Real Estate Terms
Dictionary
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Addendum
A document that is added to a real estate contract or purchase agreement.
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Amortization
Repaying a debt over a set period of time.
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Annual percentage rate (APR)
The interest rate along with other fees that you can expect to pay when securing a mortgage loan.
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Appraisal
An approximation of a home's current value based on a range of factors such as the price of similar properties in the area.
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Appreciation
The increase in a property's value over time.
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Assessed Value
When a county, village, city, or town hires an assessor to determine the value of a property for tax purposes.
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Broker
A real estate broker is qualified to represent a seller or buyer. He or she can choose to work independently of a firm, real estate agents must work with licensed brokers.
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Closing
The final step of a real estate transaction when a property is finally transferred from the seller to the buyer.
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Closing Costs
The costs and fees that come along with the purchase of a property.
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Commission
This refers to 5 - 6% that a real estate agent makes at closing.
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Construction loan
This is a short-term loan that covers the cost of building a property.
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Conventional mortgage
Ideal for borrowers with strong credit, this type of loan is not backed by a government agency like the Federal Housing Administration (FHA).
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Deed
The deed refers to the legal document that transfers ownership of a property from a seller to a buyer.
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Default
Default refers to when a homeowner fails to make several mortgage payments on time, according to the terms of the loan contract.
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Delinquency
Delinquency means a homeowner has failed to make a mortgage payment on time.
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Down payment
The down payment is the amount of money a buyer has saved in order to purchase a property. This can typically range from 5 - 20% of the home's cost.
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Equity
This is calculated by taking the difference between the amount owed to a lender and the market value of a property.
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Escrow
During the home buying process, your money will be placed "in escrow" and is protected by a third party until the real estate transaction is closed.
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Exclusive listing
An exclusive listing is when a seller commits to working with one specific broker and a designated agent on the sale of a property.
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Fair Credit Reporting Act
This federal law determines how a consumer's credit information can be used.
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Fair market value
The amount a property would sell for in a competitive market, or when a seller and buyer can agree on the price of a property.
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FHA mortgage
A Federal Housing Administration mortgage loan is backed by the government and is typically reserved for buyers with a low credit score or significant amount of debt.
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Fixed-rate mortgage
This mortgage has the same interest rate for the term of the loan.
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For sale by owner
This refers to a homeowner putting their property up for sale without assistance from a real estate agent or broker.
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Foreclosure
A property goes into foreclosure when the homeowner misses mortgage payments and the lender tries to recover the balance of a loan.
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Home equity line of credit
Also referred to as a HELOC, this is a second mortgage that allows a homeowner to borrow money against their home's value.
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Home inspection
A home inspection involves the evaluation of a property's condition, including electrical work, sewage, and plumbing before the closing.
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Homeowner's association
When a group of homeowners in a community, such as a condo, join in paying fees that cover the maintenance of the entire property.
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Homeowner's insurance
Financial protection that helps with covering costs associated with repairs of a property or even replacement if necessary.
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Lender
A lender is a financial institution or person that loans money to another party for the purpose of purchasing real estate.
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Lien
A mortgage lender can place a lien on a property if the homeowner is not up-to-date on payments.
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Mortgage
A mortgage is a loan that is used to purchase a home or other form of real estate.
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Mortgage banker
A mortgage banker provides mortgage loans.
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Mortgage broker
A mortgage broker acts as the middleman between mortgage borrowers and potential lenders.
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Mortgage insurance
This form of insurance can protect a lender in the event that a homeowner defaults on their mortgage.
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Negative amortization
When interest on a mortgage loan has not been paid to the lender, it's added to the loan balance.
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Original principal balance
This is the balance of the mortgage loan before interest is taken into account.
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Pre-approval
The pre-approval process involves a potential lender or bank reviewing an individual's finances, including their income, assets, and credit history, to determine how much money can likely be borrowed.
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Prime interest rate
Banks offer customers who have proven to be creditworthy their best, or prime, interest rate.
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Principal
The principal is the amount of money you borrowed from a lender, excluding the interest.
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Real estate agent
A licensed professional who helps sellers or buyers complete real estate transactions.
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Right of Refusal
A lease or contract might include "right of first refusal" to note that an individual has the right to put an offer on a property before it is listed on the market by a seller.
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Second mortgage
Also known as a junior lien, a second mortgage is an additional loan taken on the same property. It typically has a higher interest rate than the primary mortgage and can be used for repairs, among other reasons.
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Servicer
A servicer is a company that monitors and manages mortgage loans.
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Title
This legal document states who has owned a property in the past and notes any liens associated with it.
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Transfer of ownership
This means that a property has a new owner who purchased it and assumed its mortgage debt.
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Transfer tax
A tax that is charged by a state, county, or city when ownership of a property is transferred.
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Under contract
This refers to a prospective buyer and seller reaching an agreement on a property. At this early stage, both parties are in alignment with the terms of the deal, including the property's price and closing date.
List brought to you by Good Housekeeping: https://www.goodhousekeeping.com/life/money/a35794780/real-estate-terms-glossary/