97 Real Estate Terms You Need to Know
That’s why we’ve put together this glossary of real estate terms you need to know. You’ll get the definitions of everything from “addendum” to “walk-through” so that you can purchase your home feeling more confident in your understanding of the process.
A
Addendum
An addendum is an add-on to a contract.
Adjustable-Rate Mortgage (ARM)
An ARM, also known as a variable rate mortgage, has an interest rate that changes at set intervals after a fixed period, during which the initial interest rate remains constant. The introductory interest rate on an ARM is generally lower than that of a comparable fixed-rate loan. Read “Fixed vs. Variable Mortgage Rates: Which One Is Right for You?” to learn more.
Amortization
Amortization is the gradual repayment of a loan using a schedule of interest and principal payments of a loan until the entire amount is repaid with interest.
Annual Percentage Rate (APR)
The APR is the cost of the loan as an annual rate, including the broker fees, interest rate, points, and other charges the borrower has to pay.
Annuity
The annuity is an amount paid at regular intervals, usually at a guaranteed minimum amount.
Application Fee
The application fee is what a mortgage lender or broker charges to apply for a mortgage. This fee is used to cover processing costs.
Appraisal
An appraisal is a professional analysis of the estimated value of a property. This estimate also includes examples of similar properties (see Comparables). Learn more in our article “What is a Home Appraisal and Do I Need One?”
Appreciation
Appreciation is an increase in the market value of a home. This value can change due to factors such as market conditions and home improvements.
Assessed Value
The assessed value is usually the value placed on a property for taxation purposes.
Assessor
An assessor is a public official who sets the value of a property for tax purposes.
B
Backup Offer
A backup offer is a buyer’s request to be considered next in a line if a home is already under contract. Legally, there can only be one backup offer on a home at a time.
Balloon Mortgage
A balloon mortgage, usually based on a 30-year amortization schedule, requires monthly payments with the unpaid balance due in a lump sum payment at the end of a specific period of time. These mortgages can include the option to reset the interest rate and extend the due date.
Blanket Mortgage
A blanket mortgage covers more than one plot of land financed by the same borrower.
Blind Offer
A blind offer is putting in an offer on a home without ever seeing it in person.
Bridge Loan
A bridget loan is a short-term loan that can be used for building or closing on a new home before the borrower’s current home is sold. It is secured by the borrower’s current home.
C
Cap
A cap is the limitation on the amount the interest rate or mortgage payments may increase or decrease. It is usually associated with an adjustable-rate mortgage.
Cash-Out Refinance
Cash-out refinance is a refinancing transaction that allows the borrower to receive additional funds over and above what’s needed to repay the existing loan (which includes the mortgage, closing costs, points, and any subordinate liens).
Certificate of Eligibility
A certificate of eligibility is a document issued by the U.S. Department of Veterans Affairs certifying a veteran’s eligibility for a VA-guaranteed mortgage loan.
Chain of Title
A chain of title is a collection of documents that show the history of all of the owners of a parcel of real property, from the earliest documented owner to the most current.
Clear Title
A clear title shows that ownership of the property is free of liens, defects, and other encumbrances.
Closing
Closing is the process of completing the home purchase. It includes paying any outstanding fees, signing closing documents, and completing the title transfer.
Closing Agent
The closing agent is the person or entity that coordinates all of the various closing activities.
Closing Costs
Closing costs are the upfront fees charged for a mortgage loan transaction. It can include the loan origination fee, attorney’s fee, escrow deposits, and more. Learn even more in “Demystifying Closing Costs: What Every Homebuyer Should Know.”
Closing Date
The closing date is the date on which both the sale of the property is finalized and the loan transaction is completed.
Commission
The commission is the fee paid to REALTORS® or agents based on completion of the sale. It is calculated as a percentage of the home sale.
Comparables
Comparables, or "comparable properties,” are recently sold properties that are used as a comparison in determining the current value of a property.
Condominium
A condominium, or condo, is a unit in a multiunit building. Condominium owners own their individual units and have rights to the common areas.
Construction Loan
A construction loan finances the cost of construction or improvements to a property. The money goes directly to the builder at various intervals throughout the construction process.
Contingency
A contingency is a condition in a real estate contract that must be met before the sale can proceed, such as a home inspection or financing approval. Find out more in “Contingent: What Does it Mean in Real Estate?”
Conventional Mortgage
A conventional mortgage is a home loan not insured or guaranteed by a government agency, typically requiring higher credit scores and down payments.
Counter-Offer
A counter offer is a response to an offer on a property that modifies the original terms proposed by the buyer or seller.
