📘 Real Estate Terms, Explained Simply

At Royer Realty, we understand that real estate can come with its own language—full of jargon and terms that might seem confusing. But don’t worry, we’re here to help! This easy-to-use Real Estate Dictionary is designed to break down common industry terms, making it easier for you to understand the process, whether you're buying, selling, or just learning about the market.

🏡 Why Knowing Real Estate Terms Matters:

Understanding the right terms can help you make more informed decisions during your home buying or selling journey. From "escrow" to "contingency," we’ve made it simple to access definitions and explanations to ensure you feel confident and knowledgeable every step of the way.

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Check out the definitions below, or use the search feature to quickly find the term you're looking for. Whether you're a first-time buyer, seasoned investor, or just brushing up on real estate lingo, we’ve got you covered!

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Here are 100 real estate terms that buyers, sellers, and even agents need to understand when engaging in the real estate market.

We've provided definitions for each term along with common usage examples:

1. Appraisal

  • Definition: An evaluation of a property’s value, usually conducted by a professional appraiser.
  • Common Use: "The bank required an appraisal before approving the mortgage."

2. Assessment

  • Definition: The process of determining the value of a property, typically for tax purposes.
  • Common Use: "The assessment of the property was higher than expected, leading to a higher tax bill."

3. Assets

  • Definition: Anything of value or a property owned by an individual or entity.
  • Common Use: "The buyer’s assets were evaluated to determine their eligibility for the loan."

4. Assumption of Mortgage

  • Definition: When a buyer takes over the seller’s existing mortgage, keeping the same terms and interest rates.
  • Common Use: "The buyer agreed to the assumption of the mortgage to save on interest."

5. Breach of Contract

  • Definition: A violation or failure to perform any of the agreed terms in a real estate contract.
  • Common Use: "The seller was in breach of contract when they failed to make the necessary repairs."

6. Buyer’s Agent

  • Definition: A real estate agent who represents the buyer's interests in a transaction.
  • Common Use: "The buyer’s agent helped us negotiate the best price for the house."

7. Closing Costs

  • Definition: Fees and expenses associated with completing a real estate transaction.
  • Common Use: "Closing costs can include title insurance, taxes, and mortgage related expenses."

8. Closing Date

  • Definition: The date on which the property transaction is finalized, and ownership is transferred.
  • Common Use: "The closing date was set for the end of the month."

9. Comparable Sales (Comps)

  • Definition: Properties similar in location, size, and features to the subject property, used to help assess its value.
  • Common Use: "We reviewed recent comps to determine a fair asking price for the home."

10. Contingency

  • Definition: A condition that must be met before a contract becomes legally binding.
  • Common Use: "The sale was contingent on the buyer's inspections."

11. Contract

  • Definition: A legal agreement between the buyer and seller outlining the terms and conditions of the sale.
  • Common Use: "The contract was signed after all terms were agreed upon."

12. Conventional Loan

  • Definition: A mortgage not insured or guaranteed by the federal government.
  • Common Use: "They were able to secure a conventional loan with a 20% down payment."

13. Debt-to-Income Ratio (DTI)

  • Definition: A percentage that shows a borrower’s monthly debt payments relative to their monthly income.
  • Common Use: "Lenders typically prefer a DTI of less than 43%."

14. Deed

  • Definition: A legal document that transfers ownership of property from one party to another.
  • Common Use: "The deed was recorded with the county to transfer ownership."

15. Down Payment

  • Definition: The portion of the home’s purchase price paid upfront by the buyer, typically a percentage.
  • Common Use: "The buyer made a 10% down payment on the home."

16. Earnest Money

  • Definition: A deposit made by the buyer to show seriousness in the transaction.
  • Common Use: "The buyer placed earnest money to show commitment to the purchase."

17. Easement

  • Definition: A legal right to use someone else's land for a specific purpose, such as for utilities.
  • Common Use: "The property had an easement for access to the waterline."

18. Equity

  • Definition: The difference between the current market value of a property and the amount owed on it.
  • Common Use: "After 10 years of payments, they had built up significant equity in the home."

19. Escrow

  • Definition: A third-party account where funds and documents are held until specific conditions are met.
  • Common Use: "The funds for the purchase were held in escrow until the closing was finalized."

