Common Real Estate Terms

Abstract of title: A summary or digest of the conveyances, transfers, and any other facts relied on as evidence of title, together with any other elements of record which may effect the marketability of the title.

Amortization: Paying a loan by making scheduled payments on the amount you borrowed with interest.

Annual Percentage Rate (APR): The cost of your credit expressed as a yearly percentage. It includes interest and other finance charges such as points, origination fees and mortgage insurance.

Buydown: Money you can pay your lender at the beginning of a loan to temporarily lower your interest rate and monthly payments.

Buyer Broker: A real estate professional who works for you and represents you, the buyer.

Caps: A feature of adjustable rate mortgages that limits how high your interest rate can rise. This protects you from dramatic upward swings in the interest rate market.

Closing: The official statement of your home purchase and mortgage loan.

Downpayment: The difference between the sales price of a home and the mortgage amount. The downpayment is usually paid with the cashier’s check at closing.

Equity: The difference between a home’s market value and the balances on outstanding home loans. Your equity value is considered an asset.

FHA Loan: A loan insured by the Federal Housing Administration against loss to your lender. An FHA loan usually requires a lower downpayment than a conventional mortgage.

Float Down Option: Lowers your interest rate if market rates drop after you lock in, or commit to a certain rate.

Gross Income: Your income before any taxes or other obligations are deducted.

Homeowner’s Insurance: Insurance that protects your home and possessions from theft and damage.

Interest: A fee you pay for borrowing money.

Listing Agent: A real estate professional who is contacted by and works for the seller. He or she can do nothing to harm the seller’s position, but assists you with the purchase and shows the features of the homes.

Origination Fee: A sum, usually a small percentage of your loan amount, charged by your lender to process your mortgage paperwork.

PITI: Shorthand for “Principal-Interest-Taxes-Insurance,” the four elements of your monthly mortgage payments.

Planned Unit Development (PUD): A subdivision having common areas maintained by its homeowners, they are also often zoned for residential as well as commercial uses (neighborhoods with schools, shopping, etc.)

Point: A fee charged by your lender to maintain or lower the interest rate on a mortgage loan. A point is equal to one percent of the amount borrowed.

Prepayment Penalty: A fee charged by your lender if you pay off your loan before it is due.

Principal: Your loan amount, excluding interest.

Private Mortgage Insurance (PMI): Insurance that protects the lender if foreclosure on your home is unavoidable.

Property Taxes: Taxes homeowners pay for community services like public schools. These taxes are typically included in your monthly mortgage payment.

Purchase and Sale Agreement: A contract between you and the seller that defines the terms and conditions of your home purchase.

Rate Lock: Guarantees a certain interest rate and points for a specified period of time, from 30 to 60 days or longer. This protects you from fluctuating market conditions.

Survey: A measurement of land by a registered surveyor that shows dimensions, easements and improvements.

Title: Written evidence that proves you are the owner of your property.

Underwriting: The analysis of your overall credit and property value and the determination of a mortgage rate and term.

VA Loan: A loan guaranteed by the Department of Veterans Affairs against loss to your lender.