Dictionary
Common Real Estate Definitions
- Adjustable-Rate Mortgage (ARM): A mortgage loan with an interest rate that changes periodically based on a market index.
- Annual Percentage Rate (APR): The true yearly cost of a mortgage, including the interest rate, origination fees, and other associated costs.
- Appraisal: An estimated value of a property, conducted by a licensed appraiser, to determine its worth for a mortgage lender.
- Closing Costs: Fees associated with the finalization of a real estate transaction, including appraisal fees, taxes, and attorney fees.
- Debt-to-Income Ratio (DTI): A ratio that compares your total monthly debt payments to your gross monthly income, used by lenders to determine borrowing eligibility.
- Down Payment: An upfront payment made by a buyer toward the total purchase price of a property, typically 3-20% for a conventional loan.
- Earnest Money: A deposit made by a buyer to a seller to show their serious intent to purchase a property.
- Equity: The difference between a property’s current market value and the amount the owner still owes on the mortgage.
- Escrow: A financial instrument where a third party holds funds on behalf of the buyer and seller until all contractual obligations are met.
- Fixed-Rate Mortgage: A mortgage with an interest rate that remains constant for the entire term of the loan, offering predictable payments.
- Foreclosure: The legal process by which a lender repossesses a property when the borrower has failed to make mortgage payments.
- Home Equity Line of Credit (HELOC): A line of credit based on the equity a homeowner has built in their property.
- Loan-to-Value Ratio (LTV): A ratio that compares the amount of a mortgage loan to the appraised value of the property.
- Mortgage: A loan used to finance the purchase of a property, with the property serving as collateral.
- Pre-approval: A lender’s conditional commitment to lend a specific amount to a borrower based on a review of their finances.
- Principal: The original amount of a loan, separate from the interest.
Market and sales terms
- Appreciation: An increase in a property’s value over time.
- Buyer’s Market: Market conditions where homes for sale outnumber buyers, leading to lower prices and more negotiating power for buyers.
- Comparative Market Analysis (CMA): An in-depth analysis by a real estate agent to estimate a home’s value based on recently sold comparable properties.
- Days on Market (DOM): The number of days a property has been listed for sale.
- Depreciation: A decrease in a property’s value over time.
- For Sale By Owner (FSBO): A property that is being sold directly by the owner without the assistance of a real estate agent.
- Listing Price: The price of a home as set by the seller.
- Multiple Listing Service (MLS): A database used by real estate brokers to list properties for sale and view listings from other brokers.
- Seller’s Market: Market conditions where buyers outnumber homes for sale, leading to higher prices and bidding wars.
- Short Sale: The sale of a home for less than the amount owed on the mortgage, with the lender’s approval.
Property and legal terms
- Assessed Value: The value assigned to a property by a public tax assessor for calculating property taxes.
- Closing: The final stage of a real estate transaction where ownership is transferred from the seller to the buyer.
- Contingency: A provision in a purchase agreement that requires a specific event to occur for the contract to be valid.
- Deed: A legal document that transfers ownership of real estate from one party to another.
- Due Diligence: The period during which a buyer investigates a property and its surrounding area to ensure it is in good condition and meets their needs.
- Easement: A right that allows one party to use or access another’s property for a specific purpose.
- Home Inspection: A professional assessment of a property’s condition, identifying any potential issues or repairs needed.
- Homeowners Association (HOA): A private organization that sets and enforces rules for a subdivision, planned community, or condominium.
- Landlord: The owner of a property who rents it out to a tenant.
- Lien: A legal claim placed on a property as security for a debt.
- Mortgage Insurance: An insurance policy that protects the lender against loss if a borrower defaults on their mortgage.
- Tenant: A person who occupies land or property rented from a landlord.
- Title: A legal document proving ownership of a property.
- Zoning: Regulations established by local governments that dictate how a property can be used.
Types of real estate
- Condominium (Condo): A type of ownership where residents own their individual unit but share ownership and costs of common areas.
- Cooperative (Co-op): A type of ownership where residents buy shares in a corporation that owns the building, giving them a lease to their unit.
- Single-Family Home: A detached house designed for one family.
- Townhouse: A multi-story residence that shares a wall with another property.
- Multi-Family Home: A property with more than one separate living unit, such as a duplex or apartment building.
- Planned Unit Development (PUD): A type of development where building is concentrated in specific areas, leaving common areas and open space.
- Real Estate Owned (REO): Property that is owned by a lender after an unsuccessful foreclosure auction.
- Commercial Real Estate (CRE): Any non-residential property, such as office buildings, retail space, and industrial warehouses.
People and professionals
- Broker: A licensed real estate agent who can work independently and has additional training or licensing requirements.
- Mortgage Broker: A professional who acts as an intermediary between a borrower and a lender, helping a client find the best mortgage.