Glossary of Real Estate Terms

Explore key real estate terms and definitions to guide you through the home buying and selling process.

A

Annual Percentage Rate (APR):: The cost of a loan as an annual rate, including interest, points, and broker fees.
Appraisal:: The estimated market value of a property, determined by a professional using comparable sales and features.
Assessed Value:: The value assigned to a property for taxation purposes, typically lower than market value.

Balloon Mortgage:: A loan with smaller monthly payments based on a long-term schedule, with the remaining balance due in a lump sum after a set period.
Bridge Loan:: A short-term loan that helps a borrower close on a new home before their current home is sold. Also known as a "swing loan."

Closing:: The final step in a property transaction, where funds are disbursed, documents are signed, and ownership is transferred.
Closing Costs:: Upfront fees paid at closing, including loan origination fees, title insurance, and prepaid expenses like taxes and insurance.
Commission:: A fee paid to a real estate agent for their services, typically a percentage of the sale price.
Contingency:: A condition that must be met for a contract to be binding, such as a home inspection or financing approval.

Debt-to-Income Ratio:: The percentage of monthly income spent on housing and other debt obligations, used by lenders to evaluate affordability.
Down Payment:: The portion of a home's price paid upfront, typically ranging from 3% to 20% of the purchase price.

Equity:: The difference between a home's market value and the amount owed on the mortgage.
Escrow:: A third party holds funds or documents until certain conditions, like closing, are met.

Fair Market Value:: The price a property would sell for in a competitive market, with a willing buyer and seller.
First-Time Home Buyer:: A buyer who has not owned a principal residence within the past three years.
Flood Insurance:: Insurance covering property damage caused by flooding, often required in designated flood zones.

Gift Letter:: A letter from a family member confirming that gifted funds for a down payment do not need to be repaid.
Good-Faith Estimate:: A form required by RESPA that outlines the estimated costs of closing a mortgage loan.

Home Inspection:: A professional assessment of a property’s condition, including its structure, systems, and any defects.
Homeowner’s Insurance:: A policy protecting against property damage, personal liability, and loss of personal belongings.
Homeowner’s Warranty (HOW):: Insurance offered by a seller that covers certain home repairs for a specified period.

Jumbo Loan:: A mortgage loan exceeding conforming loan limits set by Fannie Mae and Freddie Mac.

Loan Origination Fees:: Fees paid to the lender or broker for processing a mortgage loan, usually expressed as points.

Market Value:: The price a property would sell for on the open market, often determined by an appraisal.
Mortgage:: A loan secured by the borrower’s property, used to purchase a home.

Offer:: A formal proposal from a buyer to a seller to purchase a property.
Open House:: A scheduled event where potential buyers can tour a property for sale.

Power of Attorney:: A legal document authorizing someone to act on behalf of another person in legal or financial matters.
Pre-Approval:: A lender's verification that a borrower qualifies for a specific loan amount based on a credit check and financial review.
Private Mortgage Insurance (PMI):: Insurance required for conventional loans with less than a 20% down payment, protecting the lender in case of default.

Radon:: A colorless, odorless gas found in soil that can seep into homes and pose health risks.
Right of First Refusal:: A contractual agreement giving someone the first opportunity to purchase a property before it’s offered to others.

Settlement:: The final step in a property transaction where funds are disbursed and ownership is transferred to the buyer. Also called “closing.”
Survey:: A precise measurement of property boundaries and improvements, conducted by a licensed surveyor.

Title:: The legal ownership of a property, often evidenced by a deed.
Title Insurance:: Insurance protecting against disputes or defects in property ownership.

VA Guaranteed Loan:: A mortgage loan guaranteed by the U.S. Department of Veterans Affairs for eligible military members and veterans.
Veterans Affairs (VA):: A federal agency providing benefits like home loans and health care to veterans and their families.

Walk-Through:: A final inspection of a property by the buyer before closing to ensure the property is in the agreed-upon condition.
Warranties:: Guarantees from the seller or builder regarding the quality of the property and repairs within a specified period.