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105 Real Estate Terms Every Realtor Should Know

Real estate requires a clear understanding of its language. For real estate agents and brokers, a comprehensive grasp of real estate terms is not just beneficial, it is necessary. A firm foundation in real estate terms empowers professionals to communicate effectively with clients, colleagues, and legal representatives, ensuring that all parties involved in a real estate transaction are on the same page.

105 Real Estate Terms Every Realtor Should Know

The lexicon of real estate terms can be extensive and at times, intricate. Agents encounter a wide range of jargon, from the specifics of contracts to the nuances of financing and negotiation. Real estate terms like “amortization,” “escrow,” and “contingent” are just a few examples of the vernacular used daily in the profession. Knowledge of these real estate terms can provide clarity in discussions, help avoid misunderstandings, and enhance the overall professionalism of real estate agent.

Mastering these real estate terms can also elevate an agent’s ability to guide clients through the buying, selling, or leasing process. It is the responsibility of the real estate professional to ensure clients are well-informed and comfortable with the terminologies or real estate terms applied in agreements and contracts. In essence, fluency in real estate language is a key component that can lead to successful transactions and satisfied clients.

The Basics of Real Estate Terms and Transactions

A busy office with agents on the phone, signing contracts, and discussing property listings. A whiteboard displays key real estate terms

Real estate transactions involve complex processes and multiple parties to transfer ownership of a property. Knowing the meaning of specific real estate terms and how these play a part in transactions is crucial for success when it comes to representing both buyers and seller clients.

The Role of Real Estate Agents

Real estate agents act as fiduciaries for either a buyer or a seller in the buying and selling of real property. A listing agent represents the seller, working to market and sell the property. Conversely, a buyer’s agent works with the buyer to locate a suitable property and negotiate the transaction. Both types of agents typically operate under a brokerage, which oversees the transaction’s legal and ethical conduct.

As a real estate agent, one of your key responsibilities is your ability to understand and explain key real estate terms to your clients so that you can not only help them buy or sell a house, but also guide them through the process so that they are comfortable with the transaction and the details that it entails. Below are 105 important real estate terms that all real estate agents should know!

105 Important Real Estate Terms

1. What Does Contingent Mean?

One of the real estate terms is contingent. When a home’s sale is labeled as contingent, it signifies that the seller has accepted an offer, but certain conditions or contingencies must be satisfied before the transaction can be completed. Common contingencies include successful home inspections, appraisals, or mortgage pre-approval.

2. What Does Pending Mean?

A home with a pending status indicates that the seller has accepted an offer from a buyer, but the deal has not yet been finalized. Unlike contingencies, a pending status means that all conditions have been met, and the transaction is in the final stages of processing.

3. What is a Short Sale ?

A short sale occurs when a property is sold for less than the outstanding mortgage balance. The sale proceeds go to the lender, who must approve the sale. For sellers, short sales are preferable to foreclosure from a financial standpoint.

4. What is Wholesaling in Real Estate?

Wholesaling involves finding sellers willing to sell their properties at a discount and connecting them with cash buyers or real estate investors. The wholesaler earns a fee for facilitating the transaction, providing a hassle-free sale for the seller and an investment opportunity for the buyer.

5. What is Cap Rate?

The cap rate, or capitalization rate, is a metric used by real estate investors to evaluate the profitability of a property. It is calculated as the ratio of a property’s net operating income to its purchase price, helping investors assess potential returns.

6. What is ARV?

ARV stands for After Repaired Value, which represents the estimated value of a property after it has been renovated. An appraiser determines this value based on the planned repairs and improvements.

7. What is Right of First Refusal in Real Estate

The right of first refusal is a contractual provision that gives an interested party the first opportunity to purchase a property before the seller can consider other offers. The seller can negotiate with other buyers only if the party with the right of first refusal declines to buy.

