Real Estate Terms You Need to Know

During the purchase of a home, you will hear a wide range of acronyms between your real estate agent, lender etc. The intent of this guide is to educate you on what these acronyms are what they mean. For example, is there a difference between a real estate agent verses a real estate broker? What is PITI, and why does real estate vocabulary use so many confusing acronyms? We have created a guide with terms to know that you may hear when selling and / or purchasing a home.

Real Estate Terminology

Agreement to Amend Contract

A contract amendment is a change, correction, clarification, or deletion to an agreement you have already signed.


An addendum is an add-on to a contract. In real estate, addendums often clarify offer letters or add a competitive edge. For example, a REALTOR® may use an addendum to make the buyer’s offer contingent on securing a loan.

Adjustable-Rate Mortgage

Adjustable-rate mortgages (ARM) offer variable interest rates. It usually begins with a lower interest rate than fixed-rate mortgages, but typically changes over time following market rates. If you don’t plan on staying in your home long-term, refinancing to an ARM can sometimes benefit you.


Amortization refers to a payment schedule outlining what goes toward principal and interest balances. Typically, payment goes toward interest first and then the principal balance.

Annual Percentage Rate (APR)

APR is the annual cost of a loan expressed as an interest rate. It often includes loan origination fees, most closing costs, mortgage interest and any discount points.


Appraisals are an expert’s opinion of a home’s market value. Appraisers examine a home’s condition, location and similar properties recently sold. By law, appraisals are done by neutral third parties with no interest in the sale.


Appreciation is a home’s increased value over time. Historically, real estate appreciates from 3% – 5% each year nationally.


Sometimes a buyer will ask the seller to update the home during the offer process – like adding new carpeting or replacing an old roof. When a seller will not make any changes to a home, the home is being sold as-is.

Assessed Value

Assessed value is a professional estimate of a home’s market price for property tax purposes. Similar properties, the home’s location and its condition are considered when finding assessed value.

Backup Offer

If a buyer wants a home already under contract, they may request to be “next in line” by submitting a backup offer. Backup offers must still be negotiated with any fees – like earnest money – paid. There can legally only be one backup offer on a home at any given time.

Biweekly Mortgage

A biweekly mortgage allows the borrower to make mortgage payments every 2 weeks rather than once a month. The result is 26 half payments, or 13 full payments, over a year rather than 12. The extra payment will help pay off the mortgage faster.

Blanket Mortgage

Blanket mortgages cover more than one plot of land financed by the same borrower. This can help save time and money. For example, a seller ready to buy a second property before their first has sold may use a blanket mortgage to access equity from the first property to put toward the second.

Blind Offer

If you put an offer on a home without seeing it in person, you’re making a blind offer. This may happen when an out-of-state buyer is physically unavailable to see a new listing. It can also happen in highly competitive markets when viewing slots are immediately filled but a buyer still wants to compete.


In real estate, you can pay for a home outright with cash or through a loan. When you pay using a loan, you are legally referred to as the borrower.


When buying a home, you may work with a REALTOR® or a real estate broker. While these terms sound the same, they are not. A REALTOR® is a real estate professional who is member of the National Association Of REALTORS® and likely works under a broker or brokerage. Real estate brokers are agents who continue their education and receive a broker license. Real estate brokers can work independently and hire other agents to work under their supervision.


A buydown happens when the borrower purchases a lower interest rate by paying a premium called a “point.” If you expect to increase your earnings in the future but want a lower payment now, a buydown may be a helpful option.

Buyer’s Agent/Listing Agent

What’s the difference between a buyer’s agent and a listing agent? A buyer’s agent represents the buyer’s interests – finding a home within budget that matches their preferences. The listing agent represents the seller’s interests – getting a good sale price with a deal likely to close.

uyer’s Market/Seller’s Market

The real estate market will vary in who it favors: buyers or sellers. In a buyer’s market, conditions favor those looking to purchase real estate. This happens when the supply of homes for sale exceeds purchase demand. The reverse is called a seller’s market and favors those looking to sell real estate.

Cash-Out Refinance

Cash-out refinancing is a way to turn your equity into cash. Let’s say you own a home worth $250,000. You have $100,000 in equity and owe $150,000. You can refinance by setting up a new $200,000 loan with your lender and receive $50,000 cash at closing.

Chain Of Title

A chain of title is a document containing all previous property owners, listed in chronological order from the first owner to the present owner.

Clear Title

A clear title shows the undisputed, legal property owner. This means there are no liens or levies from creditors or other parties that may cause legal confusion.


Closing, or settlement, is the final step in the home buying process. This is where closing documents are signed, outstanding funds are paid and the title transfers from seller to buyer.


A co-borrower is someone who is financially responsible for paying back a loan, along with the borrower. If a husband and wife take out a home loan together, one may be the primary borrower and the other a co-borrower.


Commission is payment based on the completion of a sale. REALTORS® or agents work on commission, which means they will receive a portion of the home sale as payment upon closing.


Comparables are recently sold properties that help appraisers determine a home’s fair market value. They are similar to the listed property in size, location and available amenities.

Comparison Market Analysis (CMA)

A CMA is an estimated value of a given home by comparing recently sold properties, not more than 90 to 120-days, within similar areas, square footage, and features. A CMA assist sellers in determining an asking price for their home.

Compound Interest

Compound interest accumulates from both your principal balance and interest owed. On a loan, this means you will progressively owe more interest. On an investment, you will progressively make more money from compounding interest.


A contingency is a condition that must be met before the sale is legally binding. For example, a buyer can make their offer contingent on a satisfactory home inspection. If this contingency is not met, the sale may fall through.

Conventional Mortgage

Conventional mortgages are funded by private lenders rather than government-backed agencies. Most often, these loans are then sold to government-sponsored enterprises like Fannie Mae or Freddie Mac to provide liquidity to the nation’s mortgage market.

