Real Estate Glossary

Real Estate Terms Made Easy! Unlocking the Lingo

Buying or selling a property can be a daunting task, especially when it comes to understanding the complex language and real estate terms used in the real estate industry. It’s easy to get lost in a sea of jargon, but fear not! This article is here to help you unlock the lingo and make your real estate journey a breeze. So, let’s dive in! Real estate terms can be overwhelming, but it’s essential to understand it to make informed decisions.

Here’s a detailed real estate glossary with various terms and their definitions:

Real Estate Terms Beginning with

A 

Annual Percentage Rate (APR): The cost of a loan or other financing as an annual rate. The APR includes the interest rate, points, broker fees, and certain other credit charges a borrower is required to pay.

Appraisal: A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties.

Appraiser: A professional who conducts an analysis of the property, including examples of sales of similar properties, in order to develop an estimate of the value of the property. The analysis is called an “appraisal.”

Annuity: An amount paid yearly or at other regular intervals, often at a guaranteed minimum amount. Also, a type of insurance policy in which the policyholder makes payments for a fixed period or until a stated age, and then receives annuity payments from the insurance company.

Appreciation: An increase in the market value of a home due to changing market conditions and/or home improvements.

Application Fee: The fee that a mortgage lender or broker charges to apply for a mortgage to cover processing costs.

Arbitration: A process where disputes are settled by referring them to a fair and neutral third party (arbitrator). The disputing parties agree in advance to accept the decision of the arbitrator. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.

Asbestos: A toxic material that was once used in housing insulation and fireproofing. Because some forms of asbestos have been linked to certain lung diseases, it is no longer used in new homes. However, some older homes may still have asbestos in these materials.

Assessed Value: Typically, the value placed on the property for the purpose of taxation.

Assessor: A public official who establishes the value of a property for taxation purposes.

Asset: Anything of monetary value that is owned by a person or company. Assets include real property, personal property, stocks, mutual funds, etc.

Assignment of Mortgage: A document evidencing the transfer of ownership of a mortgage from one person to another.

Assumable Mortgage: A mortgage loan that can be taken over (assumed) by the buyer when a home is sold. The seller remains liable unless released by the lender from the obligation. If the mortgage contains a due-on-sale clause, the loan may not be assumed without the lender’s consent.

Assumption: A homebuyer’s agreement to take on the primary responsibility for paying an existing mortgage from a home seller.

Assumption Fee: A fee a lender charges a buyer who will assume the seller’s existing mortgage.

Automated Underwriting: An automated process performed by a technology application that streamlines the processing of loan applications and provides a recommendation to the lender to approve the loan or refer it for manual underwriting.

Real Estate Terms Beginning with

B

Balance Sheet: A financial statement that shows assets, liabilities, and net worth as of a specific date.

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). The mortgage may contain an option to “reset” the interest rate to the current market rate and to extend the due date if certain conditions are met.

Balloon Payment: A final lump sum payment that is due, often at the maturity date of a balloon mortgage.

Bankruptcy: Legally declared unable to pay your debts. Bankruptcy can severely impact your credit and your ability to borrow money.

Before-tax Income: Income before taxes are deducted. Also known as “gross income.”

Biweekly Payment Mortgage: A mortgage with payments due every two weeks (instead of monthly).

Bona fide: In good faith, without fraud.

Bridge Loan: A short-term loan secured by the borrower’s current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new house before the current home is sold. Also known as a “swing loan.”

Broker: An individual or firm that acts as an agent between providers and users of products or services, such as a mortgage broker or real estate broker.

Building Code: Local regulations that set forth the standards and requirements for the construction, maintenance, and occupancy of buildings. The codes are designed to provide for the safety, health, and welfare of the public.

Buydown: An arrangement whereby the property developer or another third party provides an interest subsidy to reduce the borrower’s monthly payments typically in the early years of the loan.

Buydown Account: An account in which funds are held so that they can be applied as part of the monthly mortgage payment as each payment comes due during the period that an interest-rate buydown plan is in effect.

One way to master real estate terms and jargon is to do your research.

Take the time to familiarize yourself with common terms and phrases, and don’t be afraid to ask questions. Your real estate agent or broker is there to help you, and they will be more than happy to explain any unfamiliar terminology.