Credit
Credit is a borrower’s financial trustworthiness, often evaluated using credit scores when applying for loans.
D
Debt-to-Income Ratio
Debt-to-income ratio is the percentage of a borrower’s gross monthly income used to pay debts, including housing costs, used by lenders to assess loan eligibility.
Deed
A deed is a legal document that transfers ownership of real estate from one party to another.
Default
Default is the failure to meet the terms of a loan agreement, such as missing mortgage payments.
Delinquency
Delinquency is late payments on a loan or mortgage that have not yet resulted in default.
Down Payment
A down payment is an upfront payment made by a buyer toward the purchase price of a property, usually expressed as a percentage of the price.
Due Diligence
Due diligence is the investigation and research conducted by a buyer to evaluate a property before finalizing the purchase.
E
Earnest Money Deposit
An earnest money deposit is a good-faith deposit made by a buyer to show serious intent to purchase a property, typically held in escrow. Check out “What is an Earnest Money Deposit When Buying a Home?” to learn more.
Easement
Easement is the legal right for someone to use part of another person's property, such as for utilities or access.
Encroachment
Encroachment is when a structure or object extends onto another person’s property without permission.
Equity
Equity is the difference between the market value of a property and the amount owed on its mortgage.
Escrow
Escrow is the legal arrangement in which a neutral third party holds funds or documents until all conditions of a real estate transaction are met. Learn more in our article “What is Escrow and How Does it Work?”
F
Fair Market Value
Fair market value is the price a property would sell for in a competitive and open market.
Fannie Mae
Fannie Mae is a government-sponsored enterprise that buys and securitizes mortgages in the United States to provide liquidity to the housing market.
FHA-Insured Loan
A FHA-insured loan is a mortgage insured by the Federal Housing Administration in the U.S., designed to help low- to moderate-income buyers.
Fixed-Rate Mortgage
A fixed-rate mortgage is a home loan with an interest rate that remains the same throughout the life of the loan. Learn more by reading “Fixed vs. Variable Mortgage Rates: Which One Is Right for You?”
Foreclosure
A foreclosure is the legal process by which a lender takes possession of a property due to the borrower’s failure to repay the mortgage.
Fully Amortized Mortgage
A fully amortized mortgage is a loan where payments cover both interest and principal, reducing the balance to zero by the end of the term.
G
Good-Faith Estimate
A good-faith estimate is a form provided by lenders outlining the expected costs associated with a mortgage loan.
Government Mortgage
A government mortgage is a home loan insured or guaranteed by a government agency, such as FHA, VA, or USDA loans.
Growing-Equity Mortgage (GEM)
A growing-equity mortgage is a fixed-rate mortgage with increasing monthly payments, designed to accelerate the repayment of principal.
H
Home Equity
Home equity is the value of a homeowner’s interest in their property, calculated as the property value minus any mortgage debt. Learn more in our article “What is Home Equity and How Does it Work?”
Home Equity Line of Credit (HELOC)
A home equity line of credit is a type of revolving loan secured by the equity in a home, allowing homeowners to borrow as needed up to an amount that represents a specified percentage of the borrower’s equity in the property.
Home Inspection
A home inspection is a professional assessment of a property’s condition, including structural, electrical, and plumbing systems.
Homeowner’s Insurance
Homeowner’s insurance is a policy protecting homeowners from financial losses due to damage, theft, or liability. It is usually required by mortgage lenders. Check out “Homeowners Insurance: What Additional Coverage Do I Need?” to learn more.
Homeowners’ Association
A homeowners’ association is an organization that manages and enforces rules for properties within a community, funded by dues from homeowners. HOAs often manage shared amenities and programming within a community. Go more in depth in our article “What is an HOA?”
Hybrid Loan
A hybrid loan is a mortgage combining fixed and adjustable rates, typically starting with a fixed rate for an initial period.
I
Index
Index is a benchmark interest rate used to calculate changes in adjustable-rate mortgages.
Initial Interest Rate
An initial interest rate is the starting rate charged on an adjustable-rate mortgage, typically lower than fixed-rate loans.
Interest
Interest is the cost of borrowing money, expressed as a percentage of the loan amount.
Interest Rate Cap
An interest rate cap is the limit on how much the interest rate on an adjustable-rate mortgage can increase.
Interest Rate Ceiling
Interest rate ceiling is the maximum rate an adjustable-rate mortgage can reach over its lifetime.
Interest Rate Floor
Interest rate floor is the minimum rate an adjustable-rate mortgage can ever have.
J
Jumbo Loan
A jumbo loan is a mortgage that exceeds conforming loan limits, typically used for higher-priced properties.
