Adjustable-rate mortgage (ARM)
A loan whose interest rate can change after an initial period. Read the adjustment schedule, index, margin, caps and worst-case payment—not only the introductory rate.
ESSENTIAL DEFINITIONS
U.S. real-estate language, explained plainly.
Definitions for reading a listing, offer, loan estimate or closing package with more confidence.
22 TERMS TO KNOW
A term never replaces verification.
Legal effect and process differ by state and contract. Use this glossary to prepare questions, then confirm material details locally.
Amortization
The scheduled repayment of principal over time. Early payments on many mortgages contain more interest than principal.
Appraisal
An opinion of value prepared for a lender or another intended user. It is not a structural inspection or a guarantee of resale price.
APR
Annual percentage rate: a broader cost measure than the note rate, designed to include certain finance charges. Compare the same loan type and assumptions.
Closing Disclosure
The federal form that presents final loan terms and closing costs for many consumer mortgages. Compare it with the earlier Loan Estimate.
Comparable sale
A recent, genuinely similar closed sale used to support a pricing opinion. Location, condition, date and features matter.
Contingency
A contract condition that can allow a buyer or seller to proceed, renegotiate or exit if a defined event occurs within a deadline.
Debt-to-income ratio (DTI)
Monthly debt payments divided by qualifying gross monthly income. Lenders may calculate it differently depending on the product.
Deed
The legal instrument used to transfer an ownership interest. Its effect and recording rules are determined locally.
Earnest money
Money placed under the contract to demonstrate good faith. Who holds it, when it is refundable and dispute rules depend on the agreement and local law.
Escrow
A neutral holding arrangement for funds or documents; it may also describe a lender-managed account for taxes and insurance.
FICO score
One common credit-score model. A score is not the whole underwriting file, and the score version used may differ by loan program.
FIRPTA
A federal withholding regime that can apply when a foreign person sells U.S. real property. Obtain qualified tax advice early.
Homeowners association (HOA)
An association that may impose dues, rules, assessments and use restrictions. Read its governing documents and finances before committing.
Loan Estimate
A standardized estimate of loan terms and costs for many mortgages. Use it to compare written offers made on the same assumptions.
Mortgage insurance
Insurance that may protect a lender or loan program if the borrower defaults. It is distinct from homeowners insurance.
Preapproval
A lender’s preliminary assessment based on submitted information and documentation. It is not an unconditional final approval.
Principal
The original amount borrowed or the unpaid balance, excluding future interest. Each amortizing payment generally reduces it.
Property tax
A recurring local tax assessed against real property. Assessment methods, exemptions, bills and appeals vary by jurisdiction.
Title
The collection of legal rights and interests in a property. A title search and title insurance address different risks; neither replaces due diligence.
Underwriting
The lender’s verification and risk-review process before final loan approval. New debts, job changes or large unexplained deposits can matter.
Zoning
Local land-use rules that affect what may be built or operated on a site. Confirm the exact parcel, use and permit history with the authority.