20. Exclusive Listing

  • Definition: A contract where a seller agrees to work with only one agent or broker for a specified time.
  • Common Use: "The seller signed an exclusive listing agreement with the real estate agent."

21. FHA Loan

  • Definition: A loan insured by the Federal Housing Administration designed for low-to-moderate-income buyers.
  • Common Use: "The couple used an FHA loan because it required a smaller down payment."

22. Fixed-Rate Mortgage

  • Definition: A mortgage with an interest rate that remains constant throughout the term of the loan.
  • Common Use: "A fixed-rate mortgage ensures predictable monthly payments."

23. Foreclosure

  • Definition: The legal process in which a lender takes ownership of a property due to the borrower’s failure to make payments.
  • Common Use: "The property was sold at a foreclosure auction after the owner defaulted."

24. Inspection

  • Definition: A detailed examination of a property’s condition, typically conducted by a licensed inspector.
  • Common Use: "The buyer requested an inspection to ensure there were no major issues with the house."

25. Interest Rate

  • Definition: The percentage charged by a lender on the loan amount.
  • Common Use: "The interest rate affects how much the mortgage will cost over time."

26. Joint Tenancy

  • Definition: A form of property ownership where two or more people share ownership with equal rights and survivorship.
  • Common Use: "The couple owned the property under joint tenancy, so if one passed away, the other automatically inherited it."

27. Lien

  • Definition: A legal claim against a property, often due to unpaid debts or taxes.
  • Common Use: "The seller couldn’t close the sale unless the lien on the property was settled."

28. Listing

  • Definition: A property that is for sale, typically managed by a real estate agent.
  • Common Use: "The property listing was updated with new photos and a price reduction."

29. Loan-to-Value Ratio (LTV)

  • Definition: A ratio used by lenders to measure the amount of a loan relative to the appraised value of a property.
  • Common Use: "The buyer's loan-to-value ratio was 80%, meaning they put down 20%."

30. Market Value

  • Definition: The price a property would sell for in a competitive market.
  • Common Use: "The market value of the property was $300,000, but the seller wanted $350,000."

31. Mortgage

  • Definition: A loan specifically for purchasing property, which is secured by the property itself.
  • Common Use: "The couple took out a mortgage to buy their first home."

32. Mortgage Broker

  • Definition: A professional who helps buyers find and secure a mortgage from a lender.
  • Common Use: "The mortgage broker helped them compare rates from different banks."

33. Multiple Listing Service (MLS)

  • Definition: A database used by real estate professionals to share property listings.
  • Common Use: "The property was listed on the MLS and quickly attracted multiple offers."

34. Notary

  • Definition: A person authorized to witness the signing of legal documents.
  • Common Use: "The deed was notarized to ensure the transaction was legally binding."

35. Offer

  • Definition: A proposal made by a buyer to purchase a property at a specific price.
  • Common Use: "The buyer submitted an offer of $275,000 for the house."

36. Open House

  • Definition: A scheduled event where a property is open for potential buyers to visit without an appointment.
  • Common Use: "The agent held an open house to showcase the property to prospective buyers."

37. Origination Fee

  • Definition: A fee charged by a lender for processing a new loan application.
  • Common Use: "The mortgage origination fee was 1% of the loan amount."

38. PITI (Principal, Interest, Taxes, Insurance)

  • Definition: The total monthly payment that includes principal, interest, taxes, and insurance.
  • Common Use: "The monthly PITI payment for the home was $2,000."

39. Pre-Approval

  • Definition: A process where a lender determines how much money a borrower is qualified to borrow.
  • Common Use: "The buyer was pre-approved for a loan, making their offer more attractive."

40. Pre-Qualification

  • Definition: An informal evaluation by a lender to determine if a borrower might qualify for a mortgage.
  • Common Use: "The seller wanted to see a pre-qualification letter before considering the offer."

41. Principal

  • Definition: The original loan amount excluding interest.
  • Common Use: "Each mortgage payment goes toward reducing the principal balance."

