Have you heard a word or phrase and wondered what it meant? Below are some common words or phrases and their definitions.

Adjustable Rate Mortgage(ARM)	Good Faith Estimate
Agent	Hazard Insurance
Amortization	Home Equity Line of Credit
Annual Percentage Rate (APR)	Home Equity Loan
Application	Homeowner's Association
Application Fee	HUD/Settlement Statement
Appraisal	Inspection
Appreciation	Interest
Assessment	Interest Rate
Balloon Payment	Lease Purchase
Bridge Loan	Lien
Closing	Listing
Closing Costs	Loan Origination Fee
Closing Statement	Lock-in
Comparable Market Analysis (CMA)	LTV (Loan to Value)
Condominium	Market Value
Contingencies	MLS(Multiple Listing Service
Contract of Sale	Mortgage Loan
Conventional Mortgage	Mortgage Insurance (PMI)
Credit Limit	Negative Amortization
Debt Service	PITI
Debt to Income Ratio	Points
Deed	Prepayment Penalty
Discount Point (or Points)	Prequalification
Down Payment	Pre-paids
Earnest Money	Principal
Easement	Promissary Note
Encumbrance	Property Tax
Equity	REALTOR®
Equity Mortgage	Recording
Escrow	Sub-Agent
Fixed Rate	Title
FHA Loan	Title Insurance
Foreclosure	Transaction Fee
FSBO (For Sale By Owner)	Variable Rate
	VA Loan
	Warranty
	Zoning

Adjustable Rate Mortgage (ARM)--A mortgage in which the Interest rate is adjustable, meaning that the rate can go up or down according to prevailing financial market conditions.

Agent--An individual who represents a seller, a buyer or both in the purchase or sale of real estate.

Amortization--The schedule of loan payments that establishes the amount of payment to be applied to the principal and the amount to be applied to interest, usually on a monthly basis, for the full term of the loan.

Annual Percentage Rate (APR)--The cost of credit on a yearly basis, expressed as a percentage. Required to be disclosed by the lender under the federal Truth in Lending Act, Regulation Z. Includes up-front costs paid to obtain the loan, and is, therefore, usually a higher amount than the interest rate stipulated in the mortgage note. Does not include title insurance, appraisal, and credit report.

Application--An initial statement of personal and financial information which is required to approve your loan.

Application Fee--Fees that are paid upon application. An application fee may frequently include charges for property appraisal and a credit report

Appraisal--An estimate of value of a Real Estate property by a professional third party. Virtually all non-owner financed mortgages will require an appraisal and is generally paid for by the buyer.

Appreciation--Increase in value due to any cause.

Assessment--The value of a property as determined by the local tax jurisdiction which is used to determine the amount of your property taxes.

Balloon Payment--A lump sum payment for the unpaid balance of the loan.
Buyer's Agent--A Real Estate Agent that has made an agreement to represent the buyer exclusively, rather than the seller.

Bridge Loan--A short-term mortgage made until a longer-term loan can be made; it’s sometimes used when a person needs money to build or purchase a home before the present one has been sold.

Closing--The process that effects the final transfer of the deed from the seller to the buyer, as well as finalize all aspects of the mortgage of the property.

Closing Costs--Funds needed at the time of closing (separate from and in addition to the down payment). Loan origination fees, discount points, Attorney fees, recording fees and pre-paids are some items that may be included. They often will total from 3% to 5% of the price of the home, payable in cash.

Closing Statement--A financial statement rendered to the buyer and seller at the time of transfer of ownership, giving an account of all funds received or expended.

Comparable Market Analysis (CMA)--A comparison of the prices of similar houses in the same general geographic area. A CMA is used to help determine the value of a property, either for a seller or a buyer.

Condominium--Housing where the owner owns only the unit in which the live--from the interior walls inward, generally--as well as a portion of the common area.

Contingencies--These are conditions--or "safety valves" written into Real Estate offers and contracts to prevent a buyer from being forced to buy a house that is unsatisfactory--either structurally or financially. Examples of contingencies are "This contract is subject to the buyer obtaining a satisfactory whole house inspection." or "Subject to the buyer being able to obtain a mortgage."

Contract of Sale--The agreement between the buyer and seller on the purchase price, terms, and conditions necessary to both parties to convey the title to the buyer.

Conventional Mortgage--A fixed rate, fixed-term mortgage not insured by the federal government.

Credit Limit--The maximum amount that you can borrow under a home equity plan.

