Real Estate Terms

Addendum – A legally binding amendment to a real estate contract. Used to modify terms such as the closing date or include additional items, like furniture or appliances in the sale.
Adjustable-Rate Mortgage (ARM) – A home loan with an interest rate that fluctuates based on market trends. Typically starts lower than a fixed-rate mortgage but adjusts over time.
Amortization – The process of gradually paying off a mortgage through scheduled payments applied to both principal and interest.
Annual Percentage Rate (APR) – The total cost of a mortgage, expressed as a percentage, including interest, loan fees, and other charges.

Backup Offer – A legally binding secondary offer on a home that is already under contract. If the initial deal falls through, the backup offer becomes active.
Blind Offer – A purchase offer submitted without an in-person viewing—common in competitive markets or for out-of-state buyers.
Borrower – The homebuyer taking out a loan to finance a property purchase.
Bridge Loan – A short-term loan used by a homeowner to buy a new property before selling their current home.
Broker – A licensed real estate professional who has completed additional training and can manage agents, operate independently, and oversee transactions.

Cash-Out Refinance – A refinance option allowing homeowners to borrow against home equity, replacing an existing mortgage with a larger loan and receiving the difference in cash.
Chain of Title – A documented history of past property ownership, confirming a clear and legal title.
Closing – The final step in a real estate transaction when ownership transfers from seller to buyer, and all payments are finalized.
Comparables (Comps) – Recently sold properties used to determine the fair market value of a home.
Contingency – A condition that must be met for a real estate contract to proceed, such as a home inspection, financing approval, or appraisal.

Debt-to-Income Ratio (DTI) – A financial metric showing total monthly debt payments as a percentage of gross income, used by lenders to determine mortgage eligibility.
Deed – A legal document confirming ownership of a property.
Down Payment – A percentage of the purchase price paid upfront to secure a mortgage. A 20% down payment typically eliminates Private Mortgage Insurance (PMI).

Earnest Money – A good faith deposit made by a buyer to show commitment to purchasing a home. Applied toward the down payment or closing costs at settlement.
Equity – The difference between a home’s market value and the remaining mortgage balance—essentially, the amount of the home you truly own.
Escrow – A neutral third party holds funds and documents until all contractual conditions are met. Escrow ensures a secure, smooth transaction.

FHA Loan – A government-backed loan insured by the Federal Housing Administration, designed for first-time homebuyers or buyers with lower credit scores.
Fixed-Rate Mortgage – A home loan with a consistent interest rate and monthly payments that do not change for the life of the loan.
Foreclosure – A legal process where a lender seizes and sells a property when a borrower defaults on mortgage payments.

Grace Period – A short extension after a payment due date during which no late fees are charged.
Home Equity Line of Credit (HELOC) – A flexible loan allowing homeowners to borrow against their home’s equity as needed.
Home Inspection – A professional assessment of a home’s condition, identifying potential structural, electrical, or plumbing issues before purchase.
Jumbo Loan – A mortgage that exceeds conforming loan limits, often used for luxury homes or high-cost real estate markets.
Lien – A legal claim on a property, typically due to unpaid debts, that must be resolved before selling.
Listing Agent vs. Buyer’s Agent – A listing agent represents the seller’s interests, while a buyer’s agent helps homebuyers find and negotiate their purchase.
Mortgage – A home loan secured by the property, repaid in monthly installments covering principal and interest.

Offer & Counteroffer – A buyer’s formal proposal to purchase a home, which a seller can accept, reject, or modify with a counteroffer.
Pending – A property under contract but not yet closed, meaning no new offers are typically accepted.
Private Mortgage Insurance (PMI) – Required for conventional loans with down payments under 20%, PMI protects lenders in case of default.
Refinancing – The process of replacing an existing mortgage with a new loan featuring better terms (e.g., lower interest rates).
Seller’s Disclosure – A legal document outlining known property defects, ensuring transparency before closing.
Title – A legal ownership record of a property, different from a deed, which is the physical document proving ownership.
Under Contract – A property with a signed purchase agreement, but not yet closed.
Underwriting – The lender’s process of assessing a buyer’s financial profile to approve a mortgage.
VA Loan – A government-backed mortgage for veterans and active-duty service members, often requiring no down payment.