Addendum – A separate document form describing a change or addition to the initial purchase agreement.
Adjustable Rate Mortgage (ARM) – Interest rates on this type of mortgage are periodically adjusted up or down depending on a specified financial index.
Amortization – A method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed.
Annual Percentage Rate – The actual finance charge for a loan, including points and fees, in addition to the stated interest rate.
Appraisal – A expert opinion of the value or worth of a property. This is required by the lender who chooses an impartial professional appraiser. The results may not be the same amount as the selling price. If the value comes back lower, it could result in additional negotiations between the buyer and seller.
Assessed Value – The value placed on a property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value.
Balloon Payment – A large principal payment due all at once at the end of some loan terms.
Cap – A limit on how much the interest rate can change in an adjustable rate mortgage.
Certificate of Title – A document, signed by a title examiner, proves that that property is legally owned by the seller and no other institution or party has any claims.
Closing – The deed to a property is legally transferred from seller to buyer and documents are recorded.
Commission – A fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.
Comparative Market Analysis (CMA) – A survey, done by a real estate broker, of the attributes of similar and comparable homes on the market or recently sold; used to help determine a fair asking price for a seller’s property.
Comps – A term for properties that are comparable (in size, amenities, location, and more) to the property being analyzed.
Contingency – A condition in a contract that must be met for the contract to be binding.
Contract – A binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property).
Deed – A legal document that formally conveys ownership of a property from seller to buyer.
Disclosures – Information about the home (not always flattering) that a seller must provide to a buyer.
Down Payment – A percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender. It usually ranges from as low as 3% up to 20%.
Due Diligence – This is the responsibility of the buyer to take all necessary care before closing on the purchase. For example, it would include confirming there are no issues that have yet to be disclosed that would prevent the buyer from wanting to proceed with the purchase.
Equity – The value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens.
Escrow – The time period and process where the purchase funds are released and the transfer of the house between parties is completed. The escrow company is a neutral third party and executes the transaction utilizing the purchase agreement and other documents as the directive.
Fiduciary Duty – The obligation your real estate broker has to act solely in your interest. Examples of these duties are disclosure, confidentiality, and loyalty.
Fixed Rate Mortgage – A type of mortgage in which the interest rate does not change over the course of the loan. Compare to "adjustable rate mortgage.”
Fixture – Anything of value that is permanently attached to or a part of the property. This can include lighting, carpet, or landscaping. These items can be a source of dispute between buyer and seller and can be leverage for negotiations.
Hazard Insurance – Compensates for property damage from specified hazards such as fire and wind.
HOA Docs – The short form of Homeowner’s Association Documents. These apply when purchasing a condo and include HOA meeting minutes, a copy of the building’s yearly budget, and/or rules for shared spaces.
Interest – The cost of borrowing money, usually expressed as a percentage rate.
Lien – A security claim on a property until a debt is satisfied.
Listing Contract – An agreement whereby an owner engages a real estate company for a specified period of time to sell a property, for which, upon the sale, the agent receives a commission.
Market Price – The actual price at which a property sold.
Market Value – The price that is established by present economic conditions, location and general trends.
Mortgage – A document that pledges the property to the lender as security for the loan needed to purchase the home.
Multiple Listing Service (MLS) – This is where brokers to share their listings with other brokers.
Originantion fee – An application fee(s) for processing a proposed mortgage loan.
PITI – Another way of describing your monthly mortgage payment; principal, interest, taxes and insurance, forming the basis for monthly mortgage payments.
Point – 1% of the loan principal; it’s charged in addition to interest and fees.
Prepayment Penalty – Penalty for paying off the loan before it is due.
Pre-Qualification – The process the lender goes through to confirm if a borrower qualifies for a loan based on their credit history and current financial status as well as the amount of money a recipient qualifies to receive.
Principal – One of the parties to a contract; or the amount of money borrowed, for which interest is charged.
Prorate – Divide or assess proportionately.
Settlement – All financial transactions required to make the contract final.
Title – A document that indicates ownership of a specific property.
Title Search – Detailed examination of the entire document history of a property title to make sure there are no legal encumbrances.