Adjustable Rate Mortgage (ARM):
Mortgage in which rates/payment vary according to the current rate of interest.
Many offer lower-than-market initial rates that rise only gradually for the first few years.

Adjustments:
Money that both buyers and sellers credit to each other at closing, including taxes and down payment.

Agent:
Licensed representative of the seller who assists both buyers and sellers with information,
advice, and assessment of current market conditions.

Appraisal:
Unbiased, professional opinion of a property's value based on its style and appearance,
construction quality, usefulness, and the value of comparable properties.

Asking Price:
Price at which the owner wishes to sell a property.

Assessor:
Municipal or county official who determines the value of property for taxation.

Balloon Mortgage:
Short term loan, usually at a fixed interest rate, paid back in equal monthly payments,
with a large, final "balloon" payment for the balance.

Broker:
Person licensed to represent home buyers or sellers for a fee.

Buyer's Agent:
Agent that represents the buyer in the real estate transaction.

Closing:
Final settlement, including the buyer's signing of the mortgage and mortgage note, and exchange of title.

Closing Costs:
Fees and other charge paid by both buyers and sellers at closing.

Commission:
Percentage of the home's sale price paid at closing to the listing agent and to cooperating agents.

Comparable's:
Houses and properties that are similar in style, appearance, construction quality and usefulness to a
particular property in a certain location.

Competitive Market Analysis (CMA):
Realistic estimate of a home's current market value based on the most salient points of the local real estate market.

Conventional Mortgage:
Mortgage not FHA insured or guaranteed by the VA, so-called because it is the most popular home financing method.

Counter-offer:
Offer made by the buyer or seller in response to the other's bid.

Curb Appeal:
Common term for everything prospective buyers can see from the street that might make them want to take a closer
look at a house for sale.

Deed:
Instrument that transfers title from the seller to the buyer.

Down Payment:
Buyer's payment to the seller at time of closing for that percentage of the purchase price required by the buyer's mortgage loan.

Earnest Money:
Money paid by a buyer at the time of making an offer or entering into a contract to purchase which is intended to show the
buyer's good faith intention to complete the purchase. Generally, earnest money is applied against the purchase price, but
may be forfeited if the buyer fails to complete the purchase.

Equity:
Difference in dollars between a house's anticipated sale price and the mortgage.

Escrow Account:
Third-party account for holding money, such as a buyer's earnest money and the owner's taxes and insurance payment.

Exclusive Agency:
Sales contract in which sellers owe no commission to an agent if they find a buyer for their house on their own.

Exclusive right to sell:
Sales contract in which sellers owe commission to the listing agent even if they find a buyer for their house on their own.

Fair market value:
Highest price an informed buyer will pay, assuming there is not unusual pressure to complete the purchase.

FHA-insured mortgage:
Mortgage with low down payment requirements, insured by the Federal Housing Administration and made available
through banks and other lenders.

Fixed rate mortgage:
Mortgage that is locked in to a set interest rate and relatively unaffected by inflation and interest rate changes.

Home warranty:
Policy purchased by a buyer or seller as assurance against unexpected home repair costs.

Homeowner's Policy:
Insurance policy covering at least the appraised value of a house and property.

Inspection:
Formal survey of a home's structure and systems, often performed by a licensed professional.

Inspection clause:
Stipulation in an offer-to-purchase that makes the contract contingent upon the findings of a professional home inspector.

Interest:
Charge paid to a lender for borrowed money.

Lease-purchase agreement:
Agreement between a tenant and landlord that a portion of monthly rent may be credited toward eventual purchase
of the rental property.

Lender's agent:
Person who represents the lender holding the mortgage at closing.

Listing:
Contract in which the seller agrees to pay a commission to the agent who finds a purchaser who can meet the specified terms.

Mortgage:
Claim that a lender receives on a property as its security for the loan it makes to the home buyer.

Mortgage broker:
Independent, third-party broker who arranges transactions between borrowers and lenders by streamlining the application and
approval process and finding favorable terms for the buyer.

Mortgage note:
Signed promise to repay a mortgage loan in regular monthly payments.

Multiple Listing Service (MLS):
System in which participating brokers agree to share commission on the sale of houses listed by any one of them.

Offer (offer-to-purchase):
Legally binding, written contract that declares how much a buyer will pay for the house provided certain conditions are met.

Open house:
Opportunity for prospective buyers to view a house for sale in a low-pressure atmosphere.

Origination fee:
Similar to a point; a supplemental fee paid to lenders.

Over-improvement:
Addition or improvement in which the cost is greater than the increased value of the house.

Payment cap:
Protective device included in some adjustable rate mortgages that sets a maximum amount monthly
payments may rise in any given year.

PITI:
Principal, Interest, Taxes, and Insurance, the four main parts of a monthly mortgage payment.

PMI:
Private mortgage insurance, which protects the lender in case of default by the borrower.
PMI is often used to allow buyers to obtain financing with less than a 20% down payment.

Points:
One point equals one percent of the total mortgage loan amount. Buyers often pay lenders a supplemental fee,
calculated in points, to get a better mortgage insurance rate.

Pre-payment:
Paying off an entire mortgage before the scheduled date.

Pre-qualify:
Informal determination by a lender or broker of how large a mortgage a buyer can afford.

Principal:
Money borrowed from a lender, not including any fees or interest.

Qualify:
Ability to meet a lender's mortgage approval requirements.

Rate:
Protective device in some ARMs that sets a maximum amount that interest rates may rise or decrease
annually and over the life of the loan.

Referral:
One agent's recommendation of a potential buyer of seller to another cooperating agent.

Refinancing:
Applying for a new mortgage in order to gain better terms -- usually a lower interest rate.

Return on investment:
Value or profit gained as a result of dollars spent, as in an improvement or addition.

Settlement disclosure statement:
A list giving a complete breakdown of costs involved in a real estate transaction, prepared by the lender's agent at closing.

Title:
Right of ownership and possession of a property.

Title insurance:
Policy that protects a buyer against errors or omissions or defects in the title of a property.

VA mortgage:
Mortgage guaranteed by the Department of Veterans Affairs and made available through banks and other
lending institutions. Reserved for active military personnel, veterans, or spouses of veterans who died of service-related injuries.

Walk-through:
Final inspection of a property's condition by the buyer, usually to ensure that all conditions noted in the
offer-to-purchase have been met.

Zoning:
Local restrictions for neighborhood building and land use.