42. Private Mortgage Insurance (PMI)

  • Definition: Insurance that protects the lender if the borrower defaults on a conventional loan with a low down payment.
  • Common Use: "The buyer had to pay PMI because their down payment was less than 20%."

43. Property Taxes

  • Definition: Taxes assessed by the local government on a property’s value.
  • Common Use: "The property taxes in the area were higher than expected."

44. Public Record

  • Definition: Official records, typically filed with a government office, regarding property ownership and history.
  • Common Use: "The property’s ownership history was found in the public record."

45. Real Estate Agent

  • Definition: A licensed professional who represents buyers or sellers in property transactions.
  • Common Use: "The real estate agent helped us find the perfect home."

46. Real Estate Investment Trust (REIT)

  • Definition: A company that owns, operates, or finances real estate projects and allows investors to buy shares.
  • Common Use: "REITs are a popular investment vehicle for those wanting exposure to real estate without directly owning property."

47. Refinance

  • Definition: The process of replacing an existing mortgage with a new one, often to secure a better interest rate.
  • Common Use: "The homeowner decided to refinance their mortgage to lower their monthly payment."

48. Rent-to-Own

  • Definition: A rental agreement where a portion of the rent may be applied toward the eventual purchase of the property.
  • Common Use: "The tenant entered into a rent-to-own agreement to eventually buy the home."

49. Seller’s Market

  • Definition: A market condition where there are more buyers than available properties, leading to higher prices.
  • Common Use: "It’s a seller’s market, so homes are selling quickly and for above asking price."

50. Short Sale

  • Definition: A sale of a property in which the proceeds are less than the amount owed on the mortgage, often requiring lender approval.
  • Common Use: "The seller was forced to do a short sale because they owed more than the house was worth."

51. Title

  • Definition: Legal documentation that proves ownership of a property.
  • Common Use: "The title to the house was clear, meaning there were no claims or liens on it."

52. Title Insurance

  • Definition: Insurance that protects against loss due to defects in the title, such as ownership disputes or liens.
  • Common Use: "The buyer opted for title insurance to protect against any future claims on the property."

53. Transfer Tax (a.k.a. Conveyance Fee)

  • Definition: A tax imposed by the government on the transfer of property ownership.
  • Common Use: "The seller was responsible for paying the transfer tax as part of the closing costs."

54. Underwriting

  • Definition: The process by which a lender evaluates the risk of a borrower to determine whether they qualify for a loan.
  • Common Use: "The loan was delayed because the underwriting process took longer than expected."

55. Vacancy Rate

  • Definition: The percentage of all available rental units in a property or market that are unoccupied.
  • Common Use: "The vacancy rate in the area is low, indicating strong demand for rental properties."

56. Variable Rate Mortgage (ARM)

  • Definition: A mortgage with an interest rate that can change periodically based on market conditions.
  • Common Use: "The couple chose a 5/1 ARM because the initial rate was lower than a fixed-rate mortgage."

57. Warranty

  • Definition: A guarantee provided by the seller or manufacturer on the condition of certain items in the home, such as appliances or roofing.
  • Common Use: "The home came with a one-year warranty for the appliances."

58. Warranty Deed

  • Definition: A type of deed where the seller guarantees they have clear ownership and the right to sell the property.
  • Common Use: "The buyer received a warranty deed, ensuring the property was free of encumbrances."

59. Zoning

  • Definition: Regulations that determine how land can be used, including residential, commercial, or industrial purposes.
  • Common Use: "The property is zoned for residential use, meaning it can't be used for commercial purposes."

60. Walk-Through

  • Definition: A final inspection of a property before closing to ensure everything is in the agreed-upon condition.
  • Common Use: "The buyer did a walk-through to check that the repairs were completed as promised."

61. Work Order

  • Definition: A document that specifies the scope of work to be performed, typically for repairs or improvements.
  • Common Use: "The seller issued a work order to fix the plumbing issues before closing."

62. Real Property

  • Definition: Land and anything permanently attached to it, such as buildings or other structures.
  • Common Use: "The real property includes both the house and the surrounding land."

63. Personal Property

  • Definition: Movable property that is not permanently attached to the land, such as furniture or appliances.
  • Common Use: "The refrigerator was considered personal property and wasn’t included in the sale."

