Real Estate Terms Every Homebuyer Should Know

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As a homebuyer, you might face some difficulty understanding the meaning of numerous real estate terms or jargon thrown around by real estate agents. And it is only natural because, unlike a real estate broker, you don’t deal with properties day in and day out. But as someone who wants to buy a home, you will be better served while dealing with a real estate agent if you have some prior knowledge and understanding of real estate terms.

Secure Fair Market Value In Your Real Estate Transaction

When you know real estate terms, you can negotiate better with your real estate agent and extract the fair market value for a house. This knowledge will help secure your real estate transaction.

In this article, we will curate a comprehensive list of real estate terms that you should know as a homebuyer. We aim to keep it as simple as possible to allow you to learn real estate terms in an easy language. The idea is to equip you to use your knowledge of these real estate terms as you move forward in your home buying journey.

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Acceleration Clause

This contract term, also known as an acceleration covenant, requires a borrower to repay all of their existing debt to a lender if specific standards stipulated by the lender aren’t followed.

Active under contract

A house is deemed active in the agreement if a purchaser accepts an offer with contingencies and wants the house listed as active. The seller will also likely accept a backup offer should his existing offer be insufficient.


Addendums are added to contracts. Addendums often clarify offers and add competitive advantages. In this instance, the buyer can use a clause in the offer of the buyer as a condition for getting a loan.

Adjustable-rate mortgages (ARM)

An adjustable-rate mortgage is a fixed-rate mortgage, and it offers a different rate. Most commonly, it starts at less than fixed rates and can change over time depending on market rates.


Amortization means an agreement defining how the balances are paid. Payment is typically made in interest first, followed by payment of the capital amount.

Annual percentage rate (APR)

APR is the monthly interest rate on an investment. It usually entails loans origination fees and closing costs, mortgage interest rates, or discounts.


An appraisal is a good idea of what a property is worth. During a home selling transaction, the mortgage lenders send out a qualified appraiser. This helps to determine the value of the home based on a buyer’s potential interest.

Real Estate Appraisal

Appraisal contingency

A condition in the sale of a property may prevent the seller from closing the purchase agreement when the appraised value falls below the sale price. To finalize the loan, the appraiser must determine whether or not the house is worth preserving the property.


Appreciation indicates the increase in the value of homes over the years. Historical studies indicate that real estate values in the United States range between 3% and 5% annually. I don’t want to get it. Is there a solution?

Real Estate Appreciation


An as-is property is listed for sale in its existing condition, meaning that the seller will not compensate or fix any flaws or problems with the residence. When a property is advertised “as-is,” the seller is indicating that he or she will not accommodate such requests. Buyers could either take the house as is or look for something different.

Assessed value

The assessed value is the most accurate appraisal based on real property prices. Similar properties, their position, and condition have a role as factors in determining a valuation.


An assignment occurs when the owner of property signs over the buyer’s rights and obligations to that property before the official closure.

Assumable Mortgage

When a seller transfers all of the terms and circumstances of a mortgage to a buyer, this is known as an assumption. So rather than signing out a new mortgage, the buyer assumes the seller’s remaining debt.

Backup offer

The buyer can send a backup offer if the initial deal fails to close. It is necessary to negotiate and provide all necessary monies for verification.

Balloon mortgage

A balloon mortgage is paid with one lump sum rather than in installments, as is the case with a regular fixed-rate mortgage (e.g., the balloon payment). It’s most commonly connected with short-term investment or building projects that don’t require collateral.

Balloon Mortgage

Biweekly mortgages

Biweekly mortgages are a way of paying off loans every two weeks. There are 26 half payments over one year – 13 full payments instead of 12 half payments. This additional payment helps pay off the mortgage quicker.

Blanket mortgage

Blanket Mortgage covers ten-year mortgage loans with a single loan. It’ll also help reduce your costs. The seller who is planning on buying another property before selling his first property will have to apply for a blanket loan for equity to be used on another property.

Blind Offer

If someone offers to buy their house online but does no real estate, they are blindly making their bids. Typically it happens if a foreign buyer cannot access the listing. It may occur in high competition markets where viewing spaces will fill immediately, and the purchasers still want the competition.


In real estate, you may purchase a house directly through cash as well as by obtaining a loan. If a borrower uses credit cards, they’re legally known as the borrower.

Bridge loans

Bridge loans are temporary loans used to ensure permanent finance. Bridge loans usually come in more expensive terms compared to other types of loans. These are usually used when the seller requires money to buy the house before the purchase.


A broker is someone who has passed a broker’s licensing exam and acquired education beyond that required by the state for real estate agents. They are well-versed in property law, construction, and management. Real estate agents must be supervised by a broker at all times.

Broker and Realtor

Buying homes may require the assistance of either the real agent or the broker. Even if the same term sounds different, the opposite is true. A realtor is a licensed realtor who is formally registered with the MLS and is likely working in conjunction with brokers to help clients.

A real property broker is an agent whose education continues and who receives the broker license. The realty broker is independent and may hire another agent under his/her supervision.

