Common Real Estate Terms

  • Mubanga Sampa by Mubanga Sampa
  • 1 year ago
  • Others

In this article, I will be compiling a real estate glossary to help you with definitions for common real estate terms.

Common real estate terms

Active Under Contract

When a buyer makes an offer that the seller accepts contractually, the status of the listing then turns to ‘active under contract’.

Adjustable/ Variable Rate Mortgage

A type of mortgage where the interest rate applied on the outstanding balance fluctuates throughout the life of the loan.

Amortization

The timetable of loan repayments over a stated period.

Annual Percentage Rate

Refers to a percentage that represents the yearly cost of funds over the term of a loan.

Appraisal

An appraisal is the estimate of a home’s value that is determined by comparing it to recent sales of similar properties in the area.

Balloon Mortgage

A mortgage type with low preliminary payments but requires the borrower to repay the balance in a lump sum. As a res

Bi-weekly Mortgage

Simply put, a bi-weekly mortgage has a payment schedule every 2 weeks.

Bridge Loan

A type of short-term loan given by a lender to cover an interval between two transactions. A bridge loan is primarily used to ease the transition of ownership between two properties.

Buy Down

A buy down can be viewed as a fee remitted to a lender to lower the interest rate on a mortgage for a limited interval.

Buyer’s Agent

This is a real estate agent who looks out for the best interests of the buyer in a home buying transaction.

Buyer’s Market

Under a buyer’s market, property supply exceeds demand and this pushes property prices downwards.

Cap

The maximum interest rate that may be applied to a variable rate mortgage is referred to as the cap.

Closing

This is the penultimate phase of the home buying process.

Closing Costs

The fees that cover the cost of a real estate transaction.

Closing Disclosure

An important document that provides final details about the mortgage loan you have opted for.

Contingencies

The various clauses in an offer that must be satisfied before a real estate contract is binding.

Credit Report

This is a detailed breakdown of an individual’s credit history. As such, it is a summation of an individual’s financial activity.

Credit Score

A number between 300 – 850 that depicts an individual’s creditworthiness.

Debt-to-Income Ratio

A comparison of a borrower’s gross monthly income to their monthly liabilities.

Default

A default situation happens when a borrower is unable to meet their financial obligations.

Delinquency

In real estate, delinquency refers to a scenario where a borrower fails to make their mortgage payment on time.

Down Payment

A borrower’s initial deposit towards the purchase of a home.

Earnest Money

An amount paid by a buyer to a seller as a commitment to buy a home. Earnest money is held in escrow until the transaction is closed. At that point, the earnest money is applied to the closing costs.

Escrow

Simply put escrow is a third-party account that is used to hold funds until the conclusion of a transaction.

Final Walkthrough

A buyer’s final visit to a home before closing. The final walkthrough gives you time to confirm that the seller addressed the contingencies.

Fixed-Rate Mortgage

Under a fixed-rate mortgage, the interest rate remains the same for the duration of the loan.

First Time Home Buyer

An individual who has never owned a home before and is looking to buy property for the very first time.

Foreclosure

A foreclosure arises when a borrower defaults on their mortgage payments and the lender takes possession of the home.

Home Equity

The value of a property after removing any outstanding debts.

Home Owners Insurance

A liability policy aimed at covering homeowners in the event of an injury to someone on their property.

Impounds

Impounds are the amounts of money collected from the borrower and set aside to cover property taxes and insurance.

Inspection

A physical examination of a home to determine its structural integrity and soundness.

Lien

A lien is a legal right to a property until a debt is paid. As such, a mortgage lender has a right to the property until the mortgage is paid off.

Listing Agent

A real estate agent representing the interests of a seller.

Listing broker

Holder of the contract to sell a homeowner’s property.

Loan Commitment

The ultimate phase of qualifying a borrower for mortgage approval.

Mortgage Broker

Either a person or firm working to secure a mortgage for an individual.

Mortgage insurance

An insurance policy designed to cover lenders against losses incurred when a borrower defaults on their loan payments.

Mortgage Term

The length of time the borrower will make mortgage payments.

Origination Fee

A fee charged by a mortgage lender to cover the cost of processing the loan.

Pre-Approval

This is the pre-qualification for a loan or mortgage for a home loan of a specific value range.

Pre-Qualification

A tentative of how much a mortgage lending institution is willing to lend a borrower.

Proof of Funds

Verification of a buyer’s financial ability to buy a home.

Refinance

The replacement of an existing debt obligation, such a mortgage, with a new one but under different terms.

Seller’s Market

Under a seller’s market, property demand exceeds supply and this pushes property prices upwards.

Title

The legal proprietorship of property as well as the manner in which it may be used.

Compare listings

Compare