The Ultimate Glossary of Real Estate Terms

Whether you’re interested in a career in real estate, studying for your licensing exam, looking to brush up on common lingo used in the industry, or simply curious about an unfamiliar term, it’s always a good idea to have a solid understanding of the basic concepts and terminology used during the homebuying and home selling process. The Signature School of Real Estate is here to help you learn and understand those terms. 

We’ve prepared this glossary of basic real estate terms and definitions to help aspiring real estate professionals better understand commonly used terminology in the real estate marketplace. 

Real Estate Terms and Definitions

A

Acceleration Clause

Also known as an acceleration covenant, this is a contract provision requiring the borrower to pay all of their outstanding loan to a lender if specific terms outlined by the lender aren't met. 

Active Under Contract

When a listing is Active Under Contract, that property is under contract, but it is still being actively marketed and still accepting showings to obtain backup offers. 

Adjustable-Rate Mortgage (ARM)

Adjustable-rate mortgages (ARMs) come with an interest rate that changes at predetermined intervals, such as once a year. The rate can go up or down depending on economic conditions. Typically, ARMs have a lower introductory rate, which translates to more affordable monthly mortgage payments initially. 

Annual Percentage Rate (APR)

The cost of a loan or other financing as an annual rate. The APR includes the interest rate, points, broker fees, and additional credit charges a borrower is required to pay. 

Annuity

An amount paid yearly (or at other regular intervals), most often at a guaranteed minimum amount. This is also a type of insurance policy in which the policyholder makes payments for a fixed period or until a stated age and then receives annuity payments from the insurance company. 

Application Fee

The fee that a broker or mortgage lender charges to apply for a mortgage to cover processing costs. 

Appraisal 

A professional, unbiased analysis prepared by a third party (an “appraiser”) that is used to estimate the value of a property. If the property’s appraised value is below what the potential buyer has offered, the lender may request the buyer pay the difference in cost. 

Appreciation

An increase in the market value of a property over time due to changing conditions and/or property improvements.  

Arbitration

A process where disputes are settled by referring them to a fair and neutral third party (an arbitrator). The disputing parties agree in advance to agree with the arbitrator's decision. There is a hearing where both parties have an opportunity to be heard, after which the arbitrator makes a decision.  

Assessed Value

Typically, the value placed on a property for the purpose of taxation. 

Assignment of Mortgage

A document evidencing the transfer of ownership of a mortgage from one party to another. 

Assumable Mortgage

A mortgage loan that can be taken over (or “assumed”) by the buyer when a property is sold. An assumption of a mortgage is a transaction in which the property buyer takes over the seller’s existing mortgage. The seller remains liable unless released by the lender from the obligation. If the mortgage contains a due-on-sale clause, the loan may not be assumed without the lender’s consent. 

B

Balance Sheet 

A financial statement that shows assets, liabilities, and net worth as of a specific date. 

Balloon Mortgage

A balloon mortgage is a home loan with an initial period of low (sometimes interest-only) payments, at the end of which the borrower is required to pay off the balance in full. This time of mortgage is usually short-term, usually five to seven years. 

Bi-Weekly Payment Mortgage

This type of mortgage has payments due every two weeks instead of monthly. 

Bridge Loan

Sometimes called a “swing loan,” this is a short-term loan that is secured by the buyer’s current home (which is usually for sale) that allows the proceeds to be used for building or closing on a new property before the current home is sold. 

Broker

Real estate sales associates, often referred to as “agents” by the public, are required to work under the supervision of a broker. A broker has passed a Broker’s Pre-License Exam and additional licensing requirements, allowing them to manage individual agents through a firm or operate independently. Brokers understand real estate law, property management, construction, and more.

Related: Real Estate Sales Associates vs. Brokers: What’s the Difference? 

Building Code 

Local regulations that set forth the standards and requirements for the construction, maintenance, and occupancy of buildings. These codes are designed to provide for the public's safety, health, and welfare.

Buydown 

An arrangement with which the buyer obtains a lower interest rate for typically the loan's early years. 

C

Cap

This refers to a limitation on the amount the interest rate or mortgage payment may increase or decrease for an adjustable-rate mortgage (ARM). 

