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Adjustable rate mortgage (ARM) - interest rates on this type of mortgage are periodically adjusted up or down, depending on a specified financial index.
Amortization - repayment of a mortgage debt with equal periodic payments of both principal and interest, calculated to retire the obligation at the end of a fixed period of time.
Annual Percentage Rate (APR) -- the actual finance charge for a loan, including points and loan fees, in addition to the interest rate.
Application Fee - a one-time fee charged by the mortgage company for processing your application for a loan. Sometimes called the "origination fee."
Appraisal - an expert opinion of the value or worth of a property.
ARM - See "Adjustable Rate Mortgage"
Broker - an individual who acts as the agent of the seller or buyer. A real estate broker must be lisenced by the state.
Buy-Down Mortgage - a mortgage with a below market interest rate made by a lender in return for an interest rate subsidy in the form of additional discount points paid by the builder, seller or buyer.
Buyer's Market - economic conditions in which the supply of housing exceeds demand. Sellers may be forced to make substantial price concessions.
CAP - Limit on how much the interest rate can increase in an ARM.
Closing - "closing the deal," the meeting where the deed to property is legally transferred from seller to buyer.
Comparative Market Analysis - a survey of attributes and selling prices of comparable houses on the market or recently sold; used to help determine pricing strategy for a seller's property.
Condominium (Condo) - type of real estate ownership where the owner has title to a specific unit and shared interest in common areas.
Contingency - a condition in a contract that must be met for the contract to be binding.
Contract - binding legal agreement between two or more parties that outlines the conditions for the exchange of value.
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Cooperative (Co-op) - real estate ownership where all shareholders own the whole property, but each has proprietary occupancy rights for specific units.
Counteroffer - when the seller or buyer responds to a bid. If you decide to offer $100,000 for a home listed at $150,000, the seller might counter your offer and propose that you purchase the home for $140,000. That new proposal, and any subsequent offer, is called a counteroffer.
Credit Report - a credit report lists all of your credit accounts, such as charge cards, and provides detail on payment history. Lenders use this information in determining eligibility for loans.
Discount Point - Money paid by the borrower to lower the interest rate on the note. One discount point is equal to 1% of the loan amount.
Down Payment - percentage of the purchase price that the buyer must contribute with their own funds.
Earnest Money - a deposit paid when the sale contract is signed before the closing. In some locations, it's called the "Binder."
Equity - the difference between the market value of the property and what is owed on the property.
Escrow - a fund or account held by a third-party custodian until conditions of a contract are met.
Fee Simple - the most basic type of ownership, under which the owner has the right to use and dispose of the property at will.
Fixed-Rate Mortgage - interest rates on this type of mortgage remain the same over the life of the loan term. Compare to "Adjustable Rate Mortgage."
Foreclosure - the legal action taken to extinguish a homeowner's right and interest in a property, so that the property can be sold in a foreclosure sale to satisfy a debt.
Hazard Insurance - compensates for property damage from specified hazards such as fire and wind.
Homeowner's Insurance - coverage that included hazard insurance, as well as personal liability and theft.
Home Warranty - a service contract that covers appliances (with exclusions) in working condition in the home for a certain period of time, usually one year.
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Interest - the cost of borrowing money, usually expressed as a percentage over time.
Lien - a security claim on property until a debt is satisfied.
Loan-to-Value Ratio - the ratio of the loan amount compared to the value of the property. Referred to as "LTV."
Market Value - the price that is established by present economic conditions, location, and general trends.
Market Price - the actual price at which a property sells.
Mortgage - security claim by a lender against property until the debt is paid.
Origination Fee - same as application fee.
PITI - principal, interest, taxes, and insurance, forming the basis for monthly mortgage payments.
Prepayment Penalty - a fee paid by a borrower who pays off the loan before it is due.
Prequalification - informal estimate of how much financing a potential borrower might expect to obtain. Completed before the borrower pays substantial loan application fees.
Principal - the amount of money borrowed, for which interest is charged.
Mortgage Insurance (MI) - special insurance that protects the lender in case of borrower default. It's typically required when the borrower makes less than a 20% down payment.
Realtorâ - a member of the National Association of Realtors.
Title - document that indicates ownership of a specific property.
Title Insurance - protects against loss from legal defects in the title.
Title Search - detailed examination of the entire document history of a property title to make sure there are no legal encumbrances.
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