’t refinance or pay when due. Avoid unless you have a clear exit strategy.Bridge Loan
Short-term financing used to bridge the gap between buying a new home and selling your current one. Typically 6-12 months with higher interest rates. Only use if you’re confident your current home will sell quickly.Buyer’s Agent
A real estate agent who represents the buyer’s interests in a transaction. Typically paid by the seller through commission split. Ensure they work exclusively for you, not dual agency. Related: Real Estate AgentsBuyer’s Market
Market conditions favoring buyers: more homes for sale than buyers, giving buyers negotiating leverage. Expect longer listing times and more willingness from sellers to negotiate.C
Capital Gains Tax
Tax on profit from selling an asset, including real estate. Primary residence exemption: up to $250K single/$500K married if you lived there 2 of last 5 years. Investment properties don’t qualify. Related: Accountants & Tax AdvisorsClear Title
Property ownership free from liens, disputes, or legal claims. Title company verifies this before closing. If title isn’t clear, deal can’t close until resolved. Related: Title & EscrowClosing
The final step where ownership transfers from seller to buyer. You’ll sign documents, transfer funds, and receive keys. Typically takes 1-2 hours with a settlement agent or attorney. Related: Title & EscrowClosing Costs
Fees paid at closing beyond the down payment: origination fees, title insurance, recording fees, transfer taxes, prepaid expenses. Typically 2-5% of purchase price. Get estimates upfront.Closing Disclosure
Document detailing final loan terms and closing costs, provided 3 business days before closing. Review carefully and compare to Loan Estimate. Don’t sign if numbers don’t match expectations.Comparative Market Analysis (CMA)
Report comparing your property to similar recently sold homes to estimate value. Used by agents to price listings. More informal than appraisal but useful for negotiations.Contingency
Condition that must be met for the contract to proceed. Common contingencies: financing, inspection, appraisal, sale of current home. Protects buyers from losing earnest money if conditions aren’t met.Conventional Loan
Mortgage not backed by government (FHA, VA, USDA). Typically requires higher credit score and larger down payment but offers more flexibility and avoids mortgage insurance with 20% down. Related: Mortgage LendersD
Debt-to-Income Ratio (DTI)
Your monthly debt payments divided by gross monthly income. Lenders use this to determine how much you can borrow. Most want DTI below 43%, ideally below 36%. Related: Mortgage LendersDeed
Legal document transferring property ownership. Common types: warranty deed (guarantees clear title), quitclaim deed (transfers whatever interest seller has, no guarantees). Always verify deed type.Down Payment
Upfront cash payment toward purchase price. Conventional loans: 3-20%. FHA: 3.5%. VA: 0%. Larger down payment = lower monthly payment and potentially no PMI.Due Diligence
Investigation period where buyer inspects property, reviews documents, and verifies everything before committing. Use this time to uncover issues before you lose negotiating power.E
Earnest Money
Deposit showing you’re serious about buying, held in escrow. Typically 1-3% of purchase price. Applied to down payment at closing. Refundable if contingencies aren’t met; lost if you back out without valid reason. Related: Title & EscrowEasement
Legal right for someone else to use part of your property for specific purpose (utility access, shared driveway). Review title report for easements before buying, as they transfer with property.Encumbrance
Any claim against a property: liens, easements, restrictions. Can prevent sale until resolved. Title company identifies these during title search.Equity
The portion of your home you actually own: current value minus what you owe. Builds through principal payments and appreciation. Can borrow against it via HELOC or second mortgage.Escrow
Neutral third party holding funds or documents until transaction conditions are met. Your earnest money sits in escrow until closing. Also refers to account where lender holds property tax and insurance payments. Related: Title & EscrowEstate Planning
Legal preparation for property transfer after death: wills, trusts, beneficiary designations. Critical if you own real estate, as it avoids probate delays and ensures your wishes are followed. Related: Legal ServicesF
Fair Market Value
Price a willing buyer would pay a willing seller, both with reasonable knowledge and no pressure. Determined by comparable sales, not what you paid or what you think it’s worth.FHA Loan
Mortgage insured by Federal Housing Administration. Lower down payment (3.5%) and credit score requirements, but requires mortgage insurance for life of loan unless you refinance. Related: Mortgage LendersFixed-Rate Mortgage
Mortgage with interest rate that never changes. Payment predictability but typically higher initial rate than ARM. Best if you plan to stay long-term or rates are rising. Related: Mortgage LendersForeclosure