Real Estate Terms Beginning with

C

Cap: For an adjustable-rate mortgage (ARM), a limitation on the amount the interest rate or mortgage payments may increase or decrease. See also “Lifetime Payment Cap,” “Lifetime Rate Cap,” “Periodic Payment Cap,” and “Periodic Rate Cap.” Capacity: Your ability to make your mortgage payments on time. This depends on your income and income stability (job history and security), your assets and savings, and the amount of your income each month that is left over after you’ve paid for your housing costs, debts and other obligations.

Cash-out Refinance: A refinance transaction in which the borrower receives additional funds over and above the amount needed to repay the existing mortgage, closing costs, points, and any subordinate liens.

Certificate of Deposit: A document issued by a bank or other financial institution that is evidence of a deposit, with the issuer’s promise to return the deposit plus earnings at a specified interest rate within a specified time period.

Certificate of Eligibility: A document issued by the U.S. Department of Veterans Affairs (VA) certifying a veteran’s eligibility for a VA-guaranteed mortgage loan.

Chain of Title: The history of all of the documents that have transferred title to a parcel of real property, starting with the earliest existing document and ending with the most recent.

Change Orders: A change in the original construction plans ordered by the property owner or general contractor.

Clear Title: Ownership that is free of liens, defects, or other legal encumbrances.

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 Agent: The person or entity that coordinates the various closing activities, including the preparation and recordation of closing documents and the disbursement of funds. (May be referred to as an escrow agent or settlement agent in some jurisdictions.) Typically, the closing is conducted by title companies, escrow companies or attorneys.

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) C Glossary 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.

Closing Date: The date on which the sale of a property is to be finalized and a loan transaction completed. Often, a real estate sales professional coordinates the setting of this date with the buyer, the seller, the closing agent, and the lender.

Closing Statement: See “HUD-1 Settlement Statement.” Co-borrower: Any borrower other than the first borrower whose name appears on the application and mortgage note, even when that person owns the property jointly with the first borrower and shares liability for the note.

Collateral: An asset that is pledged as security for a loan. The borrower risks losing the asset if the loan is not repaid according to the terms of the loan agreement. In the case of a mortgage, the collateral would be the house and real property.

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).

Commitment Letter: A binding offer from your lender that includes the amount of the mortgage, the interest rate, and repayment terms.

Common Areas: Those portions of a building, land, or improvements and amenities owned by a planned unit development (PUD) or condominium project’s homeowners’ association (or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Comparables: An abbreviation for “comparable properties,” which are used as a comparison in determining the current value of a property that is being appraised.

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.

Condominium: A unit in a multi-unit building. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own the common elements such as the exterior walls, floors and ceilings or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for building maintenance, property upkeep, taxes and insurance on the common areas and reserves for improvements.

Construction Loan: A loan for financing the cost of construction or improvements to a property; the lender disburses payments to the builder at periodic intervals during construction.

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 Glossary Rural Housing Service (RHS). Contrast with “Government Mortgage.”

Conversion Option: A provision of some adjustable-rate mortgage (ARM) loans that allows the borrower to change the ARM to a fixed-rate mortgage at specified times after loan origination.

Convertible ARM: An adjustable-rate mortgage (ARM) that allows the borrower to convert the loan to a fixed-rate mortgage under specified conditions.

Cooperative (Co-op) Project: A project in which a corporation holds title to a residential property and sells shares to individual buyers, who then receive a proprietary lease as their title.

Cost of Funds Index (COFI): An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) loans. It is based on the weighted monthly average cost of deposits, advances, and other borrowings of members of the Federal Home Loan Bank of San Francisco.

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 counteroffer 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 Bureau: A company that gathers information on consumers who use credit. These companies sell that information to lenders and other businesses in the form of a credit report.

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.

Credit Life Insurance: A type of insurance that pays off a specific amount of debt or a specified credit account if the borrower dies while the policy is in force.

Credit Report: Information provided by a credit bureau that allows a lender or other business to examine your use of credit. It provides information on money that you’ve borrowed from credit institutions and your payment history.