64. REO (Real Estate Owned)

  • Definition: A property that is owned by a lender, usually a bank, after it has gone through foreclosure.
  • Common Use: "The buyer purchased an REO property at a significant discount."

65. Refinance Rate

  • Definition: The interest rate offered to homeowners when they refinance an existing mortgage.
  • Common Use: "The refinance rate was lower than the original mortgage, so they decided to refinance."

66. Reverse Mortgage

  • Definition: A loan available to homeowners aged 62 or older that allows them to convert part of their home equity into cash.
  • Common Use: "The retiree opted for a reverse mortgage to access cash while staying in their home."

67. Second Mortgage

  • Definition: A loan taken out in addition to the primary mortgage, typically with a higher interest rate.
  • Common Use: "They used a second mortgage to finance the home renovation."

68. Seller’s Disclosure

  • Definition: A legal document in which the seller provides information about the condition of the property.
  • Common Use: "The seller’s disclosure revealed previous water damage that needed to be addressed."

69. Shared Equity

  • Definition: An arrangement where the buyer and another party (such as a government agency or lender) share in the ownership of a property.
  • Common Use: "The buyer used a shared equity program to make home-ownership more affordable."

70. Settlement

  • Definition: The final step in a real estate transaction where the buyer and seller sign the necessary documents, and ownership is transferred.
  • Common Use: "The settlement is scheduled for next week, and we’re excited to finalize the purchase."

71. Special Assessment

  • Definition: A fee levied on property owners to pay for specific improvements or projects, like road repairs or new sewers.
  • Common Use: "A special assessment was added to our property taxes for the upcoming neighborhood project."

72. Square Footage

  • Definition: The measurement of a property's size, typically used to describe the area inside a building.
  • Common Use: "The house had 2,500 square feet of living space, which was perfect for the growing family."

73. Subdivision

  • Definition: A portion of land divided into smaller lots for development or sale.
  • Common Use: "The home is located in a new subdivision with several modern homes."

74. Subsidized Loan

  • Definition: A loan where the government pays part of the interest for the borrower, typically offered to low-income buyers.
  • Common Use: "The buyer qualified for a subsidized loan through a local housing program."

75. Survey

  • Definition: A process in which the boundaries of a property are measured and documented, often required before closing.
  • Common Use: "The buyer requested a survey to confirm the exact property boundaries."

76. Syndication

  • Definition: The pooling of capital from multiple investors to fund a real estate investment, typically managed by a syndicator.
  • Common Use: "The investor participated in a syndication to buy a commercial building."

77. Tax Lien

  • Definition: A legal claim against a property for unpaid property taxes.
  • Common Use: "A tax lien is placed on a property when the owner fails to pay their property taxes."

78. Title Search

  • Definition: The process of examining public records to ensure that the property’s title is clear of any issues or claims.
  • Common Use: "The title search revealed no outstanding claims on the property."

79. Toxic Mold

  • Definition: Mold that can cause health problems, often found in homes with water damage or poor ventilation.
  • Common Use: "The buyer requested a mold inspection to check for toxic mold after noticing suspicious discoloration in the basement."

80. Townhouse

  • Definition: A type of multi-story, attached home, typically in a row of similar properties, where the owner owns both the interior and exterior of the home.
  • Common Use: "They purchased a townhouse in a quiet neighborhood near the city center."

81. Transfer of Ownership

  • Definition: The legal process through which property ownership is passed from the seller to the buyer.
  • Common Use: "The transfer of ownership was completed after all the necessary documents were signed."

82. Under Contract

  • Definition: When a seller has accepted an offer and a contract has been signed but the sale has not yet closed.
  • Common Use: "The house is under contract and we need to remove the contingencies before the closing."

83. Upside-Down Mortgage

  • Definition: When the borrower owes more on their mortgage than the property is currently worth.
  • Common Use: "They were stuck in an upside-down mortgage because the home value dropped significantly."

84. Valuation

  • Definition: The process of determining the current market value of a property.
  • Common Use: "The lender required an independent valuation of the property before approving the loan."