Cost Of Funds Index (COFI)

Lenders use this index to adjust their interest rates on adjustable-rate mortgages. COFI uses changing economic conditions to provide a statistic on current market interest rates.

Debt-To-Income Ratio

Your debt-to-income ratio is your monthly debts (home, car, credit card, student debt payments, etc.) divided by your monthly gross income. Lenders use this percentage to help determine your ability to repay a potential loan.


A deed is a legal document showing property ownership. As the buyer, your deed is signed and delivered to you at closing.

Deed In Lieu Of Foreclosure

If a borrower needs relief from mortgage debt, they may choose to do a deed in lieu of foreclosure. This transfers deed ownership to the lender in exchange for debt forgiveness to avoid foreclosure.


Default is when a borrower fails to make several loan payments over a period. Lenders and government agencies use set timeframes to decide at what point a loan move from delinquency to default. For example, a loan is not in default until 270 days of missed payments, according to the Code of Federal Regulations.


Delinquency is even a single missed mortgage payment. If failed payments continue, the loan is at risk of entering default status.

Down Payment

Your down payment is a percentage of the home’s sale price paid upon closing to secure your loan. You can typically avoid private mortgage insurance with a down payment of 20%. However, many lenders allow loans with smaller down payments.

Due Diligence

Due diligence is the period of time when a buyer examines a home’s condition and contract terms before becoming legally obligated to purchase. Due diligence is your time to discover and consider any financial risk associated with investing in a home.

Earnest Money

Earnest money is part of your down payment paid before closing to show you are serious about purchasing a home. It is also known as a good faith deposit.

Eminent Domain

The government retains the right to take private property and convert it for public use if it compensates the owner fairly. This right is known as eminent domain.


Equity is how much of a home’s value can be attributed to the owner. It’s calculated by subtracting the amount owed from the home’s market value.


Escrow is a legal arrangement where a third party holds large funds until terms of an agreement are met. In real estate, you’ll set up an escrow account to hold funds for taxes or insurance throughout the life of your mortgage.

Exclusive Listing

An exclusive listing occurs when a seller contractually agrees to work with only one broker. In contrast, an open listing means the seller may allow multiple brokers to list the home for sale and offer representation.

Fair Credit Reporting Act

The Fair Credit Reporting Act (FCRA) protects consumers’ privacy and dictates how credit bureaus are allowed to collect and distribute information. Your lender is allowed to request your credit report during your mortgage application under the FCRA.

Fannie Mae

The Federal National Mortgage Association, commonly known as Fannie Mae, is a government-sponsored corporation that helps provide affordable housing. Fannie Mae purchases loans from originating lenders and sells them to private investors. This helps free lenders from financial burden so they can continue to offer loans to new borrowers.

FHA Loan

The Federal Housing Administration (FHA) insures these loans to help provide more affordable housing, especially to first-time home buyers. FHA loans often offer lower down payments, closing costs and credit requirements.

FICO Score

A FICO score is the most common credit score report used by lenders. Developed by the Fair Isaac Corporation (FICO®), this report generates a number based on:

  • Your payment history
  • Owed debts
  • Credit history length
  • Types of credit currently in use
  • How much new credit you have

When considering a FICO® Score, lenders associate a higher number with a person less likely to default on their loan.

Fixed-Rate Mortgage

This mortgage guarantees one interest rate for the duration of your loan. With a fixed-rate mortgage, your monthly principal and interest payment never changes.


When a borrower fails to make agreed-upon payments to the lender, the lender can take possession of the home in a legal process called foreclosure. The lender may then sell the property on the market to pay off the defaulted loan.

Freddie Mac

Federal Home Loan Mortgage Corporation, commonly known as Freddie Mac, is a government-sponsored corporation that helps provide affordable housing. Freddie Mac purchases loans from original lenders and sells them to private investors. This helps free lenders from financial burden so they can continue to offer loans to new borrowers.

Grace Period

If you submit your monthly mortgage payment late, you may incur late fees. However, many loans offer a grace period where late payments do not incur fees. For example, your loan may specify a 2-week grace period, so you could submit your payment up to 2 weeks late without incurring fees.

Home Equity Line of Credit (HELOC)

A home equity line of credit is a loan where you can borrow money against your home’s equity when you want it, not as a lump sum. This loan has an agreed-upon maximum borrowing amount in an agreed-upon time period.

Homeowners Insurance

Homeowners insurance protects your home from damages covered in your policy. Not sure what your policy covers? You can find out by checking your declaration page. Homeowners insurance is required by mortgage lenders, and you must purchase a policy before closing on your home.


A home inspection examines a home’s condition to find any major safety or structural issues. Inspections usually look at a home’s exterior, electrical system, roof, plumbing, water, and HVAC systems.

Jumbo Loan

Every year in January, government-sponsored corporations Fannie Mae and Freddie Mac set conventional loan limits. Loans that exceed these limits are nonconforming jumbo loans.


A lender is a financial institution that offers home loans or other credit lines.


A lien secures payment by giving the lien holder a legal claim to the property. A mortgage is a type of lien because your lender can legally repossess your property if you fail to make payments


A loan to purchase or refinance a home is called a mortgage. Mortgage can also refer to the legal document pledging the property as collateral on the loan.

Multiple Listing Service (MLS)

A multiple listing service (MLS) is a database established by cooperating real estate brokers to provide data about properties for sale. An MLS allows brokers to see one another’s listings of properties for sale with the goal of connecting homebuyers to sellers.

Principle, Interest, Tax Insurance (PITI)

Standard components of a mortgage payment. PITI represents the total monthly mortgage payment, it helps both the buyer and the lender determine the affordability of an individual mortgage.