Glossary of Real Estate Terms
GLOSSARY OF TERMS
ADDENDUM: An addition to a document.
ADJUSTABLE RATE MORTGAGE (aka ARM): A type of mortgage loan whose interest rate is tied to an economic index, which fluctuates with the market. Typical ARM periods are one, three, five, and seven years.
AMORTIZATION: The gradual repayment of a mortgage loan by installments.
ANNUAL PERCENTAGE RATE (aka APR): The total costs (interest rate, closing costs, fees, etc…) that are part of a borrower’s loan, expressed as a percentage rate of interest. The total costs are amortized over the term of the loan.
APPLICATION FEES: Fees that mortgage companies charge buyers at the time of written application for a loan; for example, fees for running credit reports of borrowers, property appraisal fees, and lender specific fees.
APPRAISAL: A written analysis of the estimated value of a property prepared by a qualified appraiser.
ATTORNEY-IN-FACT: One who holds power of attorney from another to execute documents on behalf of the grantor of power.
BALLOON MORTGAGE: A type of mortgage that is generally paid over a short period of time, but is amortized over a longer period of time. The borrower typically pays a combination of principal and interest. At the end of the loan term, the entire unpaid balance must be repaid.
BRIDGE LOAN: A form of second trust that is collateralized by the borrower’s present home in a manner that allows the proceeds to be used for closing a new house before the present home is sold.
BUYER AGENCY: A real estate broker retained by the buyer who has a fiduciary duty to the buyer, shows the buyer properties, negotiates the contract or offer for the buyer, and works with the buyer to close the transaction.
CLOSING COSTS: Fees required by the lender at closing. The fees can vary among lending institutions, but may include the application fee, origination fee, points, appraisal fee, title search, title insurance, etc…
COMPARATIVE MARKET ANALYSIS: A study done by real estate sales agents and brokers using active, pending, and sold comparable properties to estimate a listing price for a property.
CONTINGENCY: A condition that must be met before a contract is legally binding.
CONVENTIONAL MORTGAGE: A mortgage securing a loan by investors without government underwriting (not FHA insured or VA guaranteed).
COUNTER OFFER: A new offer made as a result of another offer, which modifies or cancels the original offer.
DEED OF TRUST: The document used to mortgage real estate and conveys the property to a third party (trustee) who holds it for the benefit of the creditor.
EASEMENT: The right of way giving persons other than the owner access to or over a property.
EXCLUSIONS: Fixtures or personal property that are excluded from the contract or offer to purchase.
FEE SIMPLE: A form of property ownership where the owner has the right to use and dispose of property at will.
FHA: Federal Housing Administration
FHA LOAN GUARANTEE: A guarantee by the FHA that a percentage of a loan will be underwritten by a mortgage company or banker.
FIXTURE: Personal property that has become part of the property through permanent attachment.
GOOD FAITH ESTIMATE: Under the Real Estate Settlement Procedures Act, within three days of an application submission, lenders are required to provide, in writing, to potential borrowers, a good faith estimate of closing costs.
HAZARD INSURANCE: Insurance that covers losses to real estate from damages that might affect its value.
HOME OWNER’S INSURANCE: Coverage that includes personal liability and theft insurance in addition to hazard insurance.
HUD: US Department of Housing and Urban Development
HUD/RESPA (Housing and Urban Development / Real Estate Settlement Procedures Act): A document and statement that details all of the monies paid out and received at a real estate property closing.
IDX (Internet Date Exchange): Allows real estate brokers to advertise each other’s listings posted to listing databases such as the multiple listing service (MLS).
INCLUSIONS: Fixtures or personal property that are included in a contract or offer to purchase.
INTEREST RATE LOCK: When the borrower and lender agree to lock a rate on a loan. Terms and conditions may be attached to the rate lock.
LIEN: A charge against a property whereby the property is made security for the payment of a debt.
LOAN COMMITMENT: A written document telling the borrowers that the mortgage company has agreed to lend them a specific amount of money at a specific interest rate for a specific period of time. The loan commitment may also contain conditions upon which the loan commitment is based.
MARKETABLE TITLE: Clear title with no encumbrances, has no serious defects and will not expose the buyer to litigation.
NATIONAL ASSOCIATION OF REALTORS (NAR): A national association comprised of real estate professionals all over the country.
POINTS (aka Loan Discount Points): A one-time charge by a lender to lower the interest rate on a loan. Each point is equal to 1% of the loan amount. For example, one point on a $100,000 mortgage would cost $1000.
PLANNED UNIT DEVELOPMENT (PUD): Mixed-use development that sets aside areas for residential use, commercial use, and public areas such as schools, parks, etc…
PRE-APPROVAL: A higher level of buyer/borrower prequalification required by a mortgage lender. Some pre-approvals have conditions the borrower must meet.
PRE-QUALIFICATION: The mortgage company tells a buyer in advance of the formal mortgage application and how much money the borrower can afford to borrow. Some pre-qualifications have conditions that the borrower must meet.
PREPAID INTEREST: Funds paid by the borrower at closing based on the number of days left in the month of closing.
PRINCIPAL, INTEREST, TAXES & INSURANCE (PITI): The four parts that make up a borrower’s monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI): A special insurance paid by a borrower in the monthly installments, typically of loans of more than 80% of the value of the property.
REAL ESTATE AGENT: An individual who is licensed by the state and who acts on behalf of his or her client – the buyer or seller.
REAL ESTATE CONTRACT: A binding agreement between buyer and seller. It consists of an offer and an acceptance as well as consideration (i.e. money).
REALTOR®: A registered trademark of the National Association of REALTORS® that can be used only by its members.
RELEASE DEED: A written document stating that a seller or buyer has satisfied his or her obligation on a debt. This document is usually recorded.
VA LOAN GUARANTEE: A guarantee on a mortgage amount backed by the US Department of Veteran Affairs.
WALK-THROUGH (aka final walk-through): A showing that takes place before closing or escrow that permits the buyers one final tour of the property they are purchasing.