Let’s be honest, starting the home buying process can feel overwhelming and stressful, especially when you don’t understand the terminology being thrown around. I mean, how many people know the difference between “appraised value” and “assessed value?” And, what the heck is the purpose of “escrow?”

At McInturff and Co., we value support and education for our clients, which is why we put together this comprehensive Real Estate Glossary. Of course, we always recommend clients asking questions (there is no such thing as a dumb one!) but it can be helpful to get to know some of the terminology before you start the buying or selling process.

With that, here is an overview of all the words that may come up during the real estate process:

• ADJUSTABLE-RATE MORTGAGE (ARM)
• AMORTIZATION
• ANNUAL PERCENTAGE RATE
• APPRAISAL
• ASSESSED VALUE
• BALLOON PAYMENT
• CAP
• CERTIFICATE OF TITLE
• CLOSING
• CLOSING COST
• COMMISSION
• COMPARATIVE MARKET ANALYSIS (CMA)
• CONTINGENCY
• CONTRACT
• DEED
• DOWN PAYMENT
• EARNEST MONEY
• EQUITY
• ESCROW
• FIXED-RATE MORTGAGE
• FIXTURE
• HAZARD INSURANCE
• INTEREST
• LIEN
• LISTING CONTRACT
• MARKET PRICE
• MARKET VALUE
• MORTGAGE
• MULTIPLE LISTING SERVICE (MLS)
• ORIGINATION FEE
• PITI
• POINT
• PREPAYMENT PENALTY
• PRINCIPAL
• PRORATE
• PURCHASE & SALE AGREEMENT
• SETTLEMENT
• TITLE
• TITLE SEARCH

ADJUSTABLE-RATE MORTGAGE (ARM)

Interest rates on this type of mortgage are periodically 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

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 a property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value.

BALLOON PAYMENT

A large principal payment is due all at once at the end of some loan terms.

CAP

A limit on how much the interest rate can change in an adjustable-rate mortgage.

CERTIFICATE OF TITLE

A document, signed by a title examiner, stating that a seller has an insurable title to the property.

CLOSING

When the final money and documents are signed and transferred in order to transfer ownership of the property to the buyer.

CLOSING COSTS

A fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.

COMMISSION

A fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.

COMPARATIVE MARKET ANALYSIS (CMA)

a survey of the attributes and selling prices of comparable homes on the market or recently (CMA) 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 a 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.

EARNEST MONEY

Money placed with a holder by a prospective buyer of residential real property to show a good-faith intention to perform pursuant to an executed purchase and sale agreement. “Holder” means the party holding the earnest money pursuant to an executed purchase and sale agreement. In most cases, the Closing Agent, who is a neutral third party, is the holder of the earnest money.

EQUITY

The value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, fewer mortgages, and liens.

ESCROW

A fund or account held by a third-party custodian until conditions of a contract are met.

FIXED-RATE MORTGAGE

Interest rates on this type of mortgage remain the same over the life of the loan. Compare this to an “adjustable-rate mortgage.”

FIXTURE

A recognizable entity (such as a kitchen cabinet, drape or light fixture) that is permanently attached to a 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 is usually expressed as a percentage rate.

LIEN

A security claim on a 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 a property, for which, upon the sale, the agent receives a commission.

MARKET PRICE

The actual price at which a property is sold.

MARKET VALUE

The price that is established by present economic conditions, location, and general trends.

MORTGAGE

Security claim by a lender against a property until the debt is paid.

MULTIPLE LISTING SERVICE (MLS)

A system that provides its members with 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 & SALE AGREEMENT

A contract between buyer and seller that outlines the details of the property transfer.

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.

We hope these definitions are helpful! If you have any questions or need the definitions of any real estate words we did not include, feel free to reach out here!