Acceptance -- the seller's written approval of a buyer's offer.
Addendum -- an addition or change to an existing contract between two or more parties.
Agent -- An licensed person who represents buyers, sellers, or both in the sale or purchase of real estate property.
Amortization -- The schedule of payments that establishes the amount of payment to be applied to the principal and the amount to be applied to interest, usually on a monthly basis, from the start of the loan to the end.
Annual Percentage Rate (APR) -- The total interest rate of a mortgage, including the original loan interest as well as any upfront interest paid in securing the loan. The APR will be different from the mortgage rate quoted because of inclusion of these items.
Appraisal --An professional estimate of value of any property such as real estate by a third party. Virtually all financed mortgages will require an appraisal.
Adjustable Rate Mortgage (ARM) -- A adjustment mortgage loan in which the interest rate can move up or down depending on current financial market position.
Assessment -- The dollar value of a property as determined by the local tax office which is used to determine the amount of your property taxes.
Broker -- Broker has several meanings in different situations. Most REALTOR® are "agents" who work under a "broker." Some agents are brokers as well, either working form themselves or under another broker. In the mortgage industry, broker usually refers to a company or individual that does not lend the money for the loans themselves, but broker loans to larger lenders or investors.
Buyer's Agent -- A licensed Real Estate Agent that has made an agreement to exclusively represent the buyer, instead of the seller.
Comparable Market Analysis (CMA) -- A professional comparison of the prices of similar houses in the same general area. A CMA is used to help determine the value of a property, whether a seller wants to sell or a buyer wants to buy.
Closing -- The official process that administers the final transfer of the deed from the seller to the buyer, as well as finalize all aspects of the mortgage of the property, if any.
Closing Costs -- Money needed at the time of closing which separate from the down payment. Some of the items include : pre-paids, Loan origination fees, any legal fees, discount points, and recording fees. They usually total from 3% to 5% of the sales price of the home.
Contingencies -- These are conditions written into Real Estate offers and contracts to prevent a buyer from being held to buy a house that proves to be unsatisfactory for the reasons stated therein. Examples of contingencies are "This contract is subject to the buyer obtaining a satisfactory house inspection." or "Subject to the buyer being able to obtain a mortgage or to sell their present home."
Condominium -- Housing where the owner owns only the unit in which they live--from the interior walls inward, as well as a portion of the common area. Condominiums usually have monthly fees to offset the cost of common areas and insurance.
Debt to Income Ratio -- The ratio of a borrowers outstanding debt as a percentage of their complete total gross income.
Deed -- A legal document that, when recorded with the local government, determines and records ownership of a property. The deed is transferred from seller to buyer at the closing.
Earnest Money --Funds that are submitted with an offer to purchase which indicates a buyer's good faith. Routinely, earnest money will need to be submitted at the time of the offer and remains in escrow until the time of closing, where it then is made a part of the down payment.
Equity -- The difference in dollars between the value of a property and the total of any unpaid mortgages or existing loans taken out against it.
Escrow -- Money that is held in reserve both prior to closing by a third party and after closing by the mortgage holder to pay future real estate taxes and homeowners insurance.
Fannie Mae (FNMA) -- The Federal National Mortgage Association, is a shareholder-owned company that is the nation's largest supplier of affordable home mortgage funds.
FHA mortgage -- A mortgage that is insured by the Federal Housing Administration (FHA). Along with VA loans, an FHA loan will often be referred to as a government loan.
Fixed Rate Mortgage -- A mortgage loan where the interest rate is determined at its beginning and continues in force unchanged throughout the life of the loan.
Fixture -- Personal property that becomes real property when attached in a permanent manner to real estate.
Flood Insurance -- Insurance that covers damage to physical property resulting from flooding. It is required by mortgage companies for homes in designated flood areas.
Foreclosure -- The legal process by which a mortgage lender regains ownership of the property from a defaulting owner.
Hazard Insurance -- Insurance coverage that in the event of physical damage to a property from fire, wind, vandalism, or other hazards.
Homeowner's Association -- A group of owners, condominium, townhouse or single family subdivision that decides upon general guidelines for the good of the community. HOA's usually have monthly or yearly fees.
