Save this page to your ‘Favorite Places’ list. If you ever find yourself confused by real estate jargon, refer back to this page to clear up any confusion.
Appreciation – an increase in the value of a property and usually caused by changes to market conditions or inflation
Assessed Value – the value placed on a property by a public official for tax purposes
Balloon Mortgage – loan that requires the remaining principal balance be paid at a specific time
Balloon Payment – the lump sum due at the termination of a balloon mortgage
Contingency – a condition that must be met before a contract is legally binding
Conventional Mortgage – a home loan that is not a government loan (VA & FHA)
Cooperative – multiple ownership where the residents of a multiunit complex own shares in the corporation that owns the property which gives each resident the right to occupy a specific unit
Creditor – a person to whom money is owed
Credit Repository – organization that maintains financial and public records about individuals who are being considered for credit
Deed-in-lieu (short for deed in lieu of foreclosure) – conveys the title to the lender when the borrower is in default and wants to avoid foreclosure; lender may or may not cease foreclosure if the borrower asks to provide a deed-in-lieu; regardless of the lenders decision, the avoidance and non-repayment of debt will likely show on a credit report; may prevent documents prepped for foreclosure from being recorded and becoming public record
Default – failure to make a mortgage payment within a specified period of time
Depreciation – the decline in a property’s value; the opposite of appreciation
Earnest Money Deposit – a deposit made by a potential home buyer to indicate he/she is serious about buying the property
Effective Age – an estimate, determined by an appraiser, of the physical condition of a building
Encroachment – an improvement that intrudes illegally on another’s property
Equal Credit Opportunity Act (ECOA) – a federal law that requires lenders to make credit equally available without discrimination
Equity – the difference between the fair market value of a property and the amount still owed
Escrow – an item of value, money, or documents deposited with a third party that is to be delivered upon the fulfillment of a condition (e.g. an earnest money deposit is put into escrow until it is delivered once the transaction is closed)
Fair Credit Reporting Act – law that regulates the disclosure of consumer credit reports by reporting agencies and establishes procedures for correct mistakes
Fair Market Value – the highest price that a buyer would be willing to pay and the lowest a seller would be willing to accept
Fannie Mae (FNMA) – the Federal National Mortgage Association that is congressionally chartered; shareholder-owned company and the largest supplier of home mortgage funds
Federal Housing Administration (FHA) – agency of the U.S. Department of Housing and Urban Development (HUD) that insures residential mortgage loans made by private lenders; sets standards for construction and underwriting but does not lend money or construct housing
Foreclosure – the legal process of a borrower in default on their mortgage being deprived of interest in the property; usually involves a forced sale of the property at public auction with the proceeds being applied to the mortgage debt
Joint Tenancy – a form of ownership where each party owns the whole property and the ownership is not separate; in the event of the death of one party, the survivor owns the property in its entirety
Liability Insurance – insurance coverage that offers protection against claims alleging the owner’s negligence resulted in bodily injury
Lien – legal claim against a property that must be paid off when the property is sold
Liquid Assets – items of value that can quickly be turned into cash (e.g. bank accounts, stocks, mutual funds)
Notice of Default – formal document that serves as a notice to a borrower that a default has occurred and legal action may be taken
Owner Financing – a purchase of a property where the seller provides all or part of the financing
Pre-approval – loosely used term that usually means a borrower has completed a loan application and provided debt, income, and savings documentation that has been reviewed and approved
Prepayment – amount paid to reduce the principal balance of a loan before the due date
Pre-qualification – usually refers to the loan officer’s opinion of the ability of a borrower to qualify for a home loan, after the officer has made inquiries about debt, income, and savings
Prime rate – interest rate that banks charge preferred customers
Principal – amount borrowed or remaining to be paid
Promissory Note – a written promise to repay a specified amount over a specific period of time
Real Estate Settlement Procedures Act (RESPA) – consumer protection law that requires lenders to give borrowers advance notice of closing costs
Survey – drawing or map showing the legal boundaries of a property, the location of improvements, easements, rights of way, encroachments, and other physical features
Trustee – a fiduciary who holds or controls property for the benefit of another
Vested – having the right to use a portion of a fund (such as an individual retirement fund)