8. What is LTV in Real Estate?

LTV, or loan-to-value ratio, is a measure used by lenders to assess the risk of a loan. It is calculated by dividing the loan amount by the property’s appraised value. Higher LTV ratios are considered riskier and often come with higher interest rates.

9. What is an Encumbrance?

An encumbrance is a claim, liability, or restriction on a property, such as liens, deed restrictions, easements, or encroachments. These can affect the property’s value and the owner’s ability to transfer the title.

10. What is NOI in Real Estate?

NOI stands for net operating income, which is used to evaluate a property’s profitability. It is calculated by subtracting all operating expenses from the property’s total revenue. NOI helps determine if a property is a worthwhile investment.

11. What is an Easement?

An easement grants someone the right to use a property for a specific purpose, even though they do not own it. For example, utility companies often have easements to access roads on a property for maintenance.

12. What is Blockbusting?

Blockbusting is an illegal practice where real estate agents persuade homeowners to sell properties at low prices by instilling fear that the neighborhood’s socioeconomic status is declining. The agent then sells the property at a higher price, often exploiting discriminatory biases.

13. What Does MLS Stand for in Real Estate?

MLS, or Multiple Listing Service, is a database that compiles property listings in a specific area, accessible only to real estate agents who pay a subscription fee. It provides up-to-date market information.

14. What is CAM in Real Estate?

CAM stands for common area maintenance, referring to additional charges that tenants may pay for the upkeep of shared spaces in multi-tenant buildings. Examples include fees for pest control, security, and insurance.

15. Proof of Funds in Real Estate

A Proof of Funds letter is a document that buyers provide to sellers, proving they have the necessary funds to cover the purchase costs, including the down payment, escrow, and closing costs.

16. What is Earnest Money in Real Estate?

Earnest money is a deposit paid by the buyer to the seller after an offer is accepted. It is held in escrow and applied to the down payment and closing costs once the transaction is completed.

17. What is ADU in Real Estate?

ADU, or accessory dwelling unit, is a secondary residential building on the same lot as the main home, such as a guest house or detached garage. ADUs cannot be sold separately from the primary residence.

18. What Are Comps in Real Estate?

Comps, short for comparable sales, refer to properties in the same area with similar size, condition, and features. Buyers and sellers use comps to determine fair market values and make informed decisions on pricing and offers.

19. What is HOA in Real Estate?

HOA stands for homeowner’s association, a group formed by property owners in a subdivision or condominium complex to manage shared issues like maintenance and neighborhood regulations.

20. What is Redlining in Real Estate?

Redlining is an illegal discriminatory practice that denies financial services to neighborhoods based on racial or ethnic composition, resulting in reduced investment and economic opportunities.

21. What Does NNN Mean in Real Estate?

A triple net (NNN) lease requires the tenant to pay property expenses, including real estate taxes, insurance, and maintenance, in addition to rent and utilities, providing investors with a low-risk income source.

22. What is PMI in Real Estate?

PMI, or private mortgage insurance, is required by lenders when a buyer cannot make a 20% down payment. It protects the lender in case the buyer defaults on the mortgage.

23. What is a Variance in Real Estate?

A variance allows a property to deviate from local zoning laws. Property owners must obtain a variance from local authorities to make changes that do not conform to current zoning regulations.

24. What is AVM?

AVM, or automated valuation model, estimates a property’s market value using machine learning algorithms based on sales prices and property data. An example is Zillow’s Zestimate.

25. What is RV?

RVM, or Realtors Valuation Model, provides a more accurate property valuation than AVM, using MLS data and off-market information available exclusively to members of the National Association of Realtors.

26. What is a CRM?

CRM stands for Customer Relationship Management. In the real estate industry, a CRM is a software tool that helps agents and brokerages manage their leads, track interactions, and streamline their marketing and sales processes. It is essential for agents who want to efficiently scale their operations and maintain strong client relationships.

