Real Estate Terms
Appraisal – A third party assessment on the value of your home.
Bottom Line Signatures – The final signature needed to make a legally binding contract. It normally is to show receipt of the other parties’ acceptance.
Clear to Close – Final loan approval from the lender, which allows the closing to be scheduled.
Contingency – A clause in the purchase contract that describes certain conditions that must be met and agreed upon by both buyer and seller before the contract is binding.
Counter Offer – An offer, made in response to a previous offer, which rejects all or part of it while enabling negotiations to continue towards a mutually-acceptable sales contract.
Conventional Mortgage – One that is not insured or guaranteed by the federal government.
Debt-to-Income Ratio – A ratio that measures total debt burden. It is calculated by dividing gross monthly debt repayments, including mortgages, by gross monthly income.
Down Payment – The money paid by the buyer to the lender at the time of the closing. The amount is the difference between the sales price and the mortgage loan. Requirements vary by loan type. Smaller down payments, less than 20%, usually requires mortgage insurance.
Earnest Money/Good Faith Check – A deposit given by the buyer to bind a purchase offer which is held in escrow. If the property sale is closed, the deposit is applied to the purchase price. If the buyer does not fulfill all contract obligations, the deposit may be forfeited.
Equity – The value of the property, less the loan balance and any outstanding liens or other debts against the property.
Easements – Legal right of access to use of a property by individuals or groups for specific purposes. Easements may affect property values and are sometimes part of the deed.
Escrow – Funds held by a neutral third party (the escrow agent) until certain conditions of a contract are met and the funds can be paid out. Escrow accounts are also used by loan servicers to pay property taxes and homeowner’s insurance.
Fixed-Rate Mortgage – A type of mortgage loan in which the interest rate does not change during the entire term of the loan.
Free Market Evaluation – An offer by a REALTOR®, usually presented in marketing materials, to provide a complimentary assessment of your home’s current market value.
Good Faith Estimate (GFE) – A document from your lender of a breakdown of costs you can expect to incur when obtaining a mortgage.
Home Inspection – Professional inspection of a home, paid for by the buyer, to evaluate the quality and safety of its plumbing, heating, wiring, appliances, roof, foundation, etc.
Homeowner’s Insurance – A policy that protects you and the lender from fire or flood, a liability such as visitor injury, or damage to your personal property.
Lien – A claim or charge on property for payment of a debt. With a mortgage, the lender has the right to take the title to your property if you don’t make the mortgage payments.
Listing Presentation – A presentation given by a REALTOR® to a prospective home seller in hopes that the seller will allow the REALTOR® to represent their interests throughout the sales process. Typically delivered in the seller’s home, the presentation includes the REALTOR’S® pricing, marketing and showing strategies, as well as a suggested asking price.
Market Value – The amount a willing buyer would pay a willing seller for a home. An appraised value is an estimate of the current fair market value.
Mortgage Insurance – Purchased by the buyer to protect the lender in the event of default (typically for loans with less than 20% down. Available through a government agency like the Federal Housing Administration (FHA) or through private mortgage insurers (PMI).
Possession Date – The date, as specified by the sales agreement, which the buyer can move into the property. Generally, it occurs within a couple days of the Closing Date.
Pre-Approval Letter – A letter from a mortgage lender indicating that a buyer qualifies for a mortgage of a specific amount.
Principal – The amount of money borrowed from a lender to buy a home, or the amount of the loan that has not yet been repaid. Does not include the interest paid to borrow.
Purchase Offer – A detailed, written document which makes an offer to purchase a property, and which may be amended several times in the process of negotiations. When signed by all parties involved in the sale, the purchase offer becomes a legally-binding sales agreement.
Title – The right to, and the ownership of, property. A Title or Deed is sometimes used as proof of ownership of land. Clear title refers to a title that has no legal defects.
Title Insurance – Insurance policy that guarantees the accuracy of the title search and protects lenders and homeowners against legal problems with the title.
Truth-In-Lending Act (TILA) – Federal law that requires disclosure of a truth-in-lending statement for consumer loans. The statement includes a summary of the total cost of credit.
Title Search – A historical review of all legal documents relating to ownership of a property to determine if there have been any flaws in prior transfers of ownership or if there are any claims or encumbrances on the title to the property.