Cash-out Refinance

Also known as a “cash-out refi,” this refers to when a homeowner refinances their mortgage for more than it's worth and withdraws the difference in cash. To be eligible for this kind of financing, a homeowner is typically required to have at least 20% in equity. 

Certificate of Deposit

A document issued by a bank (or other financial institution) evidence of a deposit, with the issuer’s promise to return the deposit, plus earnings, at a specified interest rate within a specified period. 

Certificate of Eligibility

A document issued by the U.S. Department of Veterans Affairs (VA) certifying a veteran’s eligibility for a VA-guaranteed mortgage loan.

Chain of Title

The documentation of all past property ownership, starting with the earliest existing document and ending with the most recent. 

Change Orders

An amendment to a construction contract that changes the general contractor’s scope of work. Most change orders modify the work required by contract documents (which, in turn, usually increases the contract price) or adjust the amount of time the contractor has to complete the work or both. For there to be a valid change order, the property owner and contractor must both agree on all terms.

Clear Title

Also known as a “free and clear title,” “just title,” or “clean title,” a clear title does not have any type of lien, defect, or other legal encumbrances. 

Closing

The final stage in a real estate transaction. For mortgage loans, the process of signing mortgage documents, disbursing funds, and, if applicable, transferring ownership of the property. Closing may be referred to as “escrow,” a process by which a buyer and seller deliver legal documents to a third party who completes the transaction in accordance with their instructions. 

Closing Agent

The person or entity that coordinates the various closing activities, including the preparation and recordation of closing documents and the disbursement of funds. Typically, the closing is conducted by title companies, escrow companies, or attorneys. A closing agent may be referred to as an “escrow agent” or “settlement agent.” 

Closing Costs

The fees and expenses over and above the property’s price that buyers and sellers usually incur to complete a real estate transaction. The costs may include but are not limited to loan origination fees, attorney’s fees, appraisal fees, title searches, discount points, title insurance, surveys, deed recording fees, credit report charges, and taxes.  

Closing Date

The date on which the sale of a property is to be finalized and a loan transaction completed. Often, a real estate sales professional coordinates the setting of this date with the buyer, the seller, the closing agent, and the lender. 

Co-borrower

If a buyer needs assistance getting approved for a loan, they can elicit the help of a co-borrower. The co-borrower is listed on the property’s title, has ownership interest, signs loan documents, and is obligated to pay monthly mortgage payments if the buyer cannot. 

Collateral

An asset that a lender accepts as security for a loan. The borrower risks losing the asset if the loan is not repaid according to the loan agreement terms. In the case of a mortgage, the collateral would be the house and real property. 

Commission

Commission is the fee charged for services performed and is usually based on a percentage of the price of the items sold (such as the fee a real estate agent earns on the sale of a house). Currently, the average Florida real estate commission is 5.40%. 

Commitment Letter

A formal document from a lender stating that the borrower is approved for the loan. This letter is a binding offer that includes the mortgage amount, the interest rate, and repayment terms.

Comparables

An abbreviation for “comparable properties,” which are used as a comparison in determining the current value of a property that is being appraised.

Concession

A benefit or discount offered by the buyer or seller to help sell a home and close a deal. For example, the sellers may agree to help pay for closing costs.

Condominium

A condominium, commonly called a “condo,” is an individually owned residential unit in a multi unit building or complex. The owner of a condominium unit owns the unit itself and has the right, along with other owners, to use the common areas but does not own the common elements such as the exterior walls, floors and ceilings, or the structural systems outside of the unit; these are owned by the condominium association. There are usually condominium association fees for building maintenance, property upkeep, taxes, and insurance on the common areas and reserves for improvements. 

Construction Loan

A loan for financing the cost of construction or improvements to a property; the lender disburses payments to the builder at periodic intervals during construction.

Contingency

If a property has an active contingent status, the seller has accepted an offer from a potential buyer. However, there are certain conditions that the buyer must meet before the finalization of the sale. A contingency may include things that could happen to prevent the deal from closing. Contingencies might consist of the buyer selling their home, the buyer may need to secure financing, or the buyer may include a home inspection contingency; the sales contract is not binding until the buyer has the home inspected. 