Credit Score: A numerical value that ranks a borrower’s credit risk at a given point in time based on a statistical evaluation of information in the individual’s credit history that has been proven to be predictive of loan performance.

Creditor: A person who extends credit to whom you owe money.

Creditworthy: Your ability to qualify for credit and repay debts.

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Real Estate Terms Beginning with

D

Debt: Money owed from one person or institution to another person or institution.

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.

Deed: The legal document transferring ownership or title to a property.

Deed-in-Lieu of Foreclosure: The transfer of title from a borrower to the lender to satisfy the mortgage debt and avoid foreclosure. Also called a “voluntary conveyance.”

Deed of Trust: A legal document in which the borrower transfers the title to a third party (trustee) to hold as security for the lender. When the loan is paid in full, the trustee transfers the title back to the borrower. If the borrower defaults on the loan, the trustee will sell the property and pay the lender the mortgage debt.

Default: Failure to fulfill a legal obligation. A default includes failure to pay on a financial obligation but also may be a failure to perform some action or service that is non-monetary. For example, when leasing a car, the lessee is usually required to properly maintain the car.

Delinquency: Failure to make a payment when it is due. The condition of a loan is when a scheduled payment has not been received by the due date but is generally used to refer to a loan for which payment is 30 or more days past due.

Depreciation: A decline in the value of a house due to changing market conditions or lack of upkeep on a home.

Discount Point: A fee paid by the borrower at closing to reduce the interest rate. A point equals one percent of the loan amount.

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

Due-on-Sale Clause: A provision in a mortgage that allows the lender to demand repayment in full of the outstanding balance if the property securing the mortgage is sold.

Real Estate Terms Beginning with

E

Earnest Money Deposit: The earnest money deposit is a sum of money provided by a buyer to show their serious intent to purchase a home. It is typically paid when the buyer submits an offer to the seller. The deposit is held in an escrow account and is usually applied towards the down payment or closing costs at the time of closing. If the buyer backs out of the deal without a valid reason specified in the sales contract contingencies, they may forfeit the earnest money deposit to the seller.

Easement: An easement is a legal right that allows a person or entity to use or access a specific portion of someone else’s property for a particular purpose. It grants the holder of the easement a non-possessory interest in the property. Easements can be created for various reasons, such as granting access to a neighboring property, allowing utility companies to install and maintain utility lines, or providing a right of way for transportation purposes.

Employer-Assisted Housing: Employer-assisted housing refers to programs in which companies assist their employees in purchasing homes. These programs can take different forms, such as providing financial assistance with the down payment, closing costs, or monthly mortgage payments. The goal is to make homeownership more affordable and accessible for employees, thereby promoting employee retention and satisfaction.

Encroachment: Encroachment occurs when a structure, improvement, or part of a property extends beyond its legal boundary and onto an adjacent property without permission or right. It can involve physical structures like buildings, fences, or trees. Encroachments can create disputes between property owners and may require legal resolution or negotiation to address the issue.

Encumbrance: An encumbrance refers to any claim, lien, mortgage, easement, or restriction that limits or burdens the ownership rights of a property owner. It represents an interest or right held by another party that may affect the property’s transferability or use. Common examples of encumbrances include mortgages, easements, property tax liens, and homeowner association (HOA) restrictions.

Equal Credit Opportunity Act (ECOA): The Equal Credit Opportunity Act is a federal law in the United States that prohibits discrimination in the granting of credit based on certain protected characteristics. Lenders are required to provide equal access to credit and cannot discriminate against applicants on the basis of race, color, religion, national origin, age, sex, marital status, or the receipt of public assistance. The law also mandates various notices to consumers to ensure they are aware of their rights.

Equity: Equity refers to the value that an owner holds in a property over and above any outstanding debts or liens against it. It represents the owner’s financial interest or stake in the property. For example, if the market value of a property is $200,000 and there is a mortgage debt of $150,000, the owner’s equity would be $50,000.

Escrow: Escrow refers to a process where a neutral third party holds and manages funds, documents, or other assets on behalf of transacting parties until certain conditions are met. In real estate, an escrow account is commonly used during the homebuying process. The buyer typically deposits the earnest money into an escrow account, and it is held there until the closing of the transaction, at which point it is disbursed according to the terms of the agreement.

