If you are new to purchasing a home, understanding Real Estate lingo might be a bit challenging.  Do you know what the acronym MLS, ARM, or REO mean?  What about the term, escrow?  Rest assured the agents at the Sandi Meisse Team are here to help.  We’ve put together this Vocabulary 101 lesson to make understanding Real Estate language a whole lot simpler. 

  • Adjustable Rate Mortgage (ARM) – An interest rate that is tied to a financial index making the monthly mortgage payment go up or down.  The interest rate is based off of other interest rates in the area in which your home is located.
  • Annual Percentage Rate (APR)– The percent of interest that will be charged on a home loan each year.
  • Appraisal– A report highlighting the estimated value of the property, completed by a third party.  This is typically done for the benefit of the buyer to ensure that the property is worth that the buyer is paying.  For more information on the Appraisal process, click here
  • Association Fee/ HOA Fee– This is a fee in addition to the mortgage payment.  Certain communities, such as townhomes, have a monthly fee associated with maintaining the common areas and amenities, such as a park or pool.
  • Balloon Mortgage– A long term mortgage loan that starts out with a small payment, but has a large payment at maturity. 
  • Closing– The final meeting where the buyer and seller sign all necessary paperwork, complete the transaction, and release/ take possession of the property.  This is usually done in the presence of the Real Estate Agents and the buyer and seller’s attorneys.  For more information about the Closing process, click here.
  • Closing Costs– The buyer and seller have expenses associated with transactions other than the actual cost of the home.  For example, the buyer has fees due for obtaining a new loan, and the seller must pay commission to both agents. 
  • Closing Disclosure– This is a form that provides the final details of the mortgage such a loan terms, projected monthly payments and how much the extra fees will be.  This is beneficial in preparing your budget for the closing meeting.
  • Collateral– Something of value (in this case your home) that is held to ensure repayment of the mortgage or loan.
  • Commission– A percentage of the sale price of the home that is paid to the Real Estate agents.  The Seller pays both the buying and listing agents their commission.
  • Comparables– Homes in the area you are purchasing a home that have recently sold with similar features.
  • Contingencies– Conditions that must be met in order to close on the property, which are typically tied to a date (referred to as a deadline).  If the contingencies are not satisfied, the contract may be cancelled.  For more information about why Contingencies are important, click here.
  • Counter Offer– The response from the seller in regard to an offer.  This is where the price negotiation takes place. 
  • Debt to Income Ratio– A lender will look at a borrower’s debt vs. income to determine the amount of a loan they are eligible for and if they can repay both the debt and the loan without defaulting on the mortgage loan.  
  • Down Payment– A percentage of the cost of the property paid up front as part of the mortgage.  For tips on how to make saving for your down payment a little less stressful, click here.
  • Earnest Money– A deposit made from the buyer to the seller when submitting an offer.  The deposit is typically held in a trust by a third party.  At the closing, it is generally applied to the down payment or closing costs. 
  • Escrow– This term has multiple meanings- Earnest money is typically held by a third party until closing in “Escrow”.  It can also be referred to as the time period from when a contract is written and accepted by the seller until the sale closes.
  • Equity– The difference in the market value of the property vs. what is owed on the property.
  • FHA– A loan financed through a private lender and insured by the Federal Housing Administration.  They often require a lower down payment and income to qualify.  For more information about FHA Loans, click here.
  • Fixed Rate– An Interest Rate that stays the same through the life of the mortgage.  For more information about Fixed Rate Mortgages, click here.
  • Home Equity Line of Credit– A loan or line of credit determined based on the equity of the home or the home’s value after subtracting the loans owed.
  • Home Inspection– The process of having a professional inspect the seller’s home for any issues that are not openly apparent.  They then create a report for the buyer to review.  For more information about the Home Inspection process, click here.
  • Home Protection Plan– An annual service that covers the cost of repairs or replacements to items covered under the plan (ex: stove, washer/dryer, etc.)
  • Hybrid– A loan that starts out as a fixed rate, then becomes an adjustable rate. 
  • Mortgage Insurance– Insurance written in connection with the mortgage that protects the lender in the event that the borrower can not repay the loan.  Mortgage insurance is usually not required if more than a 20% down payment is placed on the property. 
  • Mortgage Note– A promise to pay a sum of money at a standard interest rate during a specific term that is secured by a mortgage. 
  • Multiple Listing Service (MLS)– A national list of all real estate properties available for sale.  This is the most reliable service to receive up to date listing information.
  • Pre-Approval– The process in which a buyer must provide a mortgage professional the appropriate information on income, debts and assets.  This information is then used to make an initial credit only loan decision.  For tips an tricks on how to prepare your credit for a great Pre-Approval rate, click here.
  • Pre-Qualification– Once approved for a loan, this is the process in where the maximum sale price, loan amount and monthly payments are calculated for the borrower.  This is not a loan approval.  However, it is useful to know prior to searching for a home. 
  • Principal– The underlying amount of the loan that is actually borrowed.
  • Property Taxes– These are taxes enforced by the city, town, county or state government agencies.  The property tax amount is included in the monthly mortgage payment and held in escrow by the lender.
  • REO– This stands for real estate owned properties or foreclosed properties currently owned by a financial institution such as the bank that made the loan to the previous owner. 
  • Reverse Mortgage– A mortgage specifically for seniors.  This allows them to convert the equity in the home into cash. 
  • Short Sale– A situation where the seller’s lender is willing to accept an offer and allows the sale to be completed for an amount less than the mortgage amount owed by the seller. 
  • Title– A legal document proving current and proper ownership of the property.  This is also referred to as the Title Deed.  This document highlights the history of the property ownership and transfers. 
  • Underwriting– The process where a potential home buyer is evaluated for their financial ability to obtain and repay a loan.  This process normally consists of a credit check and appraisal of the property.
  • VA Loan– A loan given to Americans who have served in the armed forces.  They are administered by the Department of Veteran Affairs. 

Hearing or seeing additional Real Estate lingo that you have questions on? Comment below or reach out to us at 570-402-8536 for further understandings!