Glossary

Real-estate terms, in plain English

The words you will see in listings, loan documents and contracts, explained without jargon.

Search 99 terms

A

Abstract of Title: A historical summary of all recorded legal actions, ownership transfers, and encumbrances affecting a property.
Adjustable-Rate Mortgage (ARM): A mortgage whose interest rate changes periodically based on a market index. Typically offers a lower initial rate than fixed-rate loans, with rate caps limiting how much it can change.
Amortization: The process of paying off a loan through regular payments over time. Early payments are mostly interest; later payments shift toward principal.
Appraisal: A professional estimate of a property's market value, required by mortgage lenders to ensure the loan doesn't exceed the home's worth.
Appraisal Gap: When a home appraises for less than the agreed purchase price. The buyer may need to cover the gap with cash or renegotiate.
As-Is Sale: A sale where the seller makes no repairs and the property is sold in its current condition. Disclosure requirements still apply.
Assumable Mortgage: A loan that can be transferred from the seller to the buyer, allowing the buyer to take over the existing rate and terms — valuable when current rates are higher.

B

Balloon Mortgage: A loan with smaller regular payments for a set term, followed by one large "balloon" payment of the remaining balance.
Bridge Loan: Short-term financing that helps buyers purchase a new home before selling their current one. Higher rates and fees apply.
Buyer's Agent: A real estate agent who represents the buyer's interests in a transaction, typically compensated through a commission paid by the seller or directly by the buyer.
Buyer's Market: Market conditions where supply exceeds demand, giving buyers more negotiating leverage, more choices, and less pressure to act quickly.

C

Cap Rate: Net operating income divided by property value. Used to compare investment properties — a higher cap rate generally indicates higher return and higher risk.
Chain of Title: The complete history of ownership transfers for a property, from its origin to the present.
Clear Title: A title with no liens, disputes, or encumbrances — a requirement for most real estate transactions.
Closing: The final step of a real estate transaction where ownership transfers, documents are signed, funds are distributed, and keys change hands.
Closing Costs: Fees and expenses paid at closing beyond the purchase price. Typically 2–5% of the loan amount for buyers, covering appraisal, title, lender fees, and prepaid items.
Closing Disclosure (CD): A 5-page document provided to buyers 3 business days before closing, itemizing all final loan terms and closing costs.
Comparative Market Analysis (CMA): An analysis of recently sold comparable properties used to estimate a home's market value. Performed by real estate agents.
Concessions: Credits or contributions made by the seller to cover buyer closing costs or reduce the purchase price. Subject to loan-type limits.
Contingency: A condition that must be met for the sale to proceed. Common contingencies: inspection, financing, appraisal, and sale of buyer's current home.
Conventional Loan: A mortgage not backed by a federal agency. Requires stronger credit and typically a 3–20% down payment, but avoids government-required mortgage insurance at higher down payments.
Counteroffer: A seller's response to a purchase offer that modifies the price, terms, or conditions rather than accepting or rejecting outright.

D

Days on Market (DOM): The number of days a listing has been actively on the market. High DOM can indicate overpricing or property issues.
Debt-to-Income Ratio (DTI): Monthly debt payments divided by gross monthly income. Most lenders require DTI below 43–50% for mortgage approval.
Deed: The legal document that transfers ownership of real property from seller to buyer.
Deed of Trust: Used in some states instead of a mortgage. Involves three parties: borrower, lender, and a trustee who holds title until the loan is repaid.
Default: Failure to meet loan obligations, typically by missing payments. Can lead to foreclosure proceedings.
Depreciation: A reduction in property value over time. Also an accounting tool used by investment property owners to offset rental income on tax returns.
Discount Points: Fees paid upfront to permanently lower the mortgage interest rate. One point equals 1% of the loan amount and typically reduces the rate by 0.25%.
Down Payment: The portion of the purchase price paid in cash at closing. The remainder is financed through a mortgage.
Due Diligence Period: The time after an offer is accepted during which the buyer inspects the property and can exit the contract under contingency protections.