85. Venture Capital

  • Definition: Funding provided to startups or new real estate projects with high growth potential.
  • Common Use: "The developer sought venture capital to fund the construction of a new residential complex."

86. Wholesaling

  • Definition: A real estate investment strategy where an investor finds a property, secures it under contract, and then sells the contract to another investor for a fee.
  • Common Use: "The wholesaler found a distressed property and sold the contract to a rehabber."

87. Warranty of Habitability

  • Definition: A legal guarantee that a rental property is livable and meets basic health and safety standards.
  • Common Use: "The landlord is required to maintain the warranty of habitability by fixing any major issues like plumbing problems."

88. Yard Sale

  • Definition: A sale of personal items, often before a move, typically conducted on the property’s yard.
  • Common Use: "The seller had a yard sale to get rid of unwanted furniture before moving to their new home."

89. Zoning Ordinance

  • Definition: A local law that defines how properties in specific geographic zones can be used.
  • Common Use: "The zoning ordinance restricts the property to residential use only, preventing any commercial businesses."

90. Zero Lot Line

  • Definition: A property boundary where a structure is built directly on the property line.
  • Common Use: "The house had a zero lot line, meaning there was no space between the property and the neighbor’s house."

91. Principal Residence

  • Definition: The home that a person occupies most of the time and considers their primary residence.
  • Common Use: "The tax deduction applies to the buyer’s principal residence."

92. Short-Term Rental

  • Definition: A rental property that is rented out for less than 30 days, often through platforms like Airbnb.
  • Common Use: "The condo was converted into a short-term rental for vacationers."

93. Section 8

  • Definition: A government program that provides rental assistance to low-income tenants.
  • Common Use: "The tenant qualified for Section 8 assistance to help pay the rent."

94. Seller Financing

  • Definition: When the seller agrees to finance the purchase of the property instead of a traditional lender.
  • Common Use: "The seller offered financing to the buyer because they had trouble securing a loan."

95. Rent Control

  • Definition: Laws that limit the amount of rent a landlord can charge for a rental property.
  • Common Use: "The apartment is under rent control, meaning the rent can’t be raised by more than a certain percentage each year."

96. Leasehold

  • Definition: A type of property ownership where the buyer owns the right to occupy the property for a specified period, but not the land itself.
  • Common Use: "The condominium was a leasehold property, meaning the buyer only owned the unit, not the land beneath it."

97. Market Conditions

  • Definition: The state of the real estate market, which can be either a buyer’s market, seller’s market, or neutral.
  • Common Use: "The current market conditions favor buyers, with low interest rates and ample inventory."

98. Real Estate Owned (REO)

  • Definition: Properties that are owned by lenders (typically banks) after foreclosure.
  • Common Use: "We’re looking into an REO property since it’s often sold at a discount."

99. Contingent Offer

  • Definition: An offer made on a property that is dependent on certain conditions being met, such as financing or home inspection.
  • Common Use: "The buyer’s offer is contingent on satisfactory inspections."

100. Pre-Closing

  • Definition: The steps taken to finalize the deal before the actual closing, such as signing documents and conducting inspections.
  • Common Use: "The pre-closing process included an inspection and the signing of the final paperwork."

 

This concludes the list! These are the essential terms every buyer, seller, and agent should understand to navigate the world of real estate successfully. Let us know if you'd like more information on any specific terms!

 

 

 

For an more details, check out this alphabetical list with hyperlinked sections for each letter. 

 