Legal process where lender takes property due to loan default. Sold at auction, often below market value. Buying foreclosures comes with risks: as-is condition, potential title issues, eviction complications.G
Gift Equity
When family member sells you property below market value, the difference is considered a gift toward down payment. Must be properly documented to satisfy lender requirements and avoid tax issues. Related: Legal ServicesGood Faith Estimate (GFE)
Now called Loan Estimate. Document showing estimated loan terms and costs within 3 days of application. Compare across lenders before committing.H
Home Inspection
Professional examination of property’s condition: structure, systems, safety. Not required but highly recommended. Gives you negotiating power to request repairs or walk away if issues are severe. Related: Home InspectorsHomeowners Association (HOA)
Organization managing common areas in condos, townhomes, or planned communities. Charges monthly/annual fees and enforces rules. Review HOA financials, rules, and fee history before buying.Homeowners Insurance
Coverage protecting your property and belongings from damage, plus liability if someone is injured on your property. Required by lenders. Shop multiple providers before closing. Related: Homeowners InsuranceI
Inspection Contingency
Contract clause allowing you to back out or renegotiate if inspection reveals significant issues. Don’t waive this unless you’re prepared to accept property as-is and can afford unexpected repairs.Interest Rate
Cost of borrowing money, expressed as percentage. Directly affects your monthly payment. Even 0.25% difference can cost thousands over the loan term. Shop aggressively.J
Joint Tenancy
Co-ownership where each owner has equal share and right of survivorship: when one owner dies, their share automatically transfers to surviving owner(s), bypassing probate.Jumbo Loan
Mortgage exceeding conforming loan limits (varies by county, typically $766K+). Requires excellent credit, larger down payment, and often higher interest rates due to increased lender risk. Related: Mortgage LendersL
Lien
Legal claim against property for unpaid debt: mortgages, tax liens, mechanic’s liens, HOA liens. Must be cleared before sale. Title company identifies liens during title search.Listing Agent
Real estate agent representing the seller. Paid by seller through commission. Works for seller’s best interests, not yours, even if they seem helpful.Loan Estimate
Standardized form showing loan terms, projected payments, and costs, provided within 3 days of application. Compare this across lenders, not just interest rate. Related: Mortgage LendersLoan-to-Value Ratio (LTV)
Loan amount divided by property value. Lenders use this to assess risk. Higher LTV = higher risk = higher rate or PMI requirement. Keep LTV below 80% to avoid PMI.M
Market Value
What a property would sell for in current market conditions. Not the same as assessed value (for taxes) or asking price (what seller wants). Determined by comparable sales.Mortgage
Loan secured by real estate. If you default, lender can foreclose and take the property. Most common types: conventional, FHA, VA, USDA. Structure affects rates, fees, and requirements. Related: Mortgage LendersMortgage Insurance (PMI)
Insurance protecting lender if you default, required when down payment is less than 20%. Costs 0.5-1% of loan amount annually. Can be removed once you reach 20% equity through payments or appreciation.Multiple Listing Service (MLS)
Database where agents list properties for sale. Public sites like Zillow pull from MLS but may be outdated. Only licensed agents have direct MLS access.N
Negative Amortization
When monthly payments don’t cover interest, unpaid interest is added to principal, increasing your loan balance. Avoid loans with this feature unless you fully understand the risk.Net Proceeds
Amount seller receives after paying off mortgage, closing costs, agent commissions, and other fees. Often less than expected—calculate before listing to avoid surprises.O
Offer
Written proposal to buy property at specific price and terms. Not binding until seller accepts. Include contingencies to protect yourself. Don’t let emotions drive you to overpay.Origination Fee
Lender charge for processing loan, typically 0.5-1% of loan amount. Negotiate this—it’s often flexible, especially if you have strong credit and multiple offers.Owner’s Title Insurance
One-time premium protecting you from title defects: forged documents, unknown heirs, recording errors. Optional but recommended—protects your ownership if issues arise years later. Related: Title & EscrowP
PITI
Principal, Interest, Taxes, Insurance—the four components of your monthly housing payment. Lenders qualify you based on total PITI, not just principal and interest.Pre-Approval
Lender commitment to loan you specific amount based on verified income, assets, and credit. Stronger than pre-qualification. Get this before shopping to know your budget and show sellers you’re serious. Related: Mortgage LendersPre-Qualification
Informal estimate of what you might afford based on unverified information you provide. Not a commitment. Sellers don’t take these seriously—get pre-approved instead.Principal