27. What is Novation in Real Estate?

Novation occurs when an existing contract is replaced with a new one that incorporates changes agreed upon by all parties. This process is used in both commercial and residential real estate transactions to update the terms of the agreement.

28. What is Eminent Domain in Real Estate?

Eminent domain is the government’s power to take private property for public use, such as for building roads or parks, with compensation provided to the property owner.

29. What is a 1031 Exchange in Real Estate?

A 1031 exchange, named after Section 1031 of the IRS code, allows investors to defer capital gains taxes by exchanging one investment property for another of similar value. This is commonly used in commercial real estate transactions.

30. What is Underwriting?

Underwriting involves a lender assessing the creditworthiness of a potential borrower. The process includes evaluating the borrower’s financial history, the value of the property, and other factors to determine the risk involved in approving the loan.

31. What is Probate in Real Estate?

Probate is the legal process through which a deceased person’s will is validated and their estate is distributed according to their wishes. In real estate, probate involves the court overseeing the transfer or sale of property owned by the deceased.

32. What is REO?

REO stands for Real Estate Owned. It refers to properties that lenders acquire after a foreclosure sale fails to attract a buyer. These bank-owned properties are then sold directly by the lender.

33. What is a Fixture in Real Estate?

A fixture is any item that is permanently attached to a property, such as built-in appliances or lighting. These items are considered part of the property and typically remain with it when it is sold.

34. What is Steering?

Steering is an illegal practice under the Fair Housing Act where a real estate agent directs clients toward or away from certain neighborhoods based on race, ethnicity, or other discriminatory factors.

35. What is a BPO?

BPO stands for Broker Price Opinion. It is an estimate of a property’s value provided by a real estate broker or agent, often used by lenders as an alternative to a full appraisal.

36. What is IRR?

IRR stands for Internal Rate of Return. It is a financial metric used to evaluate the profitability of a real estate investment, representing the annualized rate of return on the investment over a specified period.

37. What is EMD in Real Estate?

EMD stands for Earnest Money Deposit. This is a payment made by a buyer to show their serious intent to purchase a property, typically held in escrow until the sale is finalized.

38. What is a Covenant in Real Estate?

A covenant is a legally binding condition written into a property deed or lease that restricts the use or activities on the property, often enforced by a homeowners’ association or local government.

39. What is Estoppel?

Estoppel is a legal principle that prevents a person from arguing something contrary to a claim they previously made if someone else has relied on that original claim. In real estate, it often involves tenants or buyers confirming the terms of agreements.

40. What is DOM?

DOM stands for Days on Market. It is a metric that tracks the number of days a property has been listed for sale until it goes under contract. A high DOM can indicate a slow market or overpricing.

41. What is a PUD in Real Estate?

PUD stands for Planned Unit Development. It refers to a type of building development and regulatory process that includes both residential and commercial properties, often with shared amenities and governance by a homeowners’ association.

42. What is GRM in Real Estate?

GRM stands for Gross Rent Multiplier. It is a simple method used by real estate investors to estimate the value of an income-producing property based on its rental income.

43. What is Real Estate Syndication?

Real estate syndication involves a group of investors pooling their resources to buy and manage a property that would be difficult to acquire individually. This partnership allows for shared profits and risks.

44. What is the Statute of Frauds in Real Estate?

The Statute of Frauds requires that certain types of contracts, including those for the sale of real estate, be in writing and signed to be legally enforceable.

45. What is an Appurtenance in Real Estate?

An appurtenance is a legal term for something that is attached to and runs with the land, such as a barn, garage, or easement, and is passed on to new owners when the property is sold.

46. What is a Real Estate Trust?

A real estate investment trust (REIT) is a company that owns, operates, or finances income-producing real estate. REITs allow individual investors to earn a share of the income generated by commercial real estate ownership without having to buy, manage, or finance any properties themselves.

47. What is GLA in Real Estate?

GLA stands for Gross Living Area. It measures the total interior livable space in a residential property, excluding areas like garages, basements, and porches.