0-9 A B C D E F G H I J K L M
N O P Q R S T U V W X Y Z
0-9
  • 203(b): FHA program which provides mortgage insurance to protect lenders from default; used to finance the purchase of new or existing one- to four family housing; characterized by low down payment, flexible qualifying guidelines, limited fees, and a limit on maximum loan amount.
  • 203(k): This FHA mortgage insurance program enables homebuyers to finance both the purchase of a house and the cost of its rehabilitation through a single mortgage loan.
A
  • Amenity: a feature of the home or property that serves as a benefit to the buyer but that is not necessary to its use; may be natural (like location, Woods, water) or man-made (like a swimming pool or garden).
  • Amortization: repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years)
  • Annual Percentage Rate (APR): calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan.
  • Application: the first step in the official loan approval process; this form is used to record important information about the potential borrower necessary to the underwriting process.
  • Appraisal: a document that gives an estimate of a property's fair market value; an appraisal is generally required by a lender before loan approval to ensure that the mortgage loan amount is not more than the value of the property.
  • Appraiser: a qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.
  • ARM: Adjustable Rate Mortgage; a mortgage loan subject to changes in interest rates; when rates change, ARM monthly payments increase or decrease at intervals determined by the lender; the Change in monthly -payment amount, however, is usually subject to a Cap.
  • Assessor: a government official who is responsible for determining the value of a property for the purpose of taxation.
  • Assumable mortgage: a mortgage that can be transferred from a seller to a buyer; once the loan is assumed by the buyer the seller is no longer responsible for repaying it; there may be a fee and/or a credit package involved in the transfer of an assumable mortgage.
B
  • Balloon Mortgage a mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower.
  • Bankruptcy: a federal law whereby a person's assets are turned over to a trustee and used to pay off outstanding debts; this usually occurs when someone owes more than they have the ability to repay.
  • Borrower: a person who has been approved to receive a loan and is then obligated to repay it and any additional fees according to the loan terms.
  • Building code: based on agreed upon safety standards within a specific area, a building code is a regulation that determines the design, construction, and materials used in building.
  • Budget: a detailed record of all income earned and spent during a specific period of time.
C
  • Cap: a limit, such as that placed on an adjustable rate mortgage, on how much a monthly payment or interest rate can increase or decrease.
  • Cash reserves: a cash amount sometimes required to be held in reserve in addition to the down payment and closing costs; the amount is determined by the lender.
  • Certificate of title: a document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims.
  • Closing: also known as settlement, this is the time at which the property is formally sold and transferred from the seller to the buyer; it is at this time that the borrower takes on the loan obligation, pays all closing costs, and receives title from the seller.
  • Closing costs: customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing; these costs generally vary by geographic location and are typically detailed to the borrower after submission of a loan application.
  • Commission: an amount, usually a percentage of the property sales price, that is collected by a real estate professional as a fee for negotiating the transaction.
  • Condominium: a form of ownership in which individuals purchase and own a unit of housing in a multi-unit complex; the owner also shares financial responsibility for common areas.
  • Contingency: 
    a future event or circumstance that is possible but cannot be predicted with certainty.
  • Conventional loan: a private sector loan, one that is not guaranteed or insured by the U.S. government.
  • Cooperative (Co-op): residents purchase stock in a cooperative corporation that owns a structure; each stockholder is then entitled to live in a specific unit of the structure and is responsible for paying a portion of the loan.
  • Credit history: history of an individual's debt payment; lenders use this information to gauge a potential borrower's ability to repay a loan.
  • Credit report: a record that lists all past and present debts and the timeliness of their repayment; it documents an individual's credit history.
  • Credit bureau score: a number representing the possibility a borrower may default; it is based upon credit history and is used to determine ability to qualify for a mortgage loan.
D
  • Debt-to-income ratio: a comparison of gross income to housing and non-housing expenses; With the FHA, the-monthly mortgage payment should be no more than 29% of monthly gross income (before taxes) and the mortgage payment combined with non-housing debts should not exceed 41% of income.
  • Deed: the document that transfers ownership of a property.
  • Deed-in-lieu: to avoid foreclosure ("in lieu" of foreclosure), a deed is given to the lender to fulfill the obligation to repay the debt; this process doesn't allow the borrower to remain in the house but helps avoid the costs, time, and effort associated with foreclosure.
  • Default: the inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms.