Conventional Mortgage

A conventional mortgage loan is any mortgage loan that is not insured or guaranteed by the federal government or one of its agencies, such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS)

Convertible Adjustable-Rate Mortgage (ARM) 

A convertible ARM loan is a hybrid mortgage that combines adjustable-rate mortgages (ARMs) and fixed-rate mortgages. Borrowers begin their loan term with an adjustable interest rate, but after a set period, they can convert to a fixed-rate mortgage, but there are generally fees for the switch.

Cost of Funds Index (COFI) 

An average of the regional interest expenses acquired by financial institutions. 

D

Debt 

Money that is owed from one person or institution to another person or institution.

Debt-to-Income Ratio 

The percentage of gross monthly income that goes toward paying for your monthly housing expenses, as well as other expenses such as car payments, alimony, child support, and other installment debts and payments on open-ended accounts, such as credit cards. 

Deed

A legal document transferring a title from the seller to the buyer. The deed must be a written document and is sometimes called a “vehicle of the property interest transfer”. 

Deed-in-Lieu of Foreclosure

A legal document transferring the title of a property from a property owner to the bank that holds the mortgage in exchange for relief from the mortgage debt. A homeowner might submit a deed-in-lieu of foreclosure if the bank has denied a loan modification or short sale. However, banks can deny this request and often do. 

Deed of Trust

A legal document in which the borrower transfers the title of a property to a third party (the “trustee”) to hold as security for the lender. After the loan is paid in full, the trustee transfers the title back to the borrower. If the borrower defaults on the loan, the trustee will sell the property and pay the lender the mortgage debt owed. 

Default 

The term default refers to the failure to fulfill a legal obligation. This may include a failure to pay on a financial obligation or a failure to perform some action or service that is non-monetary. 

Delinquency

Failure to make a payment when it is due. The condition of a loan is when a scheduled payment has not been received by the due date but generally refers to a loan for which payment is 30 or more days past due.

Depreciation

A decrease in the value of a property due to changing market conditions or lack of upkeep. 

Discount Points 

A discount point is a fee paid by the borrower at closing to reduce the interest rate; one point equals 1% of the loan amount. 

Down Payment 

A portion of the sale price of a property, usually between 3% and 20%. The down payment is not borrowed and is paid upfront in cash. Some loans are offered with zero down payment. 

Due-on-Sale Clause

A provision in a mortgage agreement that allows the lender to demand repayment in full of the outstanding balance if the property securing the mortgage is sold.  

E

Earnest Money Deposit

The deposit that buyers provide to show their commitment to buying the property. The deposit gives the buyer extra time to get financing and conduct the title search, property appraisal, and inspections before closing. Earnest money can be considered a deposit on a home, an escrow deposit, or “good faith” money. 

Easement

A right to the use of, or access to, land owned by another person or entity. 

Encroachment

The intrusion onto another’s property without right or permission. For example, if a property owner violates the rights of a neighbor by building or adding to a structure that extends onto a neighbor’s land or property. 

Equal Credit Opportunity Act (ECOA) 

The Equal Credit Opportunity Act (ECOA) is a federal civil rights law enacted on October 28, 1974. The ECOA prevents lenders from discriminating against credit applicants based on factors unrelated to their ability to repay, including race, color, religion, national origin, sex, marital status, age, public assistance, or the exercise of any rights under the Consumer Credit Protection Act (CCPA).

Equity

The value of a property against the total amount of the liens against the property. For example, if a homeowner owes $200,000 on their home, but it is worth $300,000, they have $100,000 of equity.

Escrow

Part of the homebuying process, escrow refers to an item of value, documents, or money deposited with a third party to be delivered upon the fulfillment of a condition. For instance, the deposit of funds or documents with an attorney or escrow agent to be disbursed upon the closing of a sale of real estate. 

Escrow Account

An account that a mortgage servicer established on behalf of a borrower to pay taxes, insurance premiums, or other charges when they are due. 

Examination of Title

Reviews all public records tied to a property; generally, this examination checks all previous deeds, wills, and trusts to ensure that the title has passed cleanly and legally to every new owner.

Exclusive Listing 

A real estate listing agreement in which a property seller appoints and expressly authorizes one real estate broker to act as the seller’s sole agent. The broker receives a commission with exclusive right-to-sell listings regardless of who sells the property. By contrast, in an open listing, the seller retains the right to employ any number of brokers as agents.

