Sarah Coleman-Lee (USAF Ret) & Jessica Lee
AgentOwned Realty (843) 814-1513/ (843) 819-8570

Glossary of Real Estate Terms

Annual Percentage Rate (APR)

The cost of a loan or other financing as an annual rate. The interest rate, points, broker fees and certain other credit charges are included in the annual percentage rate. 

Appraisal

The value of the property is estimated by a professional analysis. This includes examples of sales of similar properties. 

Assessed Value

Typically the value placed on property for the purpose of taxation. 

Balloon Mortgage

A mortgage with monthly payments often based on a 30-year amortization schedule, with the unpaid balance due in a lump sum payment at the end of a specific period of time (usually 5 or 7 years). If certain conditions are met, the mortgage may include an option to reset the interest rate to the current market rate.

Bridge Loan

The proceeds of a short-term loan secured by the borrower's current home (Usually for sale) can be used to build or close on a new house before the current home is sold. Also known as a “swing loan.” 

Closing

The process of completing a financial transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. In some jurisdictions, closing is referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. See also “Settlement.” 

Closing Costs

The upfront fees charged in connection with a mortgage loan transaction. Money paid by a buyer (and/or seller or other third party, if applicable) to effect the closing of a mortgage loan, generally including, but not limited to a loan origination fee, title examination and insurance, survey, attorney’s fee, and prepaid items, such as escrow deposits for taxes and insurance. 

Commission

The fee charged for services performed, usually based on a percentage of the price of the items sold (such as the fee a real estate agent earns on the sale of a house). 

Concession

Something given up or agreed to in negotiating the sale of a house. For example, the sellers may agree to help pay for closing costs.

Contingency

A condition that must be met before a contract is legally binding. For example, home purchasers often include a home inspection contingency; the sales contract is not binding unless and until the purchaser has the home inspected. 

Conventional Mortgage

A mortgage loan that is not insured or guaranteed by the federal government or one of its agencies, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS). 

Counter-offer

An offer made in response to a previous offer. For example, after the buyer presents their first offer, the seller may make a counter-offer with a slightly higher sale price. 

Credit

The ability of a person to borrow money, or buy goods by paying over time. Credit is extended based on a lender’s opinion of the person’s financial situation and reliability, among other factors. 

Credit History

Information in the files of a credit bureau, primarily comprised of a list of individual consumer debts and a record of whether or not these debts were paid back on time or “as agreed.” Your credit history is called a credit report when provided by a credit bureau to a lender or other business. 

Debt-to-Income Ratio

The percentage of gross monthly income that goes toward paying for your monthly housing expense, alimony, child support, car payments and other installment debts, and payments on revolving or open-ended accounts, such as credit cards. 

Down Payment

A portion of the price of a home, usually between 3-20%, not borrowed and paid up-front in cash. Some loans are offered with zero down-payment. 

Equity

The value in your home above the total amount of the liens against your home. If you owe $100,000 on your house but it is worth $130,000, you have $30,000 of equity. 

Escrow

An item of value, money, or documents deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. 

Exclusive Right-to-Sell Listing

The traditional kind of listing agreement under which the property owner appoints a real estate agent (known as the listing agent) as exclusive agent to sell the property on the owner’s stated terms, and agrees to pay the listing agent a commission when the property is sold, regardless of whether the buyer is found by the agent, the owner or another agent. This is the kind of listing agreement that is commonly used by a listing agent to provide the traditional full range of real estate services. If a second real estate agent (known as a buyer's agent) finds the buyer for the property, then some commission will be paid to the buyer's agent. 

Fair Market Value

The price at which property would be transferred between a willing buyer and willing seller, each of whom has a reasonable knowledge of all pertinent facts and is not under any compulsion to buy or sell. 

First-Time Home Buyer

A person with no ownership interest in a principal residence during the three-year period preceding the purchase of the security property. 

Flood Insurance

Insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood hazard zones. 

Gift Letter

A letter that a family member writes verifying that s/he has given you a certain amount of money as a gift and that you don’t have to repay it. You can use this money towards a portion of your down payment with some mortgages. 