Debt Service--The total amount of credit card, auto, mortgage or other debt upon which you must pay.

Debt to Income Ratio--The ratio of a borrowers total of debt as a percentage of their total gross income.

Deed--The document that, when recorded with your local government, determines ownership of a property. Transferred from seller to buyer at closing.

Discount Points (or Points)--The amount paid either to maintain or lower the interest rate charged. Each point is equal to one percent (1%) of the loan amount (i.e., one point on a $100,000 mortgage would equal $1,000).

Down Payment--The difference between the purchase price and that portion of the purchase price being financed. Most lenders require the down payment to be paid from the buyer's own funds. Gifts from related parties are sometimes acceptable, and must be disclosed to the lender.

Earnest Money--Money that is submitted with an offer to purchase which indicates a buyer's seriousness and good faith. In virtually all cases, earnest money will need to be submitted at the time of the offer and remains in escrow until the time of closing, at which time it becomes part of the down payment.

Easement--A right to use the land of another.

Encumbrance--A claim against a property by another party which usually affects the ability to transfer ownership of the property.

Equity--The difference between the value of a property and the total of any outstanding mortgages or loans against it.

Equity Mortgage--A mortgage based on the borrowers’ equity in their home rather than on their credit worthiness.

Escrow--Funds held in reserve both prior to closing (for example the earnest money and deposit) by a third party and after closing by the mortgage company to pay future taxes and homeowners insurance. In some areas, "escrow" also refers to the closing process.

Fixed Rate--An interest rate which is fixed for the term of the loan. Payments as well are fixed at one amount.

FHA Loan--More appropriately termed "FHA Insured Loan." A loan for which the Federal Housing Administration insures the lender against losses the lender may incur due to your default.

Foreclosure--The process through which a lender takes back property from a defaulting owner and re-sells it.

FSBO (For Sale By Owner)--Real Estate that is sold without the assistance of an Agent. FSBO can refer to both the individual selling the property "They are a FSBO," or the property itself "that house is a FSBO."

Good Faith Estimate--A written estimate of closing costs which a lender must provide you within three days of submitting an application.

Hazard Insurance--A contract between purchaser and an insurer, to compensate the insured for loss of property due to hazards (fire, hail damage, etc.), for a premium.

Home Equity Line of Credit--A loan providing you with the ability to borrow funds at the time and in the amount you choose, up to a maximum credit limit for which you have qualified. Repayment is secured by the equity in your home. Simple interest (interest-only payments on the outstanding balance) is usually tax-deductible. Often used for home improvements, major purchases or expenses, and debt consolidation.

Home Equity Loan--A fixed or adjustable rate loan obtained for a variety of purposes, secured by the equity in your home. Interest paid is usually tax -deductible. Often used for home improvement or freeing of equity for investment in other real estate or investment. Recommended by many to replace or substitute for consumer loans whose interest is not tax-deductible, such as auto or boat loans, credit card debt, medical debt, and education loans.

Homeowner's Association--An owners group, whether in a condominium, townhouse or single family subdivision that establishes general guidelines for the operation of the community, as well as its standards.


HUD I Settlement Statement--A form utilized at loan closing to itemize the costs associated with purchasing the home. Used universally by mandate of HUD, the Department of Housing and Urban Development.

Inspection--A whole house inspection of a home being considered for purchase which looks for defects in the property.

Interest--That portion of a mortgage payment that is the "charge" for using the lender's funds.

Interest Rate--The periodic charge, expressed as a percentage, for use of credit.

Lease Purchase--Buyer makes a deposit for the future purchase of a property with the right to lease the property in the interim.

Lien-- A legal claim against a piece of property that can prevent it from being sold unless the lien is satisfied (paid off). Liens can be filed by unpaid contractors or other debtors in a legal process so that they will be paid when a property is sold.

Listing--A property for sale by a Real Estate Brokerage and Agent.

Loan Origination Fee--A charge imposed by the lender, payable at closing, for processing the loan.

Lock-in--An agreement by the lender at the time of mortgage application or shortly thereafter, to write the mortgage at a specific interest rate, whether rates rise or fall up to the date of closing. Obviously a good move if rates are rising, not so good if they are falling. Lock-ins have specific expiration dates, such as 30, 60 or 90 days in the future.

LTV (Loan to Value)--The ratio of the amount of the mortgage as a percentage of the value of the property.

