Vocabulary

• Mortgage – A loan typically used for buying a home, in which the property itself serves as collateral.
• Down Payment – The initial payment made when buying something on credit, typically a home.
• Interest Rate – The proportion of a loan that is charged as interest to the borrower, typically expressed as an annual percentage of the loan outstanding.
• Credit Score – A statistical number that evaluates a consumer's creditworthiness based on their credit history.
• Escrow – A contractual arrangement in which a third party receives and disburses money or documents for the primary transacting parties.
• Homeowner's Insurance – A form of property insurance that covers losses and damages to an individual's residence and assets in the home.
• Fixed-Rate Mortgage – A mortgage that has a fixed interest rate for the entire term of the loan.
• Adjustable-Rate Mortgage (ARM) – A type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan.
• Pre-Approval – An evaluation by a lender to determine whether a borrower qualifies for a loan, and for how much.
• Closing Costs – Fees paid at the closing of a real estate transaction, often including an attorney's fee, title insurance, and excise taxes.
• Loan-to-Value Ratio (LTV) – A financial term used by lenders to express the ratio of a loan to the value of the purchased asset.
• Private Mortgage Insurance (PMI) – Insurance that a mortgage lender requires a borrower to purchase if the borrower's down payment is less than 20% of the home's purchase price.
• Appraisal – An estimation of the value of a property, conducted by a qualified professional appraiser.
• Home Inspection – An examination of a real estate property's condition, often performed prior to the property's sale.
• Real Estate Agent – A professional who represents buyers or sellers in real estate transactions.
• Listing – A written contract between an owner and a real estate broker, authorizing the broker to sell or lease the owner's property.
• Offer – A proposal to buy a property at a specific price.
• Earnest Money Deposit – A deposit made to a seller demonstrating the buyer's good faith in a transaction.
• Contingency – A condition or action that must be met for a real estate contract to become binding.
• Title – A legal document evidencing a person's right to or ownership of a property.
• Deed – A legal document that conveys ownership of a property.
• Equity – The difference between the current market value of a property and the amount the owner still owes on the mortgage.
• Refinancing – Replacing an existing loan with a new one, often with better terms.
• Foreclosure – The process where a lender attempts to recover the balance of a loan from a borrower who has stopped making payments.
• Short Sale – A sale of real estate in which the net proceeds fall short of the debts secured by liens against the property.
• Closing – The final step in a real estate transaction where the title is transferred from the seller to the buyer.
• Amortization – The process of paying off a debt over time through regular payments.
• Principal – The amount of money borrowed or still owed on a loan, separate from interest.
• Home Equity Loan – A type of loan in which the borrower uses the equity of his or her home as collateral.
• FHA Loan – A mortgage issued by federally qualified lenders and insured by the Federal Housing Administration.
• VA Loan – A mortgage loan in the United States guaranteed by the United States Department of Veterans Affairs.
• Conventional Loan – A mortgage loan not guaranteed by any government agency, such as the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA).
• Jumbo Loan – A mortgage loan that exceeds the conforming loan limits set by the Federal Housing Finance Agency.
• Seller's Market – A market condition characterized by a shortage of goods available for sale, resulting in potential soars in property prices.
• Buyer's Market – A market condition characterized by an abundance of goods available for sale, resulting in potential drops in property prices.
• Home Warranty – A service contract that covers the repair or replacement of important home system components and appliances that break down over time.
• Property Tax – A levy on property that the owner is required to pay, usually collected by the local government.
• Underwriting – The process by which a lender evaluates the risk of a potential borrower and determines the terms of a loan.
• Pre-Qualification – An evaluation of a potential borrower's financial status to determine the size and type of mortgage available.
• Real Estate Broker – A person who represents sellers or buyers of real estate or real property.
• Counteroffer – An offer made in response to a previous offer, which was not accepted.
• Default – The failure to repay a loan according to the terms agreed in the promissory note.
• Fannie Mae – A government-sponsored enterprise that buys and securitizes mortgages to ensure that funds are consistently available to the institutions that lend money to home buyers.
• Freddie Mac – A government agency that buys mortgages, securitizes them, and sells those securities to investors.
• Home Equity Line of Credit (HELOC) – A loan in which the lender agrees to lend a maximum amount within an agreed period, where the collateral is the borrower's equity in his/her house.
• Real Estate Owned (REO) – A class of property owned by a lender, typically a bank, after an unsuccessful sale at a foreclosure auction.
• Lien – A claim or legal right against assets that are typically used as collateral to satisfy a debt.
• Origination Fee – An upfront fee charged by a lender for processing a new loan application.
• Discount Points – Prepaid interest on the mortgage loan. The more points paid, the lower the interest rate.
• Debt-to-Income Ratio (DTI) – A personal finance measure that compares the amount of debt you have to your overall income.