Glossary of Terms
Real estate jargon explained in plain English.
Amortization
The process of paying off a debt over time through regular payments. An amortization schedule shows how much of each payment goes to principal versus interest.
APR (Annual Percentage Rate)
The total yearly cost of a mortgage, including the interest rate plus fees and other costs, expressed as a percentage.
Appraisal
A professional estimate of a property's market value, required by lenders to ensure the home is worth the loan amount.
Closing Costs
Fees paid at the end of the real estate transaction. They typically range from 2% to 5% of the purchase price and include loan origination fees, title insurance, and appraisal fees.
Contingency
A condition that must be met before a contract is legally binding. Common contingencies include the buyer securing financing or the home passing inspection.
Debt-to-Income (DTI) Ratio
The percentage of your gross monthly income that goes toward paying debts. Lenders use this to determine how much you can borrow.
Down Payment
The portion of the home's purchase price that you pay upfront in cash. The rest is covered by the mortgage.
Earnest Money
A deposit made to a seller to show the buyer's good faith in purchasing a home.
Equity
The difference between the home's current market value and the outstanding balance of the mortgage. It's the portion of the home you truly 'own'.
Escrow
An account held by a third party on behalf of the buyer and seller. Lenders often use escrow accounts to collect and pay property taxes and insurance on behalf of the homeowner.
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the entire life of the loan, ensuring predictable monthly principal and interest payments.
HOA (Homeowners Association)
An organization in a subdivision or condo complex that makes and enforces rules. They collect monthly fees for maintenance of common areas.
PMI (Private Mortgage Insurance)
Insurance that protects the lender if you stop making payments. Usually required if your down payment is less than 20%.
Principal
The amount of money borrowed for a mortgage, not including interest.