Good-Faith Estimate

A form required by the Real Estate Settlement Procedures Act (RESPA) that discloses an estimate of the amount or range of charges, for specific settlement services the borrower is likely to incur in connection with the mortgage transaction. 

Home Inspection

A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation. 

Homeowner’s Insurance

A policy that protects you and the lender from fire or flood, which damages the structure of the house; a liability, such as an injury to a visitor to your home; or damage to your personal property, such as your furniture, clothes or appliances 

Homeowner’s Warranty (HOW)

Insurance offered by a seller that covers certain home repairs and fixtures for a specified period of time. 

Homeowners’ Association

An organization of homeowners residing within a particular area whose principal purpose is to ensure the provision and maintenance of community facilities and services for the common benefit of the residents. 

Jumbo Loan

A loan that exceeds the mortgage amount eligible for purchase by Fannie Mae or Freddie Mac. Also called “non-conforming loan.” 

Loan Origination Fees

Fees paid to your mortgage lender or broker for processing the mortgage application. This fee is usually in the form of points. One point equals one percent of the mortgage amount. 

Market Value

The current value of your home is based on what a purchaser would pay. An appraisal is sometimes used to determine market value. 

Mortgage

A loan using your home as collateral. In some states the term mortgage is also used to describe the document you sign (to grant the lender a lien on your home). It also may be used to indicate the amount of money you borrow, with interest, to purchase your house. The amount of your mortgage often is the purchase price of the home minus your down payment. 

Offer

A formal bid from the home buyer to the home seller to purchase a home. 

Open House

When the seller’s real estate agent opens the seller’s house to the public. You don’t need a real estate agent to attend an open house. 

Origination Fee

A fee paid to a lender or broker to cover the administrative costs of processing a loan application. The origination fee typically is stated in the form of points. One point is one per-cent of the mortgage amount. 

Power of Attorney

A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time. 

Pre-Approval

A process by which a lender provides a prospective borrower with an indication of how much money he or she will be eligible to borrow when applying for a mortgage loan. This process typically includes a review of the applicant’s credit history and may involve the review and verification of income and assets to close. 

Pre-Approval Letter

A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you’re a serious buyer. 

Pre-Qualification

A preliminary assessment by a lender of the amount it will lend to a potential home buyer. The process of determining how much money a prospective home buyer may be eligible to borrow before he or she applies for a loan. 

Pre-Qualification Letter

A letter from a mortgage lender that states that you’re pre-qualified to buy a home, but does not commit the lender to a particular mortgage amount. 

Private Mortgage Insurance

Insurance for conventional mortgage loans that protects the lender from loss in the event of default by the borrower.  

Radon

A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses. 

Ratified Sales Contract

A contract that shows both you and the seller of the house have agreed to your offer. This offer may include sales contingencies, such as obtaining a mortgage of a certain type and rate, getting an acceptable inspection, making repairs, closing by a certain date, etc. 

Right of First Refusal

A provision in an agreement that requires the owner of a property to give another party the first opportunity to purchase or lease the property before he or she offers it for sale or lease to others. 

Settlement

The process of completing a loan transaction at which time the mortgage documents are signed and then recorded, funds are disbursed, and the property is transferred to the buyer (if applicable). Also called closing or escrow in different jurisdictions. See also “Closing” 

Survey

A precise measurement of a property by a licensed surveyor, show-ing legal boundaries of a property and the dimensions and location of improvements. 

Title

The right to, and the ownership of, property. A title or deed is sometimes used as proof of ownership of land. 

Title Insurance

Insurance that protects lenders and homeowners against legal problems with the title. 

Veterans Affairs (U.S. Department of Veterans Affairs)

A federal government agency that provides benefits to veterans and their dependents, including health care, educational assistance, financial assistance, and guaranteed home loans. 

VA Guaranteed Loan

A mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs (VA). 

Walk-Through

A common clause in a sales contract that allows the buyer to examine the property being purchased at a specified time immediately before the closing, for example, within the 24 hours before closing. 

Warranties

Written guarantees of the quality of a product and the promise to repair or replace defective parts free of charge.

 

Source: The Federal Trade Commission