Escrow Account: An escrow account, also known as an impound or reserve account, is established by a mortgage servicer on behalf of a borrower. It is used to collect and hold funds for the payment of property taxes, insurance premiums, or other charges related to the property. The borrower makes monthly payments into the escrow account, and the servicer disburses the funds when the payments become due.

Real Estate Terms Beginning with

K

Keogh Plan: A tax-deferred retirement savings plan designed for self-employed individuals or small business owners who have earned income from their trade or business. Contributions made to the Keogh plan are eligible for tax deductions.

Real Estate Terms Beginning with

L

Lien: A legal claim on a property as security for a debt or obligation.

Listing Agreement: A contract between a property owner and a real estate broker, authorizing the broker to market and sell the property.

Loan Estimate (LE): A form that provides important details about the terms and estimated costs of a mortgage loan. It is provided to the borrower by the lender within three business days of receiving a mortgage application.

Loan Modification: A change made to the terms of an existing mortgage loan by the lender, typically to make the loan more affordable for the borrower.

Loan Officer: A representative of a lender who helps borrowers through the mortgage application process, including gathering the necessary documentation and evaluating the borrower’s eligibility for a loan.

Loan Origination Fee: A fee charged by the lender to cover the administrative costs of processing a mortgage loan.

Loan Servicer: The company or entity responsible for collecting mortgage payments, managing the escrow account, and handling other loan-related services on behalf of the lender.

Lock-In: An agreement between the borrower and the lender that guarantees a specific interest rate and other loan terms for a certain period of time, typically until the loan closes.

Real Estate Terms Beginning with

M

Margin: For an adjustable-rate mortgage (ARM), the percentage added to the index to determine the interest rate charged on the loan. The margin remains constant throughout the term of the loan.

Market Value: The estimated price at which a property would sell in the current market conditions, based on factors such as comparable sales and the property’s condition.

Maturity Date: The date on which the final payment of a loan is due.

Mortgage: A loan secured by real estate, typically used to finance the purchase of a property. The property acts as collateral for the loan.

Mortgage Broker: An intermediary who connects borrowers with lenders and helps them find mortgage loans that suit their needs. Mortgage brokers do not lend money directly but work with multiple lenders to provide loan options to borrowers.

Mortgage Insurance: Insurance that protects the lender in case the borrower defaults on the loan. It is typically required for loans with a down payment of less than 20% of the property’s value.

Mortgage Note: A legal document that outlines the terms and conditions of a mortgage loan, including the repayment schedule, interest rate, and consequences of default.

Multiple Listing Service (MLS): A database used by real estate agents to share information about properties available for sale. It allows agents to cooperate and share commissions when selling properties listed by other agents.

Real Estate Terms Beginning with

N

Net Monthly Income: The income you receive after deducting taxes and other withholdings from your gross income.

Lastly, attend open houses and talk to real estate terms with professionals.

This is an excellent opportunity to get a feel for the industry and learn from those who have experience. Don’t be afraid to strike up a conversation and ask questions – you never know what valuable information you may uncover.

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Real Estate Terms Beginning with

O

Offer: A proposal by a buyer to purchase a property at a specific price and under certain terms and conditions.

Open House: An event organized by a real estate agent or homeowner to showcase a property to potential buyers. Open houses are usually open to the public for a designated period, allowing interested parties to view the property.

Option: A contract that gives the buyer the right, but not the obligation, to purchase a property at a predetermined price within a specified period. The buyer typically pays an option fee for this privilege.

Origination Fee: A fee charged by the lender to cover the costs associated with processing a mortgage loan application.

Real Estate Terms Beginning with

P

PITI: An acronym that stands for Principal, Interest, Taxes, and Insurance. It represents the components of a monthly mortgage payment that go toward repaying the loan, paying interest, property taxes, and homeowners insurance.

Points: Upfront fees are paid to the lender at closing in exchange for a lower interest rate on the mortgage loan. One point is equal to 1% of the loan 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 pro- cess typically includes a review of the applicant’s credit history and may in- involve the review and verification of in- come 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 pro- cess 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.

Predatory Lending: Abusive lending practices that include making mortgage loans to people who do not have the income to repay them or repeatedly refinancing loans, charging high points and fees each time and “packing” credit insurance onto a loan.