48. What is an Option in Real Estate?

An option is a contract that gives a buyer the exclusive right to purchase a property at a predetermined price within a specified timeframe, while the seller cannot sell to anyone else during that period.

49. What is Puffing in Real Estate?

Puffing refers to the practice of making exaggerated, subjective claims about a property, such as saying it has “the best view in town.” While generally legal, puffing can become problematic if it crosses into misrepresentation.

50. What is a Bridge Loan in Real Estate?

A bridge loan is a short-term loan used to bridge the gap between the purchase of a new property and the sale of an existing one. These loans are typically secured by the borrower’s current home and help facilitate the transition between properties.

51. What is Condemnation in Real Estate?

Condemnation, a crucial concept in real estate, is closely tied to eminent domain. While eminent domain grants the government the right to take over property, condemnation is the legal process through which this right is executed. It can involve seizing an entire property, a portion of it, or even just temporary use.

52. What is Escheat in Real Estate?

Escheat refers to the government’s authority to claim ownership of unclaimed property and estate assets. This typically occurs when a property owner dies without a will and has no heirs. In such cases, the property reverts to the state through escheat.

53. What is Basis in Real Estate?

Basis is the value assigned to a property for tax purposes. There are two main types: cost basis and adjusted basis. Cost basis, or initial basis, is the original purchase price of the property. Adjusted basis reflects changes to the original basis over time, such as due to appreciation or depreciation.

54. What is “Subject-To” in Real Estate?

In real estate, “subject-to” refers to a scenario where a buyer acquires a property while leaving the existing mortgage in the seller’s name. This means that the property is subject to the terms of the current financing, even though it has changed ownership. This arrangement often arises in foreclosures or when a homeowner is in arrears on mortgage payments.

55. What is Dual Agency?

Dual agency arises when a single real estate agent represents both the buyer and the seller in a transaction. While not permitted in all states, it can be allowed if disclosed to both parties. While it can streamline transactions, dual agency can present challenges for both buyers and sellers.

56. What is GRI in Real Estate?

GRI, or Graduate, Realtor Institute, is a specialized designation offered by the National Association of Realtors. Agents who earn this designation gain comprehensive knowledge on various technical subjects beyond the foundational real estate knowledge.

57. What is CDA?

Commission Disbursement Authorization (CDA) is a document similar to a payment request. It specifies how the commission will be distributed once a deal is closed, and it is typically sent to the escrow company, title company, or attorney handling the closing process.

58. What is FSBO in Real Estate?

FSBO, or For Sale By Owner, refers to a property that is being sold directly by the homeowner without the involvement of a real estate agent. Homeowners often choose this route to avoid paying agent commissions.

59. What is Subagency?

Subagency is a practice where a real estate agent or broker brings a buyer to purchase a property listed by another agent or broker. In this scenario, the agent representing the buyer is considered a subagent of the listing broker, owing fiduciary duties to the seller.

60. What is HUD in Real Estate?

HUD, which stands for the Department of Housing and Urban Development, specifically refers to the HUD-1 Settlement Statement in real estate. This document serves as a detailed closing statement, itemizing all financial transactions related to the property’s closing.

61. What is CDOM in Real Estate?

CDOM, or Cumulative Days on Market, indicates the total number of consecutive days that a property has been listed on the Multiple Listing Service (MLS) under any listing agent. It includes all historical listing data for the property.

62. What is Encroachment in Real Estate?

Encroachment occurs when a property owner builds or extends a structure onto a neighboring property, often due to disputed property lines or a lack of awareness of boundary limits.

63. What is COE in Real Estate?

COE, or Close of Escrow, marks the date when all necessary funds and documents are processed in escrow, officially transferring ownership of the property to the buyer.

64. What is Situs in Real Estate?

Situs refers to the physical location of a property, often used for taxation and legal purposes, such as determining jurisdiction or property rights.

