Adjustable-Rate Mortgage (ARM)
A type of mortgage where the interest rate can change periodically based on an index. This means your monthly payments can go up or down over time.
Amortization
The process of paying off a loan through regular payments over a set period. Part of each payment goes toward the loan principal, and part goes toward interest.
Amendment
A change or addition made to an existing contract. Amendments must be agreed upon and signed by all parties involved in the original contract.
Appraisal
A professional evaluation of a property's market value, typically required by lenders to ensure the property is worth the loan amount.
Assessment
A tax or fee imposed by a local government on property owners for public projects like roads or schools.
Attorney Review
A period during which a buyer's or seller's attorney can review and propose changes to a real estate contract before it becomes binding.
Capitalization Rate (Cap Rate)
A rate that helps in evaluating the return on an investment property. It is calculated by dividing the property’s net operating income (NOI) by its current market value. Cap rate = NOI / Current Market Value.
Clear to Close
A lender’s notification that all conditions for the mortgage have been satisfied, and the loan is ready to be finalized at closing.
Closing
The final step in a real estate transaction where the title is transferred from seller to buyer, and all financial agreements are settled.
Closing Costs
Expenses over and above the price of the property, typically including loan origination fees, title insurance, and appraisal fees.
Contingency
A condition that must be met before a contract becomes binding. Common contingencies include home inspections and financing approval.
Contract
A legally binding agreement between the buyer and seller outlining the terms and conditions of the sale of the property.
Down Payment
The initial payment made by a buyer, usually a percentage of the purchase price. It reduces the amount of the loan.
Earnest Money
A deposit made by the buyer to show they are serious about purchasing the property. It is usually applied to the purchase price at closing.
Equity
The difference between the market value of a property and the amount still owed on the mortgage. It represents the owner's financial interest in the property.
Fixed-Rate Mortgage
A mortgage with an interest rate that remains the same for the entire term of the loan, providing stable monthly payments.
Home Inspection
An examination of a property's condition, often required by buyers to identify any issues before completing the purchase.
Home Insurance
Insurance that covers losses and damages to an individual's house and assets in the home. It typically also provides liability coverage against accidents in the home or on the property.
Homeowner’s Association (HOA)
An organization in a subdivision or condominium complex that makes and enforces rules for the properties within its jurisdiction.
Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount.
Listing Agent
The real estate agent who represents the seller and lists the property for sale.
Loan Pre-Approval
A preliminary evaluation by a lender indicating the amount they are willing to lend to a potential buyer, based on their financial situation.
Mortgage
A loan used to purchase real estate, with the property itself serving as collateral.
Net Operating Income (NOI)
The total income from a property after operating expenses have been deducted.While NOI takes into account all operating expenses, it does not account for loan payments. It can therefore be used to compare rental properties irrespective of financing terms.
Principal
The amount of money borrowed for a mortgage, excluding interest.
Private Mortgage Insurance (PMI)
Insurance that a borrower must pay if their down payment is less than 20% of the home's value. It protects the lender in case of default.
Property Taxes
Taxes paid by property owners, typically used to fund local services such as schools, roads, and public safety.
Title
A legal document proving ownership of a property.
Title Company
A company that ensures the title to the property is legitimate and then issues title insurance for that property.
Title Insurance
Insurance that protects the buyer and lender from any legal disputes over property ownership that may arise after the sale is complete.
Underwriting
The process a lender uses to assess the risk of lending money to a borrower, including evaluating credit history, income, and other financial factors.
Walk-Through
A final inspection of the property by the buyer before closing to ensure the condition of the property is as agreed upon.