Below is a list of common words involved in a real estate transaction along with their definition. If you did not find the word you were looking for please send us an email and we would be happy to answer any other questions you might have.
Adjustable Rate Mortgage (ARM) – Otherwise known as a variable-rate mortgage. This type of loan has a fixed interest rate for only a specified period and after the rate will rise and fall with changes in the market. The time allowed with the initial rate varies as well as how much they change and the rules they have.
Buyer’s Specialist–A real estate agent that works exclusively with home buyers. This is beneficial because the buyer’s agent has vast knowledge about the market and has more time to search for homes in the area because they work for buyers only.
Buyer Representation – This document states that any home you buy, you will buy with the help of your agent for the duration of the agreement.
Closing Costs – Includes the lender’s own fees, third-party fees for requirements such as title insurance and cost of prepaying for a year’s worth of property insurance
Contingency – Clauses that prevent a contract from becoming firm and binding and protect the buyer until the property is inspected, the title is searched, and financing is approved. They will let you out of the deal if the house has a problem that didn’t exist or you weren’t aware of when you went under contract.
Down Payment – an initial payment on your house when purchasing it on credit. The more you put down the less you will have to borrow.
Earnest Money – This is also called a deposit, protects the sellers from the possibility of you unexpectedly pulling out of the deal. This is usually a percentage of the price of the property and goes into an escrow account and becomes part of your down payment at closing.
Escrow – An account that allows you to save money throughout the year so that the buyer can have enough money to pay annual tax and insurance bills. Escrow assures the lender that the money will be paid on time, there will be no tax default and that the home will be properly insured.
Expired Date – The day before the deal must be closed. It typically occurs thirty-sixty days after the contract is accepted.
Fix Rate Loan – Interest rate stays the same over the life of the loan.
Home Inspection – An inspection exposes any issues or problems with a home. After an inspection, the buyer can negotiate with the owner which repairs they would like fixed before they own the property.
Home Warranty – A home warranty is different than home owner’s insurance. Warranties cover repairs or replacement of appliances and major systems, like the roof, plumbing, siding or wiring.
Listing Specialist – A real estate agent who works exclusively with home sellers. This is beneficial because they only work with sellers, they have a better understanding and stronger tactics to sell your home quicker and for the most money.
Loan Officer – “Mortgage Loan Originator” is someone who works for the bank or a financial institution who explains the different kinds of loans and interest rates you qualify for and the fees that their lender charges.
Market Value–Value of your home in relation to other homes that sold in the area in terms of size, condition, location and amenities.
Mortgage Bankers – They approve and then make their own loans. Their loan officers are intimately familiar with their company’s mortgage products. They are able to predict with great certainty what their underwriters will approve.
Mortgage Brokers – They specialize in shopping the mortgage market to find the right loan for their clients with mortgage bankers. They do business with many mortgage bankers, brokers can offer a wider variety of mortgage products.
Mortgage Loan– pledging your home as collateral. Portion of monthly payments applies towards principal (original amount borrowed) and the other portion goes toward interest ( cost of loan)
Occupancy Date – The date the buyer can move into their new home.
PITI– This refers to the monthly payment amount. Payments made toward the Principal (will reduce the loan amount) , Interest (paid to the lender for borrowing money), Property Taxes (paid to local government) and Homeowner’s Insurance (paid to company that is insuring your home. The insurance and tax parts of these funds are held in escrow (a separate account) until the premiums or taxes are due.
Pre-Approval – a formal application that goes through underwriting for independent verification of the information you provide. It is the same loan approval process that all buyers must go through, except that pre-approval gets it out of the way before you find the house you want to buy. Upon pre approval, you will receive a formal commitment from the lender stating how much you can borrow and at what rate.
Pre-qualification – process by which a loan officer estimates the amount you can borrow based on information you provide about your income, assets, and debts. There is no formal application or verification of that information, so it is only a rough estimate.
Private Mortgage Insurance (PMI)– A type of insurance you may be required to have if you have a conventional loan. This protects lenders against the loss if the borrower stops making payments on the loan. PMI is part of the monthly payment and is not tax-deductible. Once the borrower reaches the 20 percent mark or below a certain loan-to-value ratio, they are eligible to have the PMI cancelled.
Terms – Details of the transaction. Date the deal will close, inclusions, who pays for closing costs, etc. These allow the buyers and sellers the ability to negotiate a win-win deal.
Title – A legal document that describes who has legal ownership to a piece of property.
Keller, G. Jenks, D. & Papasan , J. (2008). Your first home: The proven path to home ownership. Austin, TX: Relleck Publishing Partners, Ltd.