Homeowner's Insurance -- An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.
Inspection -- An professional inspection of the complete home under consideration for purchase which looks for defects in the property for a fee.
Interest -- The amount of a mortgage loan payment that is considered the "charge" for using the lender's funds.
Lien -- A legal claim against a piece of real property that can prevent it from being sold unless the lien is complete paid for. Liens can be filed by unpaid contractors or other debtors in a legal process so that they will be paid to them when a property is sold.
Listing -- A real estate property for sale by a licensed Real Estate Brokerage firm and Agent.
Loan Officer -- Also referred to by a variety of other terms, such as lender, loan representative, loan "rep," account executive, and others. The loan officer has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.
Loan Origination Fee -- A fee charged by the lender payable at the time of closing for processing the loan.
Lock-in -- An binding agreement by the lender to the buyer at the time of mortgage application or shortly thereafter, to honor the mortgage at a specific interest rate, even if rates rise or fall before the date of closing. If rates are rising, it's wise to lock. If rates are falling, it may be best to wait. All lock-ins have specific expiration dates, such as 30, 60 or 90 days in the future.
LTV (Loan to Value) -- The ratio of the amount of the mortgage loan as a percentage of the value of the property.
Mortgage Banker -- For a more complete discussion of mortgage banker, see "Types of Lenders." A mortgage banker is generally assumed to originate and fund their own loans, which are then sold on the secondary market, usually to Fannie Mae, Freddie Mac, or Ginnie Mae.
Mortgage Broker -- A mortgage company that originates loans, then places those loans with a variety of other lending institutions with whom they usually have pre-established relationships.
MLS (Multiple Listing Service) -- A detailed listing usually in electronic form of all the properties for sale by Real Estate Brokerages or agents in a given geographical area.
No Cost Loan -- Many lenders offer loans that you can obtain at "no cost." You should inquire whether this means there are no "lender" costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions. There are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a "no-point" loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.
PMI (Private Mortgage Insurance) -- Required generally on all conventional loans unless a 20% down payment is made. These payments for PMI are made a part of the mortgage payment and they are protection for the lender should the mortgagee default on the loan. On FHA loans, this is called a MIP (Mortgage Insurance Premium) which is virtually the same thing.
Points -- 1 point is equal to one percent of the loan value, etc. Points can be loan origination fees otherwise known as discount points which reduce the interest rate of the loan. For example, when a lender quotes a rate of 7 1/2% with 1 + 1 points, 1 point is for the discount fee. and 1 point is for the origination fee.
Pre-approval -- A loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification.
Prequalification -- The first stage of a mortgage application process where the lender will run a basic credit report and determine your debt to income ratio in order to see how much mortgage money they would lend you should you decide to go forward with the loan.
Pre-paids --Payments made in cash at the closing for such items as homeowners insurance for one year and real estate taxes for several months.
Principal -- The total amount borrowed for a mortgage loan. The monthly mortgage payment will be applied to both the interest and the principal, where the majority of the payment is applied to the interest portion for the first few years of the load.
Property Tax-- Generally an annual tax paid to one or more governmental jurisdictions based on the amount of the property assessment. Most of the time it is paid as part of the mortgage payment.
Quitclaim deed -- A deed that transfers without warranty whatever interest or title a grantor may have at the time the conveyance is made.
Recording -- The process of entering deed and/or mortgage information into public record with the local government jurisdiction.
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.
Survey -- A drawing or map showing the precise legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features.
Title Insurance -- Protects the title to the property along with your ownership rights from claims against it. Title insurance is paid at closing and may be the responsibility of the buyer, the seller, or both, depending on what is traditional in your locality.
VA mortgage -- A mortgage that is guaranteed by the Department of Veterans Affairs (VA).
Warranty -- Covers either most of the house in a newly constructed home, or selected items such as a/c or heating systems in a used home. Warranties can be different depending on certain factors and are optional in used homes paid for by either the buyer or the seller.
Zoning -- Laws that regulate specifically how a area can be used for real estate. For example, an property may be zoned for single family residential, commercial or retail, or a mix of two or more uses.