Real Estate Terms
RealStar's glossary of Real Estate terms is designed to help you understand some of the terminology used in the buying and selling process.
ADJUSTABLE RATE MORTGAGE (ARM): Interest rates and monthly payments are adjusted periodically during the life of the loan to correspond with changes of the money market. The initial interest rate is lower than that of a fixed rate mortgage. A cap limit by which either the rate or the payment can change.
AGENT: Someone who is authorized to represent another individual (the principal).
AMORTIZATION: The process of paying off debt installments, normally by equal installments over a fixed period of time, as in a 30-year fixed-mortgage.
APPRAISAL: A formal opinion or estimate by one who is qualified to evaluate factors of value. In a real property appraisals, the propose of the report given might affect the type of report issued, e.g., insurance, market value tax assessment, etc.
ASSESSMENT: A special charge placed against a property for some specific purpose. With Townhomes and Condos a monthly assessment will usually cover exterior maintenance, snow removal etc. With Single Family homes an assessment might cover one time events such as installation of sidewalks.
BALLOON PAYMENT: The amount due when a mortgage becomes due, which is excess of normal installment payments.
BROKER: One who acts as an agent or negotiator for his principal when dealing with third parties on behalf of his client.
CARRYING CHARGES: The various expenditures necessary to obtain a property from month to month, such as taxes, insurance, and repairs.
CLIENT: Person who the broker has an agency relationship
CLOSING COSTS: Additional costs other than the down payment needed to purchase a property. Theses include points, application fee, hazard insurance, tax, insurance escrow deposits, city stamps, recording fees and attorney fees.
CLOSING STATEMENT: The settlement sheet, which is a statement of debits and credits for the buyer and the seller. In summary, it's the costs involved when selling a property.
COMMITMENT: An agreement to a loan specified amount to a purchaser in the event of title transfer of a seller in summarizing the costs involved when selling property.
CONTINGENCY: Any requirement in contract, which must be completed before the contract is ready for performance, most likely refers to either a home inspection or financial contingency.
CONTRACT: An agreement negotiated and entered into by two or more parties who exchange mutual promises to perform certain acts in accordance with the wishes of both parties.
CONVENTIONAL MORTGAGE: Any mortgage that is not government insured is considered to be conventional mortgage.
CO-SIGNER: one who expects equal obligation for the performance of a contract, note or other act by affixing his or her name to documents involved.
DEED: A written instrument, which conveys title to real property.
DEFAULT: Failure to complete the acts or promises made such as default on a mortgage when the payment is not made on time.
DISCOUNT POINTS: Refers to points saved in connection with an FHA or VA loan. Will fluctuate with money market.
EARNEST MONEY: A sum of money given to bind the agreement and to show good faith.
ESCROW: A depository of papers, funds and instructions with a third party who is willing to follow instructions provided they are in complete agreement.
EQUITY: The interest that one has in a real property as an owner.
FHA LOAN: the government insures Federal Housing Administration loans. The Down Payment required is usually lower than the 5% usually required under conventional loans.
FIXED RATE MORTGAGE: Interest rates and monthly payments remain the same throughout the entire loan.
LEGAL DESCRIPTION: A description of property, which can be recognized by law and by which the property can be located by reference to recorded maps.
PERSONAL PROPERTY: Which is movable and is not affixed to a real property (i.e. furniture).
P.I.T.I: A phrase used to denote the components of a mortgage payment: principal, interest, taxes and insurance.
POINTS: A term used to describe loan discounts by the mortgage lenders. A point is 1% of the amount of the mortgage.
PRIVATE MORTGAGE INSURANCE (PMI): An insurance premium charged by the lender to the buyer with less than 20% of the down payment. In the event that the buyer should default on a loan.
PRORATION: To divide proportionally among the parties involved such as taxes, water, sewer, and rents.
VA LOAN: Only veterans of the United Armed Forces who have received honorable discharge are eligible to receive loans. Administered by the Veterans Administration, whose loans are guaranteed by the government. Either buyer or seller can pay discount points as agreed. Qualified veterans are able to purchase property without a down payment.
ZONING: The control of land usage by local government limiting property use to these standards.