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Real Estate Glossary

Appraisal	An estimate of the fair market value of a property; required by lenders before approving a loan.
ARM	Adjustable Rate Mortgage; a loan in which the interest rate changes over time, as market interest rates go up (or down), your loan payment goes up or down. Normally set to an index rate.
Assessment	An estimate of the market value of a property by a taxing authority; this value determines the taxes due to the city or town the property is located in.
Building Codes	Safety standards set by Federal, State, or municipal agencies; from initial construction to all housing.
Closing	A meeting with the buyer & seller (with lender or title company representatives) to sign all legal documents related to a property sale. Title of the property is transferred when the deed from the closing is recorded at the government registry of deeds.
Commission	A percent of a real estate sale that goes to a real estate broker for their services in the transaction.
Condominium	A form of real estate ownership; condominium associations are self-governing entities regulated by the State.
Credit Report	A person's credit history as reported to credit bureaus by lenders.
Credit Score	A statistical ranking of your credit history to evaluate risk by a lender, determined by credit bureaus.
Deed	Document representing legal transfer of ownership of a property, recorded at the local government registry of deeds.
Easement	A legal right associated with a property that is recorded on a deed or at the government registry of deeds, that grants access to a property (the right of an electric company to have telephone poles on a property for example).
Equity	The owner's financial interest in a piece of property; that is, the fair market value minus loans and/or liens.
Escrow	A separate account that lenders put non-loan funds, such as property taxes (often required to be paid from an escrow, which changes your total payment amount once per year), or homeowners insurance.
Fair Market Value	The theoretical market price of a property; often measured by comparing recent sales of nearby properties.
Fannie Mae	A company that creates a market in mortgages by buying and selling them, and also provides funds to other lenders to grant mortgages.
Fixed Rate Mortgage	A mortgage loan in which the interest rate is fixed (non-adjustable) for the life of the loan. This is generally the most desirable type of loan, especially if interest rates are rising.
Home Inspection	Contractually with a seller, a potential home buyer hires a person to physically inspect the condition of a building (electrical, plumbing, mechanical, roof, etc.) to determine any potential repairs before buying.
Index Rate	For Adjustable Rate Mortgages, when the interest rates changes, it is set to a public interest rate such as the current 2 Year U.S. Treasury Note + 1.5%.
Interest Rate	The amount of money paid to a lender in addition to the original amount borrowed, expressed as a percentage.
Judgment	A legal decision; when a person's property is attached (lien placed) until they pay off an unrelated debt; lenders will check for liens before granting a mortgage.
Lien	A financial claim against a property that must be cleared before the property is sold.
Loan Fraud	Deliberately lying on a mortgage application; it is illegal.
Lock	Interest rates change frequently; a lender will lock-in an interest rate near the start of the mortgage process, attempting to get the most favorable rate.
Mortgage Insurance	Often required by lenders if a buyer of a property does not make a 20% down payment.
PITI	Principal + Interest + Taxes + Insurance = Monthly Mortgage Payment [usually]
PMI	Private Mortgage Insurance, see Mortgage Insurance.
Points	A fee sometimes paid to mortgage lenders at closing (usually 1% or 1 point of principle); it buys a lower interest rate for that loan (in theory). The best thing to do is shop around with different lenders to get the best interest rate in the first place.
Pre-Approve	A lender commits, in writing, to lend a buyer an amount of money if certain conditions are met.
Pre-Qualify	A lender calculates how much potential money a buyer can qualify for; it is non-binding, and is subject to a mortgage application / evaluation process.
Principal	The total amount of money borrowed (sometimes with fees added to total) for a mortgage loan; you pay interest on this principle amount.
Radon	A radioactive gas that can cause health problems; many potential home buyers test for it before buying.
Refinance	To pay off a loan with the funds from another; often done when interest rates drop after you buy a home.
Settlement	Another name for "closing."
Survey	A property diagram that indicates legal boundaries, easements, encroachments, rights of way, improvement locations, etc."
Title	"A certificate provided by a qualified source (such as a title company) that shows the property legally belongs to the current owner; before the title is transferred at closing, it should be clear and free of all liens or other claims."
Title Insurance	"Insurance that protects the lender against any claims that arise from arguments about ownership of a property; also available for homebuyers."
Title Search	"A check of public records to be sure that the seller is the recognized owner of the real estate and that there are no unsettled liens or other claims against the property." A property needs to be free and clear before a lender grants a loan.