Adjustable Rate Mortgage (ARM)

A mortgage with an interest rate that changes over time in line with movements in the index. ARMs are also referred to as AMLs (adjustable mortgage loans) or VRMs (variable rate mortgages).

Agent

Licensed representative who assists both buyers and sellers with information, advice, and assessment of current market conditions.

Amortization
Repayment of a loan in installments of principal and interest, rather than interest-only payments.
 

Appraisal

Unbiased, professional opinion of a property’s value based on its style and appearance, quality, usefulness, and the value of comparable properties.

Assessor

Municipal or county official who determines the value of property for taxation.

Balloon payment
A lump sum principal payment due at the end of some mortgages or other long-term loans.
 

Closing

Final settlement, including the buyer’s signing of the mortgage and mortgage note, and exchange of title.

Closing costs

Fees and other charges paid by both buyers and sellers at closing.

Commission

Percentage of the home’s sale price paid at closing to the listing agent and cooperative agents.

Counter-offer

Offer made by the buyer or seller in response to the other’s bid.

Deed

Instrument that transfers title from the seller to the buyer

Down payment

Buyer’s payment to the seller at time of closing for that percentage of the purchase price required by the buyer’s mortgage loan.

Earnest money

Money paid by a buyer at the time of making an offer or entering into a contract to purchase which is intended to show the buyer’s good faith to complete the purchase. Generally, earnest money is applied against the purchase price, but may be forfeited if the buyer fails to complete the purchase.

Equity
The difference between what is owed and what the property could be sold for.

Escrow account

Third party account for holding money, such as a buyer’s earnest money or the owner’s taxes and insurance payment.

Fair market value

Highest price an informed buyer will pay, assuming there is no unusual pressure to complete the purchase.

Fee simple

An estate in which the owner has unrestricted power to dispose of the property as he wishes, including leaving by will or inheritance.  It is the greatest interest a person can have in real estate.

Finance charge

The total cost a borrower must pay, directly or indirectly to obtain credit according to Regulation Z.

Fixed rate mortgage

A conventional loan with a single interest rate for the life of the loan.

Graduated payment mortgage
A residential mortgage with monthly payments that start at a low level and increase at a predetermined rate.

Home warranty

Policy purchased by a buyer or seller as assurance against unexpected home repair costs.

Homeowner’s policy

Insurance policy covering at least the appraisal value of a home and property.

Inspection

Formal survey of a home’s structure and systems, often performed by a licensed professional.

Joint tenancy

An equal undivided ownership of a property by two or more persons. Upon the death of any owner, the survivors take the decedent's interest in the property.

Lien

A legal hold or claim on property as security for a debt or charge.
 

Lock-in
The fixing of an interest rate or points at a certain level, usually during the loan application process. It is usually done for a certain period of time, such as 60 days, and may require a fee or premium in the form of a higher interest rate.

Mortgage note

Signed promise to repay a mortgage loan in monthly payments.

Multiple Listing Service (MLS)

System in which participating brokers agree to share commission on the sale of houses listed by anyone of them.

Offer (offer-to-purchase)

Legally binding contract that declares how much a buyer will pay for a house provided certain conditions are met.

Origination fee

Similar to a point; a supplemental fee paid to lenders.

Points

One point equals one percent of the total mortgage loan amount. Used to buy a better mortgage interest rate.

Prequalify

Informal determination by a lender of how large a mortgage a buyer can afford.

Principal

Money borrowed from a lender, not including any fees or interest.

Realtor®
A real estate broker or associate active in a local real estate board affiliated with the National Association of Realtors®.

Title

Right of ownership and possession of a property.

Title insurance

Policy that protects against error or omissions or defects in the title of a property.