65. What is Boot?

Boot is a term used in 1031 property exchanges to refer to any cash or other property received by the taxpayer that is not like-kind to the relinquished property. This can result in a taxable gain.

66. What is a Pocket Listing?

A pocket listing, also known as an off-market listing, is a property that is for sale but is not publicly advertised or listed on the Multiple Listing Service (MLS). It is typically marketed privately by a real estate agent.

67. What is HOPA?

HOPA, or Housing for Older Persons Act of 1995, exempts certain housing communities intended for individuals aged 55 and older from certain anti-discrimination laws related to familial status.

68. What is an APN?

APN, or Assessor Parcel Number, is a unique identifier assigned by a county tax assessor to each parcel of land for tax assessment purposes.

69. What is General Agent in Real Estate?

A general agent has the authority to perform a range of actions on behalf of a client, often with the power of attorney. They are not limited in the actions they can take on behalf of the client.

70. What is Special Agent in Real Estate?

A special agent is hired for a specific task or job for a client and is limited to the scope of that task. Once the task is completed, the special agent is no longer employed by the client.

71. What is TLC in Real Estate?

TLC, or Tender Loving Care, is a term used to describe a property that requires extensive repairs and renovations. Buyers should be prepared for significant investments of time and money when purchasing a TLC property.

72. What are Emblements in Real Estate?

Emblements are crops that are considered personal property, even if grown on land that is not owned by the farmer. In cases where a tenant farmer grows crops on leased land and then dies, the crops pass to the farmer’s heirs.

73. What Does MOL Mean in Real Estate?

MOL, or More or Less, is used when measuring the acreage of a property to indicate that the exact acreage is not precisely determined, especially in cases where part of the property is on a slope or irregularly shaped.

74. What is Conversion in Real Estate?

Conversion is an illegal practice where a real estate agent misappropriates funds intended for property repairs or personal purchases, violating the trust of the client.

75. What is Subrogation in Real Estate?

Subrogation is a legal principle where one party substitutes another in terms of legal rights and obligations. In real estate, it can occur in cases involving leases, mortgages, and insurance policies.

76. What is Plottage in Real Estate?

Plottage refers to the combining of adjacent parcels of land to create a larger, more valuable property, often seen in urban areas where multiple smaller properties are merged.

77. What is a Binder in Real Estate?

A binder in real estate refers to an earnest money deposit or mortgage binder in a property transaction. While not legally binding, it signifies the buyer’s strong interest in the property transaction.

78. What is FIRPTA?

FIRPTA, or Foreign Investment in Real Property Tax Act, ensures that foreign taxpayers pay income tax on U.S. real estate sales. It applies to most sales involving foreign property owners, with some exemptions.

79. What is Hypothecation?

Hypothecation is the pledging of an asset, such as a home, as collateral for a loan. This helps secure the loan for the lender.

80. What Are CDD Fees in Real Estate?

CDD, or Community Development District, fees are charges levied on residents within a designated district to fund community amenities or infrastructure improvements. They are similar to homeowner’s association fees but are established under state law.

81. What is SFR in Real Estate?

SFR stands for Single-Family Rentals, a common term in real estate investing. These properties are a popular choice for investors due to their affordability, profitability, ease of management, high demand, and widespread availability.

82. What are Material Facts?

Material facts are crucial details that can significantly impact a buyer’s decision when purchasing a property, including its price. Failure to disclose such facts can lead to legal consequences.

83. What is CCR in Real Estate?

CCR stands for Covenants, Conditions, and Restrictions. These are rules that dictate how a property can be used, such as prohibiting certain activities like keeping a boat on the premises. It’s essential for homebuyers to be aware of CCRs before buying a property.

84. What is MSA?

MSA stands for Metropolitan Statistical Areas, urban areas with a population of at least 50,000. Real estate investors often use MSA data to analyze housing trends and population movements.