The actual loan amount you borrowed, not including interest. Each payment includes both principal and interest, with principal portion increasing over time as loan balance decreases.Private Mortgage Insurance (PMI)
See Mortgage Insurance. Protects lender, not you. Avoid by putting 20% down or using lender-paid PMI (slightly higher rate, no separate PMI payment).Probate
Legal process validating will and distributing estate after someone dies. Can take months or years. Properties in probate have title complications—expect delays and legal complexity. Related: Legal ServicesProperty Tax
Annual tax based on assessed property value, used to fund schools, roads, public services. Escrowed with mortgage payment or paid directly. Can increase significantly—factor this into affordability.Q
Quitclaim Deed
Document transferring whatever ownership interest seller has, without guarantees. Common in divorces and family transfers. Offers no protection if seller doesn’t actually own the property or if title has problems.R
Radon
Radioactive gas that can accumulate in homes, causing health risks. Test during inspection, especially in basement or ground-floor properties. Mitigation is affordable if levels are high.Rate Lock
Agreement freezing your interest rate for specific period (30-60 days). Protects you if rates rise before closing. Get it in writing—verbal locks mean nothing.Real Estate Agent
Licensed professional helping buy or sell property. Buyer’s agent represents you, listing agent represents seller. Paid via commission (typically 5-6% total, split between both agents). Related: Real Estate AgentsRecording Fee
Government charge to officially record deed and mortgage in public records. Required to establish legal ownership. Typically $50 - $300 depending on location.Refinance
Replacing existing mortgage with new one, typically to get lower rate, change term, or access equity. Costs 2-5% of loan amount—only makes sense if you’ll stay long enough to recoup costs.S
Seller Concessions
Seller agreement to pay some buyer closing costs. Common in buyer’s market or when property needs repairs. Typically capped at 3-6% of purchase price depending on loan type.Seller’s Agent
See Listing Agent. Represents seller’s interests, not yours, even if they’re friendly and helpful. Never rely on them for advice.Seller’s Market
Market conditions favoring sellers: more buyers than homes, driving up prices and reducing negotiating power. Expect bidding wars and pressure to waive contingencies.Settlement
See Closing. Final meeting where ownership transfers, funds exchange hands, and you receive keys.Survey
Professional measurement of property boundaries, structures, and easements. Identifies encroachments (neighbor’s fence on your land) and boundary disputes. Required by some lenders, recommended for rural properties.T
Title
Legal ownership of property. Clear title means no disputes, liens, or claims. Title company verifies this through title search before closing. Related: Title & EscrowTitle Insurance
One-time premium protecting against title defects discovered after purchase: forged signatures, unknown heirs, recording errors. Lender’s policy (required) protects lender; owner’s policy (optional but recommended) protects you. Related: Title & EscrowTitle Search
Examination of public records to verify legal ownership and identify liens, easements, or claims. Title company performs this before closing. Any issues must be resolved before sale can proceed. Related: Title & EscrowTransfer Tax
State or local tax on property transfer, typically paid by seller but negotiable. Varies widely by location: some states have none, others charge 1-2% of sale price.Trust
Legal entity holding property for benefit of someone else. Used in estate planning to avoid probate, protect assets, or manage property for minors or disabled individuals. Property owned by trust requires trustee signature to buy/sell. Related: Legal ServicesU
Underwriting
Lender’s process of verifying your financial information and assessing loan risk. Expects documentation: tax returns, pay stubs, bank statements, employment verification. Can take 1-4 weeks.Upside Down
Owing more on mortgage than property is worth (negative equity). Happens when values drop or you financed closing costs. Limits your ability to sell or refinance without bringing cash to closing.V
VA Loan
Mortgage guaranteed by Department of Veterans Affairs for eligible veterans and service members. No down payment required, no PMI, competitive rates. Limited to primary residence. Related: Mortgage LendersW
Walk-Through
Final inspection before closing (typically day before or morning of). Verify property is in agreed-upon condition, repairs were completed, and nothing major has changed. Don’t skip this.Warranty Deed
Deed guaranteeing seller has clear title and legal right to sell. Provides buyer protection if title issues arise. Preferred over quitclaim deed for arm’s-length transactions.Wire Fraud
Scam where criminals intercept email and send fake wiring instructions, diverting your closing funds to their account. Verify all wiring instructions by phone using number you look up independently, never from email. Related: Title & EscrowReady to Learn More?
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