F

Fair Credit Reporting Act (FCRA)

The Fair Credit Reporting Act (FCRA) is a consumer protection law enacted in 1970. The FCRA ensures fairness, accuracy, and privacy of personal information (including consumer credit history) contained in files maintained by credit bureaus and similar agencies.

Fair Market Value (FMV) 

Fair market value (FMV) refers to the price that an asset, such as a house or other real property, would sell for at an open market. FMV has come to represent the price of an asset under the following usual set of conditions: willing buyers and willing sellers are reasonably knowledgeable about the asset, behaving in their own best interest, free of undue pressure to trade, and given a reasonable period for completing the transaction.

Federal Housing Administration (FHA) 

An agency within the U.S. Department of Housing and Urban Development (HUD) that insures mortgages and loans made by private lenders.

Federal National Mortgage Association (“Fannie Mae”)

The Federal National Mortgage Association, commonly known as “Fannie Mae,” is a government-sponsored enterprise (GSE) created by Congress but owned by shareholders as a private company. Fannie Mae does not lend money directly to consumers but instead works to ensure that mortgage funds are available and affordable by purchasing mortgage loans from institutions that lend directly to consumers.

Fee Simple

Fee simple is the highest form of ownership. It means that the land is owned outright, without limitations or restrictions (other than local zoning ordinances). Most homes purchased in the U.S. are fee simple purchases. Fee simple means the owner’s rights to the property (including the land and any buildings on that land) are indefinite and can be freely transferred or inherited when the owner chooses. This term is most often associated with single-family homes, as condominiums and townhomes are generally purchased with covenants, conditions, and restrictions.

FHA-Insured Loan 

Also referred to as an “FHA Mortgage,” this is a loan that is insured by the Federal Housing Administration (FHA) of the U.S. Department of Housing and Urban Development (HUD). These types of loans are meant to help first-time homebuyers and protect lenders against losses. 

First-Time Homebuyer

Generally refers to an individual who purchases a principal residence for the first time. First-time homebuyers often qualify for special assistance such as low down payments, grants, and help with paying closing costs; state and federal governments sponsor these benefits. 

Fixed-Rate Mortgage

A mortgage that has a fixed interest rate for the entire term of the loan. 

For Sale By Owner (FSBO) 

When a property has a FSBO listing, it means that the seller is attempting to sell the property without the help of a listing agent or broker. 

Foreclosure 

The legal process by which a lender seizes and sells a home or property after a borrower cannot meet their repayment obligation, usually for more than 90 days. 

G

Government Mortgage 

A mortgage loan that is insured or guaranteed by a federal government entity such as the Federal Housing Administration (FHA), the U.S. Department of Veterans Affairs (VA), or the Rural Housing Service (RHS)

Growing-Equity Mortgage (GEM) 

A growing-equity mortgage (GEM) is a type of fixed-rate mortgage where the monthly payments increase over time (often at 5% a year) according to a set schedule instead of remaining fixed and equal during the loan term. 

H

Home Equity Conversion Mortgage (HECM)

The Home Equity Conversion Mortgage (HECM), sometimes called a “reverse mortgage,” is a particular type of mortgage developed and insured by the Federal Housing Administration (FHA) that enables older homeowners the ability to convert the equity they have in their homes into cash, using a variety of payment options to address their specific financial needs. Sometimes called a “reverse mortgage.”

Home Equity Line of Credit (HELOC)

A home equity line of credit (HELOC) is a revolving loan that allows homeowners to borrow against their home value to access cash as needed. HELOCs can be helpful in paying for significant expenses or consolidating higher-interest rate debt on loans, such as credit cards. 

Home Inspection

A home inspection is a professional inspection conducted by an objective third party (an “inspector”) to establish the condition of a property during a real estate transaction. The inspector will evaluate the property’s wiring, roof, plumbing, heating and cooling systems, foundation, pest infestation, and other elements and features of the property. 

Homeowners’ Association (HOA)

An organization of homeowners residing within a particular area whose principal purpose is to ensure the provision and maintenance of a community's facilities, services, and amenities for the common benefit of the community’s residents. When buyers purchase a home in a community with an HOA, they must join the association and pay the required fees, usually due monthly or annually. 