Prepayment: Any amount paid to re- duce the principal balance of a loan before the scheduled due date.

Prepayment Penalty: A fee that a borrower may be required to pay to the lender, in the early years of a mortgage loan, for repaying the loan in full or pre-paying a substantial amount to reduce the unpaid principal balance.

Principal: The amount of money borrowed or the amount of the loan that has not yet been repaid to the lender. This does not include the interest you will pay to borrow that money. The principal balance (sometimes called the outstanding or unpaid principal balance) is the amount owed on the loan minus the amount you’ve repaid.

Private Mortgage Insurance: Insurance for conventional mortgage loans that protects the lender from loss in the event of default by the borrower. See Mortgage Insurance Promissory Note: A written promise to repay a specified amount over a specified period of time.

Property Appreciation: See “Appreciation.”

Purchase and Sale Agreement: A document that details the price and conditions for a transaction. In connection with the sale of a residential property, the agreement typically would include information about the property to be sold, sale price, down payment, earnest money deposit, financing, closing date, occupancy date, length of time the offer is valid, and any special contingencies.

Purchase Money Mortgage: A mortgage loan that enables a borrower to acquire a property. Qualifying Guidelines: Criteria used to determine eligibility for a loan.

Real Estate Terms Beginning with

Q

Qualifying Ratios: Calculations that are used in determining the loan amount that a borrower qualifies for, typically a comparison of the borrower’s total monthly income to monthly debt payments and other recurring monthly obligations.

Quality Control: A system of safeguards to ensure that loans are originated, underwritten and serviced according to the lender’s standards and, if applicable, the standards of the investor, governmental agency, or mortgage insurer. Radon: A toxic gas found in the soil beneath a house that can contribute to cancer and other illnesses.

Real Estate Terms Beginning with

R

Rate Cap: The limit on the amount an interest rate on an adjustable-rate mortgage (ARM) can increase or decrease during an adjustment period.

Rate Lock: An agreement in which an interest rate is “locked in” or guaranteed for a specified period of time prior to closing. See also “Lock-in Rate.”

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.

Real Estate Professional: An individual who provides services in buying and selling homes. The real estate professional is paid a percentage of the home sale price by the seller. Unless you’ve specifically contracted with a buyer’s agent, the real estate professional represents the interest of the seller. Real estate professionals may be able to refer you to local lenders or mortgage brokers but are generally not involved in the lending process.

Real Estate Settlement Procedures Act (RESPA): A federal law that requires lenders to provide home mortgage borrowers with information about transac- tion-related costs prior to settlement, as well as information during the life of the loan regarding servicing and escrow ac- counts. RESPA also prohibits kickbacks and unearned fees in the mortgage loan business.

Real Property: Land and anything permanently affixed thereto — including buildings, fences, trees, and minerals.

Recorder: The public official who keeps records of transactions that affect real property in the area. Sometimes known as a “Registrar of Deeds” or “County Clerk.”

Recording: The filing of a lien or other legal documents in the appropriate public record.

Refinance: Getting a new mortgage with all or some portion of the proceeds used to pay off the prior mortgage.

Rehabilitation Mortgage: A mortgage loan made to cover the costs of repairing, improving, and sometimes acquiring an existing property.

Remaining Term: The original number of payments due on the loan minus the number of payments that have been made.

Repayment Plan: An arrangement by which a borrower agrees to make additional payments to pay down past-due amounts while still making regularly scheduled payments.

Replacement Cost: The cost to replace damaged personal property without a deduction for depreciation.

Rescission: The cancellation or annulment of a transaction or contract by operation of law or by mutual consent. Borrowers have a right to cancel certain mortgage refinance and home equity transactions within three business days after closing, or for up to three years in certain instances.

Residential Loan Application: A standard mortgage application you will have to complete. The form requests your income, assets, liabilities, and a description of the property you plan to buy, among other things. Unsecured Loan: A loan that is not backed by collateral.

Revolving Debt: Credit that is extended by a creditor under a plan in which (1) the creditor contemplates repeated transactions; (2) the creditor may im- pose a finance charge from time to time on an outstanding unpaid balance; and (3) the amount of credit that may be ex- tended to the consumer during the term of the plan is generally made available to the extent that any outstanding balance is repaid.