Market Value--The highest price a buyer will pay for a property and the lowest price accepted.

MLS (Multiple Listing Service)--A listing (almost always computerized) of all the properties for sale by Real Estate Brokerages in a given geographical area.

Mortgage Loan--A loan which utilizes real estate as security or collateral to provide for repayment should you default on the terms of your loan. The mortgage or Deed of Trust is your agreement to pledge your home or other real estate as security.

Mortgage Insurance (PMI)--Required on virtually all conventional loans with less than 20% down payment. Although the payments for PMI are included in your mortgage payment, it protects the lender should you default on the loan. On FHA loans, you will pay a MIP (Mortgage Insurance Premium) which accomplishes the same purpose.

Negative Amortization--Amortization in which the payment made is insufficient to fund complete repayment of the loan at its termination. Usually occurs when the increase in the monthly payment is limited by a ceiling. The portion of the payment which should be paid is added to the remaining balance owed. The balance owed may increase, rather than decrease over the life of the loan.

PITI--Principal, interest, taxes and insurance, which comprise your monthly mortgage payment.

Points--1 point is equal to 1% of the loan value, paid at closing. Points can be loan origination fees or "discount points" which reduce the interest rate of the loan (you are actually paying a finance charge up front). When a lender, for example, quotes a rate of 8 1/2% with 1 + 1 points, 1 point is for the origination fee and 1 point is for the discount fee.

Prepayment Penalty--A fee paid to the lending institution for paying a loan prior to the scheduled maturity date.

Prequalification--The first stage of a mortgage application where the lender will run a basic credit report and determine your debt to income ratio in order to see how much mortgage you qualify for.

Pre-paids--Paid for (in cash) at closing for such items as homeowners insurance for one year and real estate taxes for several months.

Principal--The amount borrowed for a mortgage loan. Your monthly mortgage payment will be applied to both the interest and the principal (be assured, though, that the lions share will go to the interest portion in the first years of the loan).

Promissory Note--A written contract containing a promise to pay a definite amount of money at a definite future time.

Property Tax--An annual or semi-annual tax paid to one or more governmental jurisdictions based on the amount of the property assessment. Generally paid as part of the mortgage payment.

REALTOR®--The terms agent, broker and REALTOR® are often used interchangeably, but have very different meanings. For example, not all agents (also called salespersons) or brokers are REALTORS®. Learn who is a REALTOR® and the reasons why you should use one. As a prerequisite to selling real estate, a person must be licensed by the state in which they work, either as an agent/salesperson or as a broker. Before a license is issued, minimum standards for education, examinations and experience, which are determined on a state by state basis, must be met. After receiving a real estate license, most agents go on to join their local Association, NORTHWEST LOUSIANA ASSOCIATION OF REALTORS®, and the NATIONAL ASSOCIATION OF REALTORS®, the world's largest professional trade association. They can then call themselves REALTORS®. The term "REALTOR®" is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION OF REALTORS® and subscribes to its strict Code of Ethics (which in many cases goes beyond state law). In most areas, it is the REALTOR® who shares information on the homes they are marketing, through a Multiple Listing Service (MLS). Working with a REALTOR® who belongs to an MLS will give you access to the greatest number of homes and expose your property to the greatest number of REALTORS® and potential purchasers.

Recording--The act of entering deed and/or mortgage information into public record with your local government jurisdiction.

Sub-Agent--A Real Estate Agent who is working with a buyer but who represents the seller in the transaction.

Title--The written evidence that proves the right of ownership of a specific piece of property.

Title Insurance--Protects your title--your ownership rights--from claims against it. Paid at closing, title insurance may be the responsibility of the buyer, the seller, or both, depending on what is traditional in your locality.

Transaction Fee--A fee which may be charged each time you draw on a home equity credit line.

Variable Rate--An interest rate that changes periodically in relation to an index. Payments may increase or decrease accordingly.

VA Loan--More appropriately termed "VA Insured Loan." A loan for which the Veteran's Administration insures the lender against losses the lender may incur due to your default. Available only to veterans possessing a Certificate of Eligibility.

Warranty--Covers either most of the house in a new home, or selected items (for example the heating and air conditioning system or the water heater) in a used home. Warranties can vary widely and are optional in used homes (paid for by either the buyer or the seller).

Zoning--Laws that govern specifically how a zoned area can be used. For example, an area may be zoned for single family residential, condominiums, commercial or retail, or a mix of two or more uses.