Glossary of Real Estate Terms

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 an expert opinion of the value or worth of a property.

ASSESSED VALUE the value placed on 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, stating that a seller has an insurable title to the property.

CLOSING the deed to property is legally transferred from seller to buyer and documents are recorded.

CLOSING COSTS see "Settlement" or refer to Settlement Costs on this website.

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 of attributes and selling process of comparable homes on the market or recently sold; used to help determine pricing for a seller's property.

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 property from seller to buyer.

DOWN PAYMENT a percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender.

EQUITY the value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens.

ESCROW a fund or account held by a third-party custodian until conditions of a contract are met.

FIXED RATE MORTGAGE interest rates on this type of mortgage remain the same over the life of the loan. Compare to adjustable rate mortgage.

FIXTURE a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to property and belongs to the property when it is sold.

HAZARD INSURANCE compensates for property damage from specified hazards such as fire.

INTEREST the cost of borrowing money, usually expressed as a percentage rate.

LIEN a security claim on 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 property, for which, upon the sale, the agent receives a commission.

MARKET VALUE the price that is established by present economic conditions, location and general trends.

MARKET PRICE the actual price at which a property sold.

MORTGAGE security claim by a lender against property until the debt is paid.

MULTIPLE LISTING SERVICE (MLS) a system that provides to its members detailed information about properties for sale.

ORIGINATION FEE application fee(s) for processing a proposed mortgage loan.

PITI principal, interest, taxes and insurance, forming the basis for monthly mortgage payments.

POINT one percent of the loan principal. It is charged in addition to interest and fees.

PREPAYMENT PENALTY a fee paid by a borrower who pays off the loan before it is due.

PRINCIPAL one of the parties to a contract; or the amount of money borrowed, for which interest is charged.

PRORATE divide or assess proportionately.

PURCHASE & SALE AGREEMENT see "Contract," or refer to Purchase and Sale Agreement on this website.

SETTLEMENT all financial transactions required to make the contract final. See Settlement Costs on this website.

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.

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	an expert opinion of the value or worth of a property.
ASSESSED VALUE	the value placed on 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, stating that a seller has an insurable title to the property.
CLOSING	the deed to property is legally transferred from seller to buyer and documents are recorded.
CLOSING COSTS	see "Settlement" or refer to Settlement Costs on this website.
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 of attributes and selling process of comparable homes on the market or recently sold; used to help determine pricing for a seller's property.
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 property from seller to buyer.
DOWN PAYMENT	a percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender.
EQUITY	the value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens.
ESCROW	a fund or account held by a third-party custodian until conditions of a contract are met.
FIXED RATE MORTGAGE	interest rates on this type of mortgage remain the same over the life of the loan. Compare to adjustable rate mortgage.
FIXTURE	a recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to property and belongs to the property when it is sold.
HAZARD INSURANCE	compensates for property damage from specified hazards such as fire.
INTEREST	the cost of borrowing money, usually expressed as a percentage rate.
LIEN	a security claim on 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 property, for which, upon the sale, the agent receives a commission.
MARKET VALUE	the price that is established by present economic conditions, location and general trends.
MARKET PRICE	the actual price at which a property sold.
MORTGAGE	security claim by a lender against property until the debt is paid.
MULTIPLE LISTING SERVICE (MLS)	a system that provides to its members detailed information about properties for sale.
ORIGINATION FEE	application fee(s) for processing a proposed mortgage loan.
PITI	principal, interest, taxes and insurance, forming the basis for monthly mortgage payments.
POINT	one percent of the loan principal. It is charged in addition to interest and fees.
PREPAYMENT PENALTY	a fee paid by a borrower who pays off the loan before it is due.
PRINCIPAL	one of the parties to a contract; or the amount of money borrowed, for which interest is charged.
PRORATE	divide or assess proportionately.
PURCHASE & SALE AGREEMENT	see "Contract," or refer to Purchase and Sale Agreement on this website.
SETTLEMENT	all financial transactions required to make the contract final. See Settlement Costs on this website.
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.