Adjustable Rate Mortgage (ARM)
Interest rates on this type of mortgage are periodlically adjusted up or down depending on a specified financial index.
Amortization
A method of equalizing the monthly mortgage payments over the life of the loan even though the proportion of principal to interest changes over time.
In the early part of the loan, the principal repayment is very low, while the interest payment is very high.
At the end of the loan, the relationship is reversed.
Annual Percentage Rate (APR)
The actual finance charge for a loan, including points and fees, in addition to the stated interest rate.
Appraisal
An expert opinion of the value or worth of a property.
Assessed Value
The value placed on property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value.
Balloon Payment
A large principal payment due all at once at the end of some loan terms.
Cap
A limit on how much the interest rate can change on an adjustable rate mortage.
Certificate of Title
A document signed by a title examiner, stating that a seller has an insurable title to the property.
Closing
The deed to property is legally transferred from seller to buyer and documents are recorded.
Closing Costs
See Settlement.
Commission
A fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.
Comparative Market Analysis
A survey of attributes and selling process of comparable homes on the market or recently sold; used to help determine a correct pricing strategy for a seller's property.
Contingency
A condition in a contract that must be met for the contract to be binding.
Contract
A binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property).
Deed
A legal document that formally conveys ownership of property from seller to buyer.
Down Payment
A percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender.
Encroachment
A structure, or portion of a structure, but on another individual's property.
Equity
The value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens.
Escrow
A fund or account held by a third-party custodian until conditions of a contract are met.
Foreign Investment in Real Property Tax Act (FIRPTA)
Foreign Investment In Real Property Tax Account comes into play when the seller is not an American citizen.
Fixed Rate Mortgage
Interest rates on this type of mortgage remain the same over the life of the loan. Compare to "adjustable rate mortgage".
Fixture
A recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to property and belongs to the property when it is sold.
Hazard Insurance
Compensates for property damage from specified hazards such as fire and wind.
Interest
The cost of borrowing money, usually expressed as a percentage rate.
Lien
A security claim on property until a debt is satisfied.
Listing Contract
An agreement whereby an owner engages a real estate company for a specified period of time to sell property, for which, upon the sale, the agent receives a commission.
Market Value
The price that is established by present economic conditions, location and general trends.
Market Price
The actual price at which a property sold.
Mortgage
Security claim by a lender against property until the debt is paid.
Multiple Listing Service (MLS)
A system that provides to its members detailed information about properties for sale.
Origination Fee
An application fee(s) for processing a proposed mortgage loan.
PITI
Principal, Interest, Taxes and Insurance, forming the basis for monthly mortgage payments.
Point
One percent of the loan principal. It's charged in addition to interest and fees.
Prepayment Penalty
A fee paid by a borrower who pays off the loan before it is due.
Principal
One of the parties to a contract; or the amount of money borrowed, for which interest is charged.
Prorate
Divide or assess proportionately.
Purchase and Sale Agreement
see Contract
Settlement
All financial transactions required to make the contract final.
Title
A document that indicates ownership of a specific property.
Title Search
Detailed examination of the entire document history of a property title to make sure there are no legal encumbrances.