Every term we use, explained in plain English.
Loan with an interest rate that changes periodically based on a market index. Lower initial rate, higher risk later.
The schedule by which a loan is paid off — early payments are mostly interest, later payments are mostly principal.
Professional valuation of a property by a licensed appraiser, required by lenders to confirm the home is worth the loan amount.
Annual Percentage Rate — the true yearly cost of a loan including interest plus fees, expressed as a percentage.
Tax authority's valuation of a property used to calculate property taxes.
For investment properties: annual net operating income divided by purchase price. Measures yield.
All fees due at closing — typically 2-4% of purchase price for buyers, 1-3% for sellers.
Recently sold properties similar to the subject home, used to estimate market value.
A condition in a purchase contract that must be met or the contract can be cancelled (e.g., inspection contingency).
Mortgage not backed by a government agency (vs. FHA, VA). Typically requires 5-20% down.
Percentage of gross monthly income going to debt payments. Lenders typically cap at 43-50%.
Good-faith deposit submitted with an offer, applied to closing if accepted, typically forfeited if buyer cancels without cause.
Neutral third party holding funds and documents during the transaction until conditions are met.
Difference between home's market value and what you owe on it.
Government-backed loan allowing lower down payments (3.5%) and credit scores. Requires mortgage insurance.
Loan with an interest rate that stays the same for the entire term.
Legal process where a lender takes ownership of a property due to non-payment.
Lender's estimate of closing costs provided early in the loan process.
Organization in some communities collecting dues and enforcing rules. Common in condos and planned developments.
Professional examination of the home's condition. Catches defects before purchase.
Loan amount divided by property value. Higher LTV = more risk to lender, often higher rates or PMI requirement.
Database of properties listed by member real estate agents. Source of truth for active listings.
Insurance protecting lender if buyer defaults. Required for FHA loans and conventional loans with less than 20% down.
Lender's fee for processing a loan, typically 0.5-1% of loan amount.
Principal, Interest, Taxes, Insurance — the four components of a typical mortgage payment.
Insurance required on conventional loans with less than 20% down. Typically 0.3-1.5% of loan annually.
Upfront fee paid to lender to lower interest rate. One point = 1% of loan amount.
Lender's conditional commitment to lend you a specific amount, based on full financial review.
Verbal estimate of borrowing capacity. Less rigorous than pre-approval.
The original loan amount, before interest.
Splitting expenses (taxes, HOA dues) between buyer and seller based on closing date.
Replacing your existing mortgage with a new one — usually for a lower rate or different terms.
Insurance protecting against losses from defects in property title.
Lender's process of evaluating a loan application and approving or declining.
Government-backed loan for veterans and active military. Can offer 0% down.
Buyer's final inspection of the property just before closing to confirm condition.
Local government rules governing land use — residential, commercial, mixed-use, etc.