Homeowner’s Insurance 

A policy that protects a homeowner and the lender from any losses or damages that may occur, such as water damage, theft, or natural disaster. Homeowner’s insurance also covers the homeowner from liability against any accidents in the home or on the property, for instance, an injury to a visitor. Typically, insurance payments are included in monthly mortgage payments.  

HUD-1 Settlement Statement

A HUD-1 settlement statement is a document that lists all charges and credits to the buyer and the seller in a real estate transaction or all the costs in a mortgage refinance transaction. 

Hybrid Loan

An adjustable-rate mortgage (ARM) offers a fixed rate for an initial period (typically three to ten years) and then adjusts periodically for the remainder of the term. 

I

Income Property

Real estate that is purchased or developed to produce income, such as an apartment building or rental unit.

Interest

A fee that a borrower pays to a lender for the use of assets, typically cash. Additionally, interest is often earned through savings accounts and other deposits at commercial banks. The amount of interest varies and is usually referred to as the Annual Percentage Rate (APR). Interest is usually expressed as a percentage of the amount borrowed. 

Investment property

A property that is purchased to generate profitable resale, rental income, or tax benefits rather than serve as the buyer’s primary residence. 

J

Judgment Lien

A lien on the property of a debtor resulting from a court decree. 

Judicial Foreclosure

Refers to foreclosure proceedings that take place through the court system. Many states require judicial foreclosure to protect the equity that debtors may still have in the property. 

Jumbo Loan

Also called a “jumbo mortgage” or “non-conforming loan,” this is a type of home loan for an amount that exceeds the conforming loan limit set on mortgages eligible for purchase by government-sponsored enterprises (GSEs), such as Fannie Mae, that ultimately buy and administer most single-family home mortgages in the U.S. 

Junior Mortgage

A loan that is subordinate to the first or prior (senior) mortgage. The term often refers to a second mortgage but could also be a second or third mortgage. 

L

Late Charge 

A penalty that is imposed by a lender if a borrower fails to make a scheduled payment on time. 

Lease-Option

The legal term for what is commonly referred to as “rent-to-own” is an option sometimes used by sellers to rent a property to a consumer, who has the option to buy the home within a specified time. Typically, lease options include a rental credit that goes toward purchasing the home. 

Lender

In real estate, the term “lender” refers to the individual, private group, or financial institution lending money to a buyer to purchase property with the expectation that the buyer will repay the loan with interest by a specific date. 
A person’s debts and other financial obligations.

Liabilities

A person’s debts and other financial obligations

Lien

An unpaid debt on a piece of property. With a mortgage, the lender has the right to take the title to a property if the homeowner fails to make the mortgage payments.

Lifetime Cap

For an adjustable-rate mortgage (ARM), the term lifetime cap refers to the maximum interest rate allowable. This cap applies to the entire duration of a mortgage. 

Loan Origination

The process by which a loan is made, this may include taking a loan application, along with all of the stages leading up to the borrower closing on the home. 

Loan-to-Value (LTV) Ratio

The ratio of a mortgage loan balance divided by the property’s appraised value (or purchase price if that is lower). For example, a $100,000 home with a $60,000 mortgage has an LTV of 60 percent. 

Lock-in Rate

A written agreement guaranteeing a specified mortgage interest rate for a certain amount of time. 
 

M

Margin 

A percentage added to the index for an adjustable-rate mortgage (ARM) to establish the interest rate on each adjustment date. 

Market Value

The current value of a property based on what a purchaser would pay. An appraisal is sometimes used to determine market value. 

Mortgage

An agreement between two parties, a borrower and a lender that gives the lender the right to the borrower’s property if the borrower fails to repay the loan plus interest. In some states, the term “mortgage” is also used to describe the document a borrower signs (to grant the lender a lien on the borrower’s home). It also may indicate the amount of money borrowed, with interest, to purchase the home. The mortgage amount is often the home's purchase price minus the down payment. 

Mortgage Broker

An individual or firm that brings borrowers and lenders together for the purpose of loan origination. A mortgage broker typically takes loan applications and may process loans. A mortgage broker also may close the loan.

Mortgage Insurance (MI)

Insurance that protects lenders against losses caused by a borrower’s default on a mortgage loan. Typically, MI is required if the borrower’s down payment is less than 20% of the purchase price. 