Buyer’s agent/listing agent

A buyer’s agent, also called a seller agent, is a Licensed Real Estate Professional whose job focuses on locating the next house of a prospective buyer, representing the interest of that buyer through negotiations with that buyer for the most reasonable price and for that buyer. This agent represents Buyer’s fiduciary duties.

The seller agent is the licensed real estate professional who is hired by the listing agency and works with the buyer in marketing his or her properties. The agent is acting as an adviser to the buyer.

Buyer’s Market/Seller’s Market

Depending upon what kind of buyer or seller it is possible to have different effects on property. In buyers markets, conditions favor buyers who are interested in buying property. It occurs when the available house inventory exceeds the demand to buy it. It is known as the seller’s market and favors people selling properties.


A buydown happens when borrowers pay points or premiums to acquire low rates of interest. Buydowns can help you make more money, but you may need lower payments at a later stage of the process.

Certificate of eligibility

Lenders ask veterans to produce documentation of meeting the minimum service criteria to qualify for a VA loan during the VA loan process.

Certificate of reasonable value

The Department of Veterans Affairs issues a certificate of reasonable value (CRV), which is essential for veterans to secure a VA loan. It determines the property’s maximum valuation and, as a result, the loan’s maximum size.

Chain of Title

The chain of title is the record of all previous owners of a property in chronological order. It begins with the current owner and ends with the property’s very first owner.

Real Estate Title

Clear Title

A clear title, also called a “free and clear title,” is one that is free of any liens or levy from creditors. It signifies there are no issues with the property’s legal ownership, such as construction code violations or inaccurate surveys. A clear title identifies the indisputable legal owner of the property.


Closure occurs when a house sale is declared final. For some markets nationwide, recording the deed is the final and most important process for a close. Finally, the prospective buyer has the right to inspect the property, and then they become an official buyer.

Closing costs

The closing costs represent several fees, including those charged for closings with other entities. Closing charges are typically collected when closing any transaction. Find out the details of the various expenses incurred at closing.


A co-borrower is a person who, along with the borrower, is financially liable for repaying a debt. If a buyer is having difficulty getting a loan approved, they can enlist the assistance of a co-borrower. When a father and son take out a mortgage jointly, one of them may be the primary borrower and the other a co-borrower.


A commission is a payment made after a sale has been completed. Realtors and agents operate on commission, meaning that they are paid a percentage of the sale price at the time of closing. The average real estate commission is 5-6 percent of the home’s sale price.

The commission is normally shared between the buyer’s and seller’s agents, and the seller pays it at closing.

Common area assessments

If you pay a monthly fee to a Homeowners Association (HOA), a portion of your cost will almost certainly go toward a common area assessment to keep a common space open to the public.

Compound Interest

Compound Interest is a term that refers to the interest that is calculated on both the principal and interest owed on your account. In the case of a loan, this implies you’ll be paying more interest over time. Compound interest on investment allows you to earn more money over time.

Comparable sales

An appraiser uses comparable sales to determine the worth of a home-based on the information about An appraiser uses comparable sales to determine the worth of a home based on the information about what other similar properties in the neighborhood have recently sold for. Only legally closed residences are considered comparables, and most lenders and insurance companies require appraisers to utilize at least three closed sales.

Construction loan

A construction loan, sometimes known as a self-build loan, is a short-term loan intended to fund the building of a home or other real estate project. Before long-term funding can be secured, this form of loan is used to meet project costs.

Conventional sale

A traditional sale occurs when the house has been owned in full (no longer mortgage), and the homeowner owes less than it has been sold for. Typically, conventional transactions are more smooth than other forms of sales, e.g., foreclosure or probate sale, or short sale.


A contingency is a requirement that must be met before the deal can be legally completed. A buyer, for example, can condition their offer on a passing home inspection. The sale might fall through if this condition is not met. The buyer’s ability to sell their property by a certain date could also be a condition of the transaction. If either the buyer or the seller fails to satisfy the contingency’s expectations, the contract can be terminated by either side.

Convertible ARM

A convertible ARM is an adjustable-rate mortgage (ARM) that allows the borrower to convert to a fixed-rate mortgage after a certain amount of time has passed. Convertible ARMs are sold as a method to profit from declining interest rates, but they usually come with stipulations.

Although their monthly mortgage payment remains constant, interest rates change (mostly every six months). The borrower can convert their ARM to a fixed-rate mortgage, however, there are usually expenses associated with this.

Cost Of Funds Index (COFI)

Adjustable-rate mortgage lenders use this index to change their interest rates. COFI provides a statistic on current market interest rates based on shifting economic conditions.

Covenants conditions & restrictions (CC&Rs)

Usually, these are the laws that a house owner can make on their property that specify the conditions that a property owner can have on their property. This can also be monthly or annual fees or special taxation.

Days on market (DOM)

DOM is the average number of days between the sale date of an item in real estate listings and the sale date of the property. A similar measure measures the average DOM of homes sold at a given time on a specified market. A lower DOM average suggests a solid marketplace favoring sellers. A strong average DOM indicates a weak market that favours buyers. Seasonality also plays an important role.