85. What is Commingling?

Commingling refers to the mixing of funds received in a property transaction. While some forms of commingling are legal, such as pooling funds for an investment property, others, like depositing a tenant’s security deposit into a personal account, are illegal.

86. What is FAR?

FAR, or Floor Area Ratio, is a ratio that compares a building’s total floor area to the size of the land it occupies. It helps determine the maximum allowable floor space that can be constructed on a piece of land.

87. What is Vesting?

Vesting is the process of officially transferring ownership rights of a property title, necessary when multiple individuals are listed as owners. For sole property owners, vesting is not required.

88. Clarifying PA in Real Estate

PA stands for Professional Association, a business designation available to certain professions. Real estate agents may choose this designation for better tax deductions.

89. What is LTC in Real Estate?

LTC, or Loan-to-Cost Ratio, is a metric used in commercial real estate for new construction projects. It compares the project’s financing to its total cost, helping lenders assess the risk of providing a loan.

90. What is Et Al?

Et al is a legal term used in property deeds to refer to multiple parties with ownership interest in a property.

91. What is RPA?

RPA stands for Robotic Process Automation, which is used in various real estate processes to automate tasks like mortgage applications and background checks, improving efficiency and reducing errors.

92. Prepaids in Real Estate

Prepaids are fees related to the home itself, such as property taxes and homeowner’s insurance, paid at closing.

93. Bird Dogging in Real Estate

Bird dogging involves finding off-market or undervalued properties and presenting them to real estate investors for a fee or percentage of the profit.

94. Alienation in Real Estate

Alienation refers to the transfer of ownership of a property, which can trigger immediate repayment of a mortgage.

95. What is SF in Real Estate?

In real estate, SF stands for square feet, a familiar term used to measure the size of a home. This measurement is crucial for determining the area of a property. Square feet is defined as the area of a square with each side measuring one foot in length.

96. What is Entitlements?

Entitlements in real estate refer to specific permissions granted by governing agencies regarding a property’s use. These permissions are particularly relevant for undeveloped or vacant land. Entitlements also play a role in property redevelopment or when confirming the allowable use of existing developments.

97. What is NOD in Real Estate?

NOD, or notice of default, is a public notice filed in court indicating that a mortgage borrower has defaulted on a loan. It is the final step a lender takes before initiating the foreclosure process on a property.

98. What is Rescission?

Rescission is the process of canceling or undoing a contract, aiming to return both parties to their original pre-contract positions. Rescission involves canceling and re-establishing the entire contract, not just specific parts of it.

99. What is GBA?

GBA stands for gross building area, representing the total area of a building across all its floor levels. This measurement is often calculated based on external wall lengths and is commonly used for commercial real estate properties like offices, industrial facilities, and agricultural buildings.

100. What is TBD?

TBD stands for to be determined, often referring to a TBD loan approval in real estate. This type of approval involves a comprehensive examination of a buyer’s income, assets, credit, and other factors before identifying a specific property. TBD approvals demonstrate a buyer’s serious intent to purchase.

101. What is Et Ux?

Et ux is a Latin abbreviation meaning “and wife,” often found in property deeds and legal documents related to real estate. It indicates that a wife jointly owns a property with her husband.

102. What is Warranty Deed?

A warranty deed is a document that offers the highest level of protection to a home buyer in a real estate transaction. This deed ensures that the buyer is acquiring the property free from any liens, mortgages, or other claims.

103. Defining a Subagent in Real Estate

A subagent is a real estate agent or broker who represents a buyer interested in purchasing a property, even though they are not the listing agent. The subagent works on behalf of the listing broker and typically receives a portion of the listing agent’s commission.

104. What is Procuring Cause?

Procuring cause is a concept used in real estate transactions involving multiple buyer’s agents. It determines which agent is entitled to receive the commission based on who initiated the buyer’s interest in the property and ultimately facilitated the purchase.