Multiple Listing Service (MLS)

A database established by cooperating real estate brokerage firms to provide data about properties for sale. An MLS allows brokers to see one another’s listings with the goal of connecting homebuyers to sellers. Both the listing and selling brokers benefit from this arrangement by consolidating and sharing information and by sharing commissions. 

N

Negative Amortization 

Amortization means paying off a loan with regular payments so that the amount a borrower owes goes down with each payment. By contrast, negative amortization means that the amount owed will still increase even when a borrower pays because the payment does not cover the interest due. 

Note

In real estate, a “note” is a legally binding agreement between a buyer and the lender to repay a specified amount under the agreed-upon terms. The terms include the amount of debt, the amount of time the borrower has to repay the debt, and the interest rate.  

Note Rate

The interest rate stated on a mortgage note or other loan agreement.  

O

Offer

A formal bid made by a buyer or seller to buy or sell an asset. 

Open House

A scheduled time when a house (or other property) is open to the public for the purpose of viewing by potential buyers. 

Original Principal Balance

The total amount of money owed on a mortgage before the first payment is made. 

Origination Fee

A fee paid to a lender or broker to cover the costs of processing a loan application. Typically, the origination fee is stated in the form of points; one point is one percent of the mortgage amount. 

Owner Financing

A transaction where the property seller finances the purchase for the buyer. 

P

Payment Change Date

The date on which a new monthly payment amount takes effect—for example, the date change on an adjustable-rate mortgage (ARM) loan.

Payment Cap 

For an adjustable-rate mortgage (ARM) or other variable rate loans, a limit on the amount that payments can increase or decrease during any one adjustment period. 

Pending

In real estate, the term “sale pending” generally indicates that all contingencies have been satisfied (or removed), and the buyer is moving toward closing. 

PITI

An acronym that stands for the four primary components of a monthly mortgage payment: principal, interest, taxes, and insurance (PITI). 

Planned Unit Development (PUD) 

A planned unit development (PUD) is a community of single-family homes, townhomes, and condominiums (as well as commercial units), in which individuals hold title to a residential lot and/or home while the common facilities are owned and maintained by a homeowners’ association (HOA) for the benefit and use of the homeowners.

Point

One percent of the amount of the mortgage loan. For example, if a loan is made for $100,000, one point equals $1,000. 

Pre-Approval

Typically before submitting an offer on a property, a potential buyer must get pre-approved. This process usually includes a review of the applicant’s credit history and may involve reviewing and verifying income and assets to close. 

Pre-Qualification

In contrast to pre-approval, pre-qualification is more of an estimate of how much a potential home buyer can afford to spend on a property. 

Prime Interest Rate

The interest rate that U.S. commercial banks charge their preferred customers, or those with the highest credit ratings. It is the best-available loan rate and often hovers around 3% above the federal funds rate. If the Federal Reserve elects to raise interest rates, the prime rate will increase as well. 

Principal

The amount of money borrowed or the loan amount that has not yet been repaid to the lender. This does not include interest. The principal balance (sometimes called the “outstanding balance” or “unpaid principal balance”) is the amount owed on the loan minus the amount that has been repaid.

Purchase Agreement

A document that demonstrates a buyer’s intent to purchase a property and a seller’s intent to sell the property. The agreement outlines information about the property to be sold, sale price, down payment, earnest money deposit, financing, closing date, occupancy date, length of time the offer is valid, and any particular contingencies. 

Purchase-Money Mortgage

Also known as “seller financing” or “owner financing,” a purchase-money mortgage is a mortgage loan that is issued to the buyer by the seller of a property as part of the purchase transaction. 

Q

Qualifying Ratios

Calculations used to determine how likely it would be for a borrower to repay a loan. 

Quitclaim Deed 

A document transferring the ownership of a piece of property from the seller to the buyer. It transfers the right, title, or interest of the property, but only transfers what the seller actually owns. This type of transaction is commonly used between family members to transfer ownership, rather than using traditional real estate channels. 

R

Rate Cap 

The limit on the amount an interest rate on an adjustable-rate mortgage (ARM) can increase or decrease during an adjustment period. 

Rate Lock

An agreement in which an interest rate is “locked-in,” or guaranteed, for a specified period before a real estate transaction closes. 