E

Earnest Money Deposit (EMD): A good-faith deposit made by the buyer when going under contract, held in escrow and typically applied to closing costs or down payment.
Easement: The legal right of one party to use a portion of another's property for a specific purpose, such as a utility easement or shared driveway.
Encumbrance: Any claim, lien, or restriction on a property that may affect its transfer or value.
Equity: The difference between a property's market value and the outstanding mortgage balance.
Escrow: A neutral third party that holds funds and documents during a real estate transaction until all conditions are met. Also refers to the ongoing account that holds property tax and insurance payments.

F

Fair Market Value: The price a property would sell for between a willing buyer and seller, both with reasonable knowledge and no compulsion to act.
FHA Loan: A mortgage insured by the Federal Housing Administration. Allows down payments as low as 3.5% with a 580+ credit score.
Fixed-Rate Mortgage: A mortgage with an interest rate that stays the same for the life of the loan, providing predictable monthly payments.
Forbearance: A temporary pause or reduction in mortgage payments, granted by a lender when a borrower faces financial hardship.
Foreclosure: The legal process through which a lender takes possession of a property when the borrower defaults on the mortgage.
For Sale By Owner (FSBO): A home sold directly by the owner without a listing agent, avoiding the listing commission.

G

Good Faith Estimate (GFE): A now-replaced document (superseded by the Loan Estimate) that outlined expected loan costs. Still referenced colloquially.
Grant Deed: A deed where the seller guarantees they hold title and haven't previously transferred the property. Common in California.

H

Hard Money Loan: Short-term, asset-based loan from private lenders, used by investors. Higher rates, faster approval, based on property value rather than borrower credit.
Home Equity Line of Credit (HELOC): A revolving credit line secured by home equity, with a draw period followed by a repayment period.
Home Equity Loan: A lump-sum loan against home equity, typically with a fixed rate. Separate from a HELOC.
Home Inspection: A professional evaluation of a property's condition covering structure, systems, and components. Typically conducted during the due diligence period.
Homeowners Association (HOA): An organization in planned communities that enforces rules, maintains common areas, and collects dues from homeowners.
Homeowners Insurance: Insurance covering the structure, personal property, and liability. Required by mortgage lenders.

I

iBuyer: Companies (Opendoor, Offerpad) that use algorithms to make instant cash offers on homes, then resell them. Typically offer below market value in exchange for speed and certainty.
Inspection Contingency: A contract clause giving the buyer the right to inspect the property and exit the deal or negotiate repairs if unsatisfactory conditions are found.
Interest Rate: The percentage charged on the principal loan amount, expressed annually.

J

Joint Tenancy: A form of co-ownership where all parties hold equal shares and the right of survivorship — if one owner dies, their share passes automatically to the others.
Jumbo Loan: A mortgage exceeding the conforming loan limit ($806,500 in 2025 for most areas). Typically requires stronger credit, larger down payment, and more documentation.

L

Lien: A legal claim against a property, typically for unpaid debt. Must be resolved before the property can be sold with clear title.
Listing Agreement: The contract between a seller and their real estate agent, specifying commission, listing price, and duration.
Loan Estimate (LE): A 3-page document provided within 3 business days of a mortgage application, outlining projected loan terms, monthly payment, and closing costs.
Loan-to-Value Ratio (LTV): The loan amount divided by the property value. Higher LTV = more risk for lenders = potentially higher rates or PMI requirements.

M

Market Value: The most probable price a property would bring in a competitive, open market.
Mechanic's Lien: A lien filed by contractors or subcontractors for unpaid work on a property. Can cloud title and block sale.
Mortgage Insurance Premium (MIP): Insurance required on FHA loans, paid upfront and annually, regardless of down payment.
Multiple Listing Service (MLS): A database used by real estate agents to list and share property information. The primary distribution mechanism for home listings.

