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Real Estate Terms

Real Estate Terms

Acre : 43,560 square feet of land.

Amortization : The gradual repayment of a mortgage loan by installments.

Appraisal : A written analysis of the estimated value of a property prepared by a qualified appraiser.

Appraised value : An opinion of a property’s fair market value, based on an appraiser’s knowledge, experience, and analysis of the property.

Appraiser : A qualified individual who uses his or her experience and knowledge to prepare the appraisal estimate.

ARM : Adjustable Rate Mortgage, a loan subject to changes in interest rates as market conditions change.

Assessed value : The valuation placed on property by a public tax assessor for purposes of taxation.

Assumable mortgage : A mortgage that can be taken over by the buyer when a home is sold.

BA, BATH : Bathrooms

BE, BED : Bedrooms

Bridge loan : A form of second trust that is collateralized by the borrower’s present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

Certificate of title : A document provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner.

Closing : Settlement a meeting at which a sale of a property is finalized by the buyer and ownership of the property is transferred from the seller to the buyer.

CMA : Comparative Market Analysis, Competitive Market Analysis a CMA report shows prices of homes that are comparable to a subject home that were recently sold, are currently on the market, or were on the market, but were not sold within the listing period.

Closing costs : Customary costs above and beyond the sale price of the property that must be paid to cover the transfer of ownership at closing.

Comparables : Comp, An abbreviation for “comparable properties”. Comparables are properties like the property under consideration.

Contingency : A condition that must be met before a contract is legally binding.

Credit report : A report of an individual’s credit history, prepared by a credit bureau, and used by a lender in determining a loan applicant’s creditworthiness.

Debt-to-income ratio : A comparison of gross income to housing and non-housing expenses.

Deed : The document that transfers ownership of a property.

Down payment : The portion of a home’s purchase price that is paid in cash and is not part of the mortgage loan.

Earnest money deposit : Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal.

Easement : The right to use the land of another for a specific limited purpose. Examples include utility lines, driveways, and Ingress and Egress. Easements can be temporary or permanent.

Equity : An owner’s financial interest in a property; calculated by subtracting the amount still owed on the mortgage loan(s) from the fair market value of the property.

Escrow : An item of value deposited with a third party to be delivered upon the fulfillment of a condition. For example, the deposit by a borrower with the lender of funds to pay taxes and insurance premiums when they become due, or the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate.

Escrow account : A separate account into which the lender puts a portion of each monthly mortgage payment; an escrow account provides the funds needed for such expenses as property taxes, homeowners insurance, mortgage insurance, etc.

Fair Housing Act : A law that prohibits discrimination in all facets of the home buying process on the basis of race, color, national origin, religion, sex, familial status, or disability.

Fair market value : The hypothetical price that a willing buyer and seller will agree upon when they are acting freely, carefully, and with complete knowledge of the situation.

Fannie Mae : A publicly traded company and the largest non-bank financial services company in the world. It operates pursuant to a federal charter and is the nation’s largest source of financing for home mortgages.

FDR : Formal Dining Room

FHA Mortgage : A mortgage that is insured by the Federal Housing Administration (FHA).

Flood insurance : Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan.

FP, FPLC, FRPLC : Fireplace

Good faith estimate : GFE, An estimate of all closing fees including pre-paid and escrow items as well as lender charges; must be given to the borrower within three days after submission of a loan application.

Government Mortgage : A mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Contrast with conventional mortgage.

Gross Income : Normal annual income including overtime that is regular or guaranteed. The income may be from more than one source. Salary is generally the principal source, but other income may qualify if it is significant and stable.

Housing-to-Income ratio : The percentage of gross monthly income that goes toward paying housing expenses.

Home inspection : An examination of the structure and mechanical systems to determine a home’s safety; makes the potential home buyer aware of any repairs that may be needed.

Home Warranty : Offers protection for mechanical systems and attached appliances against unexpected repairs not covered by homeowner’s insurance; coverage extends over a specific time period and does not cover the home’s structure.

Homeowner’s Insurance : An insurance policy that combines protection against damage to a dwelling and Is contents with protection against claims of negligence or inappropriate action that result in someone’s injury or property damage.

HUD-1 Statement : Also known as the “settlement sheet,” it itemizes all closing costs; must be given to the borrower at or before closing.

HVAC : Heating, Ventilation, Air Conditioning, A home’s heating and cooling system.

Interest Only Loan : The monthly payment for the loan does not include any repayment of principal – the payment covers only the interest and the actual loan balance remains unchanged.

Listing : An agreement between a real estate broker and a home owner that allows the broker to market and arrange for the sale of the owner’s home. The word “listing” is also used to refer to the for-sale home itself. A home being sold by the owner without a real estate agent isn’t a “listing.”

Loan : Money borrowed that is usually repaid with interest.

Loan-to-value (LTV) ratio : A percentage calculated by dividing the amount borrowed by the price or appraised value of the home to be purchased; the higher the LTV, the less cash a borrower is required to pay as down payment.

Lock Box : A locked, key-holding device affixed to a for-sale home, so real estate professionals can gain entry into the home after obtaining permission from the listing agent.

Mortgage : A lien on the property that secures the Promise to repay a loan.

Mortgage insurance : A policy that protects lenders against some or most of the losses that can occur if a borrower defaults on a mortgage loan; mortgage insurance is required primarily for borrowers with a down payment of less than 20% of the home’s purchase price.

Offer : Indication by a potential buyer of a willingness to purchase a home at a specific price; generally put forth in writing.

Pipestem Lot : A lot that is connected to the public street by a narrow strip of land, which has a private road on it.

PITI : Principal, Interest, Taxes, Insurance, The four elements of a monthly mortgage payment; payments of principal and interest go directly towards repaying the loan, while the portion that covers taxes and insurance (homeowner’s and mortgage, if applicable) goes into an escrow account to cover the fees when they are due.

PMI : Private Mortgage Insurance, Privately-owned companies that offer standard and special affordable mortgage insurance programs, for qualified borrowers with down payments of less than 20% of a purchase price.

Power of Attorney : A legal document that authorizes another person to act on one’s behalf. A power of attorney can grant complete authority or can be limited to certain acts and/or certain periods of time.

Pre-approve : Lender commits to lend to a potential borrower; commitment remains as long as the borrower still meets the qualification requirements at the time of purchase.

Pre-qualify : A lender informally determines the maximum amount an individual is eligible to borrow.

PUD : Planned Unit Development, a project or subdivision that includes common property that is owned and maintained by a homeowners’ association for the benefit and use of the owners.

Radon : A radioactive gas found in some homes that, if occurring in strong enough concentrations, can cause health problems.

Ratified Contract : A contract which both the buyer and seller have agreed to in writing. Sometimes also called ‘under contract’.

Survey : A drawing or map that indicates legal boundaries, easements, encroachments, rights of way, improvement locations to a property.

Swing loan : A form of second trust that is collateralized by the borrower’s present home (which is usually for sale) in a manner that allows the proceeds to be used for closing on a new house before the present home is sold.

Title : A legal document evidencing a person’s right to or ownership of a property.

Title Insurance : Insurance that protects the lender against any claims that arise from arguments about ownership of the property; also available for home buyers.

Title Search : A check of the title records to ensure that the seller is the legal owner of the property and that there are no liens or other claims outstanding.