  • Delinquency: failure of a borrower to make timely mortgage payments under a loan agreement.
  • Discount point: normally paid at closing and generally calculated to be equivalent to 1% of the total loan amount, discount points are paid to reduce the interest rate on a loan.
  • Down payment: the portion of a home's purchase price that is paid in cash and is not part of the mortgage loan.
E
  • Earnest money: money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.
  • EEM: Energy Efficient Mortgage; an FHA program that helps homebuyers save money on utility bills by enabling them to finance the cost of adding energy efficiency features to a new or existing home as part of the home purchase
  • Equity: an owner's financial interest in a property; calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.
  • Escrow account: a separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.
F
  • Fair Housing Act: a law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.
  • Fair market value: the hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.
  • Fannie Mae: Federal National Mortgage Association (FNMA); a federally-chartered enterprise owned by private stockholders that purchases residential mortgages and converts them into securities for sale to investors; by purchasing mortgages, Fannie Mae supplies funds that lenders may loan to potential homebuyers.
  • FHA: Federal Housing Administration; established in 1934 to advance homeownership opportunities for all Americans; assists homebuyers by providing mortgage insurance to lenders to cover most losses that may occur when a borrower defaults; this encourages lenders to make loans to borrowers who might not qualify for conventional mortgages.
  • Fixed-rate mortgage: a mortgage with payments that remain the same throughout the life of the loan because the interest rate and other terms are fixed and do not change.
  • Flood insurance: insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.
  • Foreclosure: a legal process in which mortgaged property is sold to pay the loan of the defaulting borrower.
  • Freddie Mac: Federal Home Loan Mortgage Corporation (FHLM); a federally-chartered corporation that purchases residential mortgages, securitizes them, and sells them to investors; this provides lenders with funds for new homebuyers.
G
  • Ginnie Mae: Government National Mortgage Association (GNMA); a government-owned corporation overseen by the U.S. Department of Housing and Urban Development, Ginnie Mae pools FHA-insured and VA-guaranteed loans to back securities for private investment; as With Fannie Mae and Freddie Mac, the investment income provides funding that may then be lent to eligible borrowers by lenders.
  • Good faith estimate: an estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.
H
  • HELP: Homebuyer Education Learning Program; an educational program from the FHA that counsels people about the home buying process; HELP covers topics like budgeting, finding a home, getting a loan, and home maintenance; in most cases, completion of the program may entitle the homebuyer to a reduced initial FHA mortgage insurance premium-from 2.25% to 1.75% of the home purchase price.
  • Home inspection: an examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.
  • Home warranty: offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner's insurance; coverage extends over a specific time period and does not cover the home's structure.
  • Homeowner's insurance: an insurance policy that combines protection against damage to a dwelling and its contents with protection against claims of negligence.
  • HUD: the U.S. Department of Housing and Urban Development; established in 1965, HUD works to create a decent home and suitable living environment for all Americans; it does this by addressing housing needs, improving and developing American communities, and enforcing fair housing laws.
  • HUD1 Statement: also known as the "closing disclosure" and "settlement sheet," it itemizes all closing costs; must be given to the borrower at or before closing. HUD1 is an older term and is more commonly the Closing Disclosure
  • HVAC: Heating, Ventilation and Air Conditioning; a home's heating and cooling system.
I
  • Index: a measurement used by lenders to determine changes to the Interest rate charged on an adjustable rate mortgage.
  • Inflation: the number of dollars in circulation exceeds the amount of goods and services available for purchase; inflation results in a decrease in the dollar's value.
  • Interest: a fee charged for the use of money.
  • Interest rate: the amount of interest charged on a monthly loan payment; usually expressed as a percentage.
  • Insurance: protection against a specific loss over a period of time that is secured by the payment of a regularly scheduled premium.
J
  • Judgment: a legal decision; when requiring debt repayment, a judgment may include a property lien that secures the creditor's claim by providing a collateral source.
L
  • Lease purchase: assists low- to moderate-income homebuyers in purchasing a home by allowing them to lease a home with an option to buy; the rent payment is made up of the monthly rental payment plus an additional amount that is credited to an account for use as a down payment.
  • Lien: a legal claim against property that must be satisfied When the property is sold
  • Loan: money borrowed that is usually repaid with interest.
  • Loan fraud: purposely giving incorrect information on a loan application in order to better qualify for a loan; may result in civil liability or criminal penalties.
  • Loan-to-value (LTV) ratio: a percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.