N

Note Rate: The contractual interest rate on a mortgage, as stated in the promissory note.
Novation Agreement: A contract structure where an existing obligation is replaced with a new one, often used in real estate to substitute a new buyer in a transaction without a traditional sale.

O

Offer: A formal proposal to purchase a property at a specified price and terms. Becomes a binding contract when accepted by the seller.
Open House: A scheduled time when a listed property is open for prospective buyers to tour without an appointment.
Origination Fee: A lender fee for processing a mortgage application, typically 0.5–1% of the loan amount.

P

PITI: Principal, Interest, Taxes, Insurance — the four components of a monthly mortgage payment.
Pre-Approval: A lender's conditional commitment to provide a loan up to a specified amount, based on verified income, assets, and credit.
Pre-Qualification: An estimate of loan eligibility based on self-reported information, without verification. Less meaningful to sellers than pre-approval.
Principal: The original loan amount, before interest. Monthly principal payments reduce the outstanding balance.
Private Mortgage Insurance (PMI): Insurance required on conventional loans with less than 20% down payment, protecting the lender if the borrower defaults. Can be removed at 20% equity.
Probate Sale: Sale of property owned by a deceased person, going through the court probate process. Often takes longer and involves additional legal steps.
Purchase Agreement: The legally binding contract between buyer and seller specifying all terms of the sale.

Q

Quiet Title Action: A court proceeding to establish clear ownership of a property when title is disputed.
Quitclaim Deed: Transfers whatever ownership interest the grantor has, with no guarantees. Often used in divorces, estate transfers, or correcting title defects.

R

Rate Lock: A lender's guarantee to hold a specific interest rate for a defined period (typically 30–60 days) while the loan is processed.
Real Estate Owned (REO): Property owned by a lender after an unsuccessful foreclosure auction. Often sold below market but sold as-is with limited disclosure.
Recording: The process of filing deed and mortgage documents with the county, creating public record of ownership transfer.
Refinancing: Replacing an existing mortgage with a new one, typically to secure a lower rate, change loan terms, or access equity.

S

Sale-to-List Ratio: The ratio of final sale price to original list price. Above 100% indicates offers above asking; below indicates negotiation.
Seller Concessions: Credits from seller to buyer, typically used to offset closing costs. Subject to limits based on loan type and down payment.
Seller's Market: Market conditions where demand exceeds supply, giving sellers more negotiating power and often resulting in multiple offers and above-ask prices.
Short Sale: A sale where the proceeds are less than the outstanding mortgage balance, requiring lender approval to proceed.
Survey: A professional measurement and mapping of a property's boundaries, easements, and encroachments.

T

Tenancy in Common: Co-ownership where each owner holds a defined share that can be sold or inherited independently.
Title: Legal ownership of a property. A clear title is required for most sales.
Title Insurance: Protects against loss from defects in title discovered after purchase. Two policies: lender's (required) and owner's (strongly recommended).
Title Search: A review of public records to verify ownership and identify any liens, encumbrances, or defects in title.
Transfer Tax: A tax imposed by state or local governments when property ownership changes hands. Rates vary widely by location.

U

Under Contract: A property with an accepted offer but that has not yet closed. Also called "pending" in some markets.
Underwriting: The process a lender uses to evaluate risk and approve a mortgage, verifying income, assets, credit, and property value.
USDA Loan: A government-backed mortgage for eligible rural and suburban buyers. Zero down payment required; income limits apply.

V

VA Loan: A mortgage guaranteed by the Department of Veterans Affairs for eligible veterans, service members, and surviving spouses. Zero down payment, no PMI.
Variable Rate: An interest rate that can change over time, usually tied to a benchmark index.

W

Warranty Deed: The strongest form of deed, where the seller guarantees clear title and will defend against any future title claims.
Wholesale Real Estate: A strategy where an investor contracts to buy a property and assigns that contract to another buyer for a fee, without ever purchasing the home.

Z

Zoning: Local government regulations governing how land and buildings can be used. Affects what you can build, operate, or change about a property.