The legal document that transfers ownership from the seller to the buyer is known as a house deed. It has to be a written document, and it is also known as the vehicle for the transfer of a property interest.  It shows the ownership of the property. You get your deed once you sign and close. 

Deed In Lieu Of Foreclosure 

If a borrower is facing foreclosure, a deed in lieu of foreclosure may be the best option. This gives the lender deed ownership in exchange for debt forgiveness, allowing you to avoid foreclosure.

Debt-to-Income Ratio

Debt-to-Income Ratio is a measure of how much debt a person has compared to how much money they earn. Your monthly debts (house, automobile, student debt payments, credit cards, etc.) are divided by your monthly gross income to determine your debt-to-income ratio. This percentage is used by lenders to assess your capacity to repay a potential loan.


A borrower goes into default when they miss many loan payments over a period of time. Lenders and government bodies utilise predetermined deadlines to determine when a loan goes into default.


A single missed mortgage payment constitutes delinquency. If missed payments continue, the debt may default.

Down payment

The down payment is the amount of money paid in cash at the time of closing on a home. A 20% down payment is required for most house loans. A 5% down payment is required for some conforming loans, whereas a 3.5 percent down payment is required for FHA loans.

Due diligence

There might also be time to conduct due diligence on the sale agreement, allowing buyers the opportunity to inspect the property and perform inspections. In some instances, an individual can have the option to restructure and terminate the contract at the end of the contract. Due diligence helps to understand the buyer’s decision to buy.

Earnest money deposit (EMD)

An earnest money deposit, also called a good faith deposit, is the money that the buyer must put down before selling. This shows that the purchaser wants to buy but is also willing to give the money. The EMD’s total value can fluctuate between 5 – 5 percent of the sales price.


An easement is a legal document that allows someone else to utilise someone else’s land or property while keeping the title in the owner’s name.

Eminent Domain

If the owner is appropriately compensated, the government retains the power to seize private property and transform it for public use. Eminent domain is the legal term for this right.


An escrow is a legal arrangement in which a third party holds substantial sums of money until the requirements of a contract are fulfilled. You’ll set up an escrow account in real estate to retain funds for taxes and insurance during the term of your mortgage.


The amount of a home’s value that can be credited to the owner is called equity. The amount owing is subtracted from the home’s market value to arrive at this figure. 

The Fair Credit Reporting Act (FCRA) 

The Fair Credit Reporting Act (FCRA) was passed in 1970 and safeguards the truth, impartiality, and The Fair Credit Reporting Act (FCRA) was passed in 1970 and safeguarded the truth, impartiality, and privacy of personal information held by credit reporting organizations. The purpose of this act is to safeguard customers from being victimized by false information.

FHA Loan

The Federal Housing Administration (FHA) insures these loans in order to make housing more affordable, particularly for first-time homebuyers. The FHA mortgage typically has lower down payments, closing costs, and credit criteria than conventional loans.

Fixed-Rate Mortgage

This mortgage locks in at a fixed rate for the life of the loan. Your monthly principal and interest payment will never fluctuate if you have a fixed-rate mortgage.


Foreclosure is a legal procedure in which a homeowner loses all property rights if he or she fails to make a mortgage payment for more than 90 days. A foreclosure auction then helps in recovering as much amount as possible.

Grace Period

Late fines may apply if you fail to make your monthly mortgage payment on time. Many loans, on the other hand, provide a grace period during which late payments are not penalized.

Home Equity Line of Credit (HELOC)

A home equity line of credit is a loan that allows you to borrow money against the equity in your home as needed, rather than in one flat payment. This loan has a set maximum borrowing amount and a set repayment duration. 

Jumbo loan

The dollar amount that can be guaranteed by government-sponsored programs is limited by conforming loan limitations. These conforming loan limits, which are connected to local median home values, are exceeded by jumbo mortgages.


A lender is a financial institution that provides house loans or other forms of credit.


A lien guarantees payment by granting the lien holder legal title to the property. Because your lender can legally confiscate your property if you don’t make payments, a mortgage is a form of a lien.


Mortgage refers to a loan used to buy or refinance a home. The legal document that pledges the property as collateral for the loan is known as a mortgage.

Private Mortgage Insurance (PMI)

A policy that protects your lender in the event that you default on your loan is known as private mortgage insurance. In most cases, if you have a down payment of less than 20% on a traditional loan, you will be required to pay PMI.

Principal Balance

In the case of a mortgage or other debt instrument, the principal balance is the amount owing and owed to meet the payoff of an underlying obligation, less any interest or other penalties.


The phrase “underwriting” refers to the process of determining loan terms and safeguarding lenders from financial risk. To evaluate loan eligibility, underwriters may consider a borrower’s credit, job history, debt, and the condition of the property.


Sometimes it’s easy to assume the property has its own vocabulary. The listings here offer a full assessment and hints so that you know the basics.

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