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.

Rural Housing Service (RHS): An agency within the U.S. Department of Agriculture (USDA), which operates a range of programs to help rural communities and individuals by providing loan and grants for housing and community facilities. The agency also works with private lenders to guarantee loans for the purchase or construction of single-family housing.

Real Estate Terms Beginning with

S

Securities: A financial form that shows the holder owns a share or shares of a company (stock) or has loaned money to a company or government organization (bond).

Sale-Leaseback: A transaction in which the buyer leases the property back to the seller for a specified period of time. Second Mortgage: A mortgage that has a lien position subordinate to the first mortgage.

Secondary Mortgage Market: The market in which mortgage loans and mortgage-backed securities are bought and sold. Secured Loan: A loan that is backed by property such as a house, car, jewelry, etc.

Security: The property that will be given or pledged as collateral for a loan. Securities: Financial forms that show the holder owns a share or shares of a company (stocks) or has loaned money to a company or government organization (bonds).

Seller Take-Back: An agreement in which the seller of a property provides financing to the buyer for the home purchase. See also “Owner Financing.”

Servicer: A firm that performs servicing functions, including collecting mortgage payments, paying the borrower’s taxes and insurance and generally managing borrower escrow accounts.

Servicing: The tasks a lender performs to protect the mortgage investment, including the collection of mortgage payments, escrow administration, and delinquency management.

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” Settlement Statement: A document that lists all closing costs on a consumer mortgage transaction.

Single-Family Properties: One- to four-unit properties including detached homes, townhouses, condominiums, and cooperatives, and manufactured homes attached to a permanent foundation and classified as real property under applicable state law.

Soft Second Loan: A second mortgage whose payment is forgiven or is deferred until the resale of the property.

Service members Civil Relief Act: A federal law that restricts the enforcement of civilian debts against certain military personnel who may not be able to pay because of active military service. It also provides other protections to certain military personnel.

Subordinate Financing: Any mortgage or other lien with lower priority than the first mortgage. Survey: A precise measurement of a property by a licensed surveyor, showing the legal boundaries of a property and the dimensions and location of improvements.

Sweat Equity: A borrower’s contribution to the down payment for the purchase of a property in the form of labor or services rather than cash.

Real Estate Terms Beginning with

T

Taxes and Insurance: Funds collected as part of the borrower’s monthly payment and held in escrow for the payment of the borrower’s, or funds paid by the borrower for, state and local property taxes and insurance premiums.

Termite Inspection: An inspection to determine whether a property has termite infestation or termite damage. In many parts of the country, a home must be inspected for termites before it can be sold.

Third-Party Origination: A process by which a lender uses another party to completely or partially originate, pro- cess, underwrite, close, fund, or package a mortgage loan. See also “Mortgage Broker.” 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. Title Search: A check of the public re- cords to ensure that the seller is the legal owner of the property and to identify any liens or claims against the property.

Trade Equity: Real estate or assets given to the seller as part of the down payment for the property.

Transfer Tax: State or local tax payable when title to the property passes from one owner to another. Treasury Index: An index that is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions by the U.S. Treasury of Treasury bills and securities.

Truth-In-Lending Act (TILA): A federal law that requires disclosure of a truth-in-lending statement for consumer credit. The statement includes a summary of the total cost of credit, such as the annual percentage rate (APR) and other specifics of the credit.

Two- to Four-Family Property: A residential property that provides living space (dwelling units) for two to four families, although ownership of the structure is evidenced by a single deed; a loan secured by such a property is considered to be a single-family mortgage.

In conclusion, understanding real estate terms is crucial for making informed decisions during your property journey.

By familiarizing yourself with common terms and following these easy tips, you’ll be well on your way to mastering the lingo in no time. So, say goodbye to confusion and hello to a smooth and successful real estate experience!

Real Estate Terms Beginning with

U

Underwriting: The process used to de- termine loan approval. It involves evaluating the property and the borrower’s credit and ability to pay the mortgage. Uniform

Real Estate Terms Beginning with

V

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).

Real Estate Terms Beginning with

W

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 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.

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