  • Lock-in: since interest rates can change frequently, many lenders offer an interest rate lock-in that guarantees a specific interest rate if the loan is closed within a specific time.
  • Loss mitigation: a process to avoid foreclosure; the lender tries to help a borrower who has been unable to make loan payments and is in danger of defaulting on his or her loan.
M
  • Margin: an amount the lender adds to an index to determine the interest rate on an adjustable rate mortgage.
  • Mortgage: a lien on the property that secures the Promise to repay a loan.
  • Mortgage banker: a company that originates loans and resells them to secondary mortgage lenders like Fannie Mae or Freddie Mac.
  • Mortgage broker: a firm that originates and processes loans for a number of lenders.
  • Mortgage insurance: a policy that protects lenders against some or most of the losses that can occur when a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home's purchase price.
  • Mortgage insurance premium (MIP): a monthly payment -usually part of the mortgage payment - paid by a borrower for mortgage insurance.
  • Mortgage Modification: a loss mitigation option that allows a borrower to refinance and/or extend the term of the mortgage loan and thus reduce the monthly payments.
O
  • Offer: indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.
  • Origination: the process of preparing, submitting, and evaluating a loan application; generally includes a credit check, verification of employment, and a property appraisal.
  • Origination fee: the charge for originating a loan; is usually calculated in the form of points and paid at closing.
P
  • Partial Claim: a loss mitigation option offered by the FHA that allows a borrower, with help from a lender, to get an interest-free loan from HUD to bring their mortgage payments up to date.
  • PITI: Principal, Interest, Taxes, and Insurance - the four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan while the portion that covers taxes and insurance (homeowner's and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.
  • PMI: Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price.
  • Pre-approve: lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.
  • Pre-foreclosure sale: allows a defaulting borrower to sell the mortgaged property to satisfy the loan and avoid foreclosure.
  • Pre-qualify: a lender informally determines the maximum amount an individual is eligible to borrow.
  • Premium: an amount paid on a regular schedule by a policyholder that maintains insurance coverage.
  • Prepayment: payment of the mortgage loan before the scheduled due date; may be Subject to a prepayment penalty.
  • Principal: the amount borrowed from a lender; doesn't include interest or additional fees.
R
  • Radon: a radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.
  • Real estate agent: an individual who is licensed to negotiate and arrange real estate sales; works for a real estate broker.
  • REALTOR: a real estate agent or broker who is a member of the NATIONAL ASSOCIATION OF REALTORS, and its local and state associations.
  • Refinancing: paying off one loan by obtaining another; refinancing is generally done to secure better loan terms (like a lower interest rate).
  • Rehabilitation mortgage: a mortgage that covers the costs of rehabilitating (repairing or Improving) a property; some rehabilitation mortgages - like the FHA's 203(k) - allow a borrower to roll the costs of rehabilitation and home purchase into one mortgage loan.
  • RESPA: Real Estate Settlement Procedures Act; a law protecting consumers from abuses during the residential real estate purchase and loan process by requiring lenders to disclose all settlement costs, practices, and relationships
S
  • Settlement: another name for closing
  • Special Forbearance: a loss mitigation option where the lender arranges a revised repayment plan for the borrower that may include a temporary reduction or suspension of monthly loan payments.
  • Subordinate: to place in a rank of lesser importance or to make one claim secondary to another.
  • Survey: a property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc.
  • Sweat equity: using labor to build or improve a property as part of the down payment
T
  • Title 1: an FHA-insured loan that allows a borrower to make non-luxury improvements (like renovations or repairs) to their home; Title I loans less than $7,500 don't require a property lien.
  • Title insurance: insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for homebuyers.
  • Title search: a check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property.
  • Truth-in-Lending: a federal law obligating a lender to give full written disclosure of all fees, terms, and conditions associated with the loan initial period and then adjusts to another rate that lasts for the term of the loan.
U
  • Underwriting: the process of analyzing a loan application to determine the amount of risk involved in making the loan; it includes a review of the potential borrower's credit history and a judgment of the property value.
V
  • VA: Department of Veterans Affairs: a federal agency which guarantees loans made to veterans; similar to mortgage insurance, a loan guarantee protects lenders against loss that may result from a borrower default.

 

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Founded in 1988, Royer Realty offers unparalleled service to ALL our clients and customers. Your complete satisfaction with our service and representation is our number one priority!  Whether you are considering buying a home, selling a home or both, we know this area inside and out.

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