L
Lien
A lien is a legal claim on a property as security for a debt, such as a mortgage or unpaid taxes.
Loan Origination
Loan origination is the process of applying for and processing a mortgage loan. It can include taking a loan application, processing and underwriting the application, and closing the loan.
Loan Origination Fees
Loan origination fees are charges from lenders for processing a new mortgage loan.
Loan-to-Value (LTV) Ratio
The loan-to-value ratio is the ratio of a loan amount to the appraised value or purchase price of a property expressed as a percentage. For example, a home valued at $100,000 with a $70,000 mortgage has an LTV of 70%.
M
Market Value
The market value is the estimated price a property would fetch in the current market.
Master-Planned Community
A master-planned community is a large residential development with a variety of housing types and amenities, planned as a cohesive unit. Learn more about this term in our article “Benefits of Living in a Master-Planned Community.”
Mortgage
A mortgage is a loan used to purchase property, secured by the property itself as collateral.
Mortgage Broker
A mortgage broker is a professional who matches borrowers with lenders and helps arrange mortgage loans.
Multifamily Mortgage
A multifamily mortgage is a loan used to purchase a property with multiple residential units, such as apartments.
Multifamily Property
A multifamily property is a building or complex with more than one housing unit, designed for multiple families or tenants.
Multiple Listing Service (MLS)
The MLS is a database used by real estate professionals to share information about properties for sale.
O
Offer
An offer, in real estate, is a formal proposal to purchase a property, including terms and conditions.
P
Pending
Pending is a status indicating a property is under contract but not yet closed.
PITI
PITI is an acronym for Principal, Interest, Taxes, and Insurance – key components of a mortgage payment.
Planned Unit Development (PUD)
A PUD is a community with a mix of residential, commercial, and recreational spaces, governed by a set of guidelines. Read more about it in our article “How is a Master-Planned Community Different From a PUD?”
Pre-Approval
A pre-approval is a document spelling out a lender’s conditional commitment to provide a mortgage based on a preliminary review of a borrower’s financials.
Principal
Principal is the original loan amount borrowed, excluding interest.
Private Mortgage Insurance (PMI)
PMI is insurance protecting the lender if a borrower defaults, typically required for loans with low down payments. Read more about it in our article "Private Mortgage Insurance (PMI) Explained: When is it Required and How to Avoid it"
Purchase and Sale Agreement
A purchase and sale agreement is a legally binding contract outlining the terms of a real estate transaction.
R
Rate Lock
Rate lock is an agreement with a lender to freeze an interest rate for a specified period during the loan process.
Real Estate Broker
A real estate broker is a real estate professional who received their broker license. They can work independently or have agents and REALTORs working under them.
Real Estate Agent
A real estate agent is a licensed professional who assists buyers and sellers in real estate transactions. Most agents work under a license broker or REALTOR®. Learn more about how agents can help you in “Can I Use a Real Estate Agent to Buy a New Construction Home?”
REALTOR®
A REALTOR® is a licensed real estate agent who is a member of the National Association of REALTORS® and abides by its Code of Ethics.
S
Second Mortgage
A second mortgage is a loan taken out on a property that already has a primary mortgage. It is often used for renovations or other expenses.
Single-Family Property
A single-family property is a residential building designed for one family, detached from other structures.
T
Title
The title is a legal concept representing ownership and rights to a property. The difference between a title and a deed is that a title is not a physical document.
Title Insurance
Title insurance is a policy protecting against potential legal issues or claims related to a property’s title.
Townhome
A townhome is a multi-story, single-family home sharing one or more walls with adjacent properties.
U
Under Contract
Under contract means a property has a signed purchase agreement but is still pending final sale closure. As long as certain conditions are met, both parties are legally obligated to proceed with the sale.
Underwriting
Underwriting is the process lenders use to evaluate a borrower’s creditworthiness and property value before approving a loan. Check out “A Guide to the Mortgage Underwriting Process” to learn more.
V
VA Guaranteed Loan
A VA Guaranteed Loan is a mortgage backed by the U.S. Department of Veterans Affairs, offering favorable terms to eligible veterans and service members.
W
Walk-Through
A walk-through is the final inspection of a property by the buyer before closing to ensure it’s in the agreed-upon condition.
Buying a New Home Is Better with Brookfield Residential
With all of that information in hand, you’re now much more prepared to start the home purchase process. And if you’re looking to buy or build a new home, the Brookfield Residential’s team is ready to guide you the rest of the way.
We’d love to help you find your new home! Explore where we build, get pre-qualified for a mortgage, and connect with our sales team when you’re ready to learn more. We’ll be expecting you!