105. What is POA?

POA stands for power of attorney, a legal document that authorizes one individual to act on behalf of another in managing or selling property. In real estate, POA allows an agent to handle their client’s property, typically when the client is unable to do so themselves.

Legal Aspects and Documentation

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Other than understanding real estate terms, understanding the legal real estate terms and the required documentation is crucial in real estate transactions. Realtors must be well-versed in various contracts, understand the procedures for transferring property ownership, and ensure full disclosure and diligence to adhere to ethical standards.

Real Estate Terms for Contracts and Contingencies

Real estate transactions hinge on legal agreements known as contracts. These documents outline the terms and conditions agreed upon by the parties involved. A vital element of a contract is a contingency, which is a condition that must be met for the contract to be legally binding. Common contingencies include securing financing, successful home inspections, and the ability to sell a current home. An addendum may be attached to the contract to include additional real estate terms or conditions not addressed in the original agreement.

Title, Deed, and Ownership Transfers

The transfer of property ownership is formalized through a deed, a legal document that conveys the title from one party to another. Agents must familiarize these real estate terms and facilitate this transfer, which typically involves a title company to verify that the title is free of issues such as liens or encumbrances. The title company plays a key role in ensuring the closing process is completed smoothly, often handling the escrow account where earnest money is held until the transaction is finalized.

Real Estate Terms for Disclosure and Due Diligence

Ethical practice necessitates full disclosure from sellers regarding the condition of the property. These disclosures may include known defects, history of repairs, or any other material facts. Buyers are responsible for performing due diligence to confirm the property’s condition and legal standing. This process includes comprehensive home inspections and reviewing any disclosures or reports. In the event of discovered issues or default, the contractual agreements provide guidance on recourse for either party. Closing costs are the final financial settlement and include fees charged by the title company, lawyers, and other involved entities.

Financing and Mortgages

A realtor holds a key and a contract while standing in front of a house, surrounded by a stack of mortgage and financing documents

Understanding real estate terms for financing and mortgages is crucial for both realtors and homebuyers. This includes grasping the various loan options available, the real estate terms of these loans, and the conditions under which a property can be financed.

Understanding Mortgages: Real Estate Terms

mortgage is a loan taken out by a buyer to purchase real estate, and a lender is the institution that provides this loan. The loan is secured by the property itself, which means that in the event of foreclosure, the lender can take possession of the property if the borrower fails to make payments. When discussing mortgages, several key components come into play:

  • Principal: The initial amount of the loan, which will be gradually paid off.
  • Interest: The cost of borrowing, typically expressed as an annual percentage rate (APR).
  • Down payment: The upfront payment made by the buyer, which represents a percentage of the home’s price.
  • Mortgage insurance: Required for loans with a down payment lower than 20%, designed to protect the lender.
  • Debt-to-income ratio: A lender’s measure to determine a borrower’s ability to manage monthly payments and debts.

Real Estate Terms for Loan Types and Programs

Real estate terms such as mortgages can come in various forms, catering to different needs:

  • Fixed-rate mortgage: It is one of the real estate terms where interest remains constant throughout the life of the loan, leading to predictable monthly payments.
  • Adjustable-rate mortgage (ARM): The interest varies with market conditions—initially lower but can fluctuate and potentially increase.
  • Bridge loan: This short-term loan bridges the gap for buyers who are purchasing a new home before selling their current one, often using the real estate terms current home as collateral.

Further real estate terms for loan variations and programs include:

  • Pre-approval: A lender assesses a borrower’s financial situation to determine how much they can borrow.
  • Buydowns: Temporarily reduces the interest rate and monthly payments, often funded by sellers to make the property more attractive.
  • Clear title: Assurance that the property is free of legal claims, necessary for securing a mortgage.
  • Cash-out refinance: A mortgage refinance option where the new loan amount is larger than the existing one, allowing borrowers to access the equity in their home.

Understanding these real estate terms and the anatomy of financing and mortgages helps realtors to guide their clients through the intricate process of purchasing a home.

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