Real Estate Professional

An individual who provides services in buying and selling property. Typically, the property seller pays the real estate professional a percentage of the property sale price. Real estate professionals may be able to refer buyers to local lenders or mortgage brokers but are generally not involved in the lending process. 

Real Estate Settlement Procedures Act (RESPA)

The Real Estate Settlement Procedures Act (RESPA) is a federal law that requires lenders to provide disclosures to home mortgage borrowers informing them of real estate transaction-related costs before settlement and relevant consumer protection laws. RESPA also prohibits kickbacks and unearned fees in the mortgage loan business.

Real Property

Real property is the land and anything permanently attached to the land – including buildings, fences, trees, and minerals – and all of the interests, benefits, and rights inherent in the ownership of real estate. 

Realtor

REALTOR® is a federally registered collective membership mark which identifies a real estate professional who is member of the NATIONAL ASSOCIATION OF REALTORS® (NAR) and subscribes to its strict Code of Ethics.

Refinancing 

Refinancing replaces an existing loan with a new one that typically offers better terms, including a lower interest rate, lower monthly mortgage payments, or a shorter loan term. 

Right of First Refusal (ROFR) 

A provision in an agreement that requires the owner of a property to give an interested buyer the first opportunity to purchase or lease the property before they offer it for sale or lease to others.

Rural Housing Service (RHS)

The Rural Housing Service (RHS) is an agency within the U.S. Department of Agriculture (USDA) which operates a range of programs to help rural communities and individuals by providing loans and grants for housing and community facilities. RHS also works with private lenders to guarantee loans for the purchase or construction of single-family housing. 

S

Sale-Leaseback

A sale-leaseback occurs when a buyer closes on a home and then leases the property back to the seller for a specified period of time. 

Second Mortgage 

An additional loan placed upon a piece of real property. 

Secured Loan

A loan that is backed by the borrower’s assets, including a second home, vehicles, or other high-value items that can be used as collateral for securing repayment. 

Servicer

A mortgage servicer is the third-party that manages the administration of mortgage loans. This includes collecting mortgage payments, paying the borrower’s taxes and insurance, and generally managing borrower escrow accounts. Sevicers can be public or private entities. 

Short Sale

A short sale is a real estate transaction that occurs when a homeowner sells their property for less than what is owed on the mortgage. For this transaction to occur, a mortgage lender must approve the sale, which can save time and money. 

Single-Family Properties

A stand-alone, detached property maintained and used as a single dwelling unit. 

Survey

A precise measurement of a property by a licensed surveyor, showing legal boundaries of a property and the dimensions and location of improvements.  

T

Taxes and Insurance

Taxes and insurance are funds collected as part of the borrower’s monthly payment and held in escrow for the payment of the borrower’s, or funds paid by the borrower for state and local property taxes and insurance premiums. 

Title 

A document that proves the right to, and the ownership of, property. The rights are transferred from the property seller to the property buyer during a real estate transaction. 

Transfer Tax

Transfer tax is assessed by state or local governments when title to property passes from one owner to another. In real estate transactions, one the parties (usually the seller) must pay a transfer tax as the title is transferred to the buyer. 

Treasury Index

The treasury index is published by the Federal Reserve Board and is used to determine interest rate changes for certain adjustable-rate mortgage (ARM) plans. It is based on the results of auctions by the U.S. Treasury of Treasury bills and securities. 

U

Under Contract

A property is under contract when a property seller has accepted an offer from a buyer but the transaction has not yet closed. 

Uniform Residential Loan Application

A standard mortgage application that potential buyers have to complete. The application requests the individual’s income, assets, liabilities, and a description of the property they plan to buy, among other things. 

V

VA Guaranteed Loan

A VA guaranteed loan is a mortgage loan that is guaranteed by the U.S. Department of Veterans Affairs (VA) for veterans, service members, and other eligible individuals.

W

Walk-Through

A standard clause in a sales contract that allows the buyer to inspect the property being purchased at a specified time immediately before the official closing, usually within the 24 hours before closing. Buyers complete the final walk-through to ensure that the property they are purchasing is substantially in the same condition as when they first saw it and to confirm the completion of any negotiated repairs or replacements that were agreed upon. 

Warranty Deed 

A document often used in real estate transactions that provides the greatest amount of protection to the buyer of a property. 

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