A mortgage loan where the interest rate changes periodically based on market conditions. ARMs typically start with a lower initial rate that remains fixed for a set period (commonly 5, 7, or 10 years), then adjusts annually based on a financial index.

The process of paying off a mortgage through regular monthly payments over time. Each payment includes both principal (the loan balance) and interest. Early payments are weighted heavily toward interest, while later payments pay down more principal.

A standardized calculation that shows the total yearly cost of borrowing, including the interest rate plus certain fees like origination charges and discount points. APR provides a more complete picture of loan costs than the interest rate alone.

A professional evaluation of a property's market value conducted by a licensed appraiser. Lenders require appraisals to ensure the property is worth at least the loan amount. The appraiser considers the property's condition, size, features, and recent sales of similar nearby homes.

A listing designation indicating the seller will not make repairs or provide credits for property conditions. Buying as-is does not waive your right to inspect; it simply means the seller will not negotiate on repairs. As-is properties are often priced below market to account for needed work.

The dollar value assigned to a property by local government for calculating property taxes. Assessed value is determined by the county assessor and may differ significantly from market value. Many jurisdictions assess at a percentage of market value or limit annual increases.

A mortgage that allows a buyer to take over the seller's existing loan terms instead of obtaining new financing. FHA and VA loans are typically assumable. This can be advantageous when the existing mortgage has a lower interest rate than current market rates.

A licensed professional who represents buyers or sellers in real estate transactions. Agents help with pricing, marketing, negotiations, paperwork, and guiding clients through the process. A Realtor is an agent who is a member of the National Association of Realtors and adheres to its code of ethics.

A real estate agent who represents the buyer's interests in a transaction. The buyer's agent helps find suitable properties, provides market analysis, writes and negotiates offers, and guides the buyer through closing. Following the 2024 NAR settlement, buyers typically sign a representation agreement with their agent.

Market conditions when housing inventory exceeds buyer demand, giving buyers more negotiating power. In a buyer's market, homes sit longer on the market, prices may decline, and sellers are more likely to accept below-asking offers or provide concessions.

A financing technique where upfront payment (often from seller or builder) temporarily reduces the mortgage interest rate for the first few years. A 2-1 buydown reduces the rate by 2% the first year and 1% the second year before returning to the permanent rate.

The total amount of money you need to bring to closing, including your down payment, closing costs, and prepaid items, minus your earnest money deposit and any seller credits. This amount is specified on your closing disclosure.

A designation indicating that your mortgage has passed underwriting with all conditions satisfied and is approved for closing. Once you receive clear to close status, the title company can prepare final documents and schedule your closing appointment.

The final step in a real estate transaction where ownership transfers from seller to buyer. At closing, all documents are signed, funds are transferred, and the deed is recorded. Closing is also called settlement or escrow in some regions.

Fees and expenses beyond the home's purchase price that are paid at closing. Closing costs typically range from 2% to 5% of the loan amount and include lender fees, title insurance, appraisal, inspections, recording fees, and prepaid items.

A five-page form providing final details about your mortgage, including loan terms, projected payments, and closing costs. Lenders must provide this document at least three business days before closing. Compare it carefully to your loan estimate.

A person who agrees to take responsibility for a mortgage if the primary borrower defaults. Co-signers help buyers with insufficient income or credit qualify for loans. The co-signer's income, assets, and credit are considered in the approval.

Recently sold properties similar to the subject property in terms of size, location, condition, and features. Real estate agents and appraisers use comparables to determine a property's fair market value.

A condition written into a purchase contract that must be satisfied for the sale to proceed. Contingencies protect buyers by providing legal ways to exit the contract without losing their earnest money deposit if certain conditions are not met.

A mortgage that is not insured or guaranteed by a government agency (unlike FHA, VA, or USDA loans). Conventional loans are backed by private lenders and typically require higher credit scores and larger down payments, though they often have lower overall costs for qualified buyers.

A response to an offer that changes one or more terms. When a seller receives an offer, they can accept it, reject it, or make a counteroffer with different terms. A counteroffer rejects the original offer and creates a new offer.

A numerical representation of a person's creditworthiness based on their credit history, ranging from 300 (poor) to 850 (exceptional). Lenders use credit scores to determine loan eligibility, interest rates, and terms. Higher scores typically result in better mortgage rates.

The maximum loan amount that Fannie Mae and Freddie Mac will purchase or guarantee. Loans exceeding this limit are called jumbo loans and have different requirements. The limit is adjusted annually and varies by location.

The number of days from when a property is listed for sale until a purchase contract is accepted. DOM is an indicator of market conditions and pricing accuracy. High DOM relative to similar properties may indicate overpricing.

A percentage that compares your monthly debt payments to your gross monthly income. Lenders use DTI to assess your ability to manage monthly payments. Most lenders prefer a DTI of 43% or less, including your new mortgage payment.

A legal document that transfers ownership of real property from one party to another. The deed contains the property description, identifies the parties involved, and must be signed by the seller. It is recorded with the local government.

Upfront fees paid to a lender at closing to reduce your interest rate. Each point costs 1% of the loan amount and typically reduces the rate by 0.25%. Points make sense if you plan to keep the loan long enough to recoup the cost.

The portion of a home's purchase price you pay upfront in cash. Down payment requirements vary by loan type: conventional loans may require as little as 3%, FHA loans require 3.5%, while VA and USDA loans offer zero-down options for eligible buyers.

A situation where one agent represents both the buyer and seller in the same transaction. Dual agency presents a conflict of interest since the agent cannot fully advocate for either party. Some states prohibit dual agency, while others require disclosure.

A deposit made by a buyer when submitting an offer to demonstrate serious intent to purchase. Earnest money is held in an escrow account and typically ranges from 1% to 3% of the purchase price. It is applied toward your down payment at closing.

The difference between your home's current market value and the amount you still owe on your mortgage. Equity represents the portion of your home you actually own and can be accessed through refinancing, home equity loans, or selling.

A financial arrangement where a third party holds funds or documents until specific conditions are met. During purchase, escrow holds your earnest money. After purchase, an escrow account may hold funds for property taxes and insurance.

A mortgage insured by the Federal Housing Administration, designed to help buyers who may not qualify for conventional loans. FHA loans accept lower credit scores (as low as 580 with 3.5% down) and have more flexible debt-to-income requirements.

A last inspection of the property, typically 24 to 48 hours before closing, to verify the home's condition has not changed and that any agreed-upon repairs have been completed. This is a confirmation, not a second inspection.

A mortgage with an interest rate that remains constant throughout the entire loan term. Your principal and interest payment never changes, providing predictability for budgeting. Fixed-rate mortgages are available in 30-year, 15-year, and other terms.

A method of selling property without using a listing agent. FSBO sellers handle pricing, marketing, showings, negotiations, and paperwork themselves. While this can save commission costs, FSBO homes typically sell for less than agent-assisted sales.

A legal process by which a lender takes possession of a property after the borrower fails to make mortgage payments. The property is typically sold to recover the outstanding loan balance. Foreclosed homes may be sold at auction or listed as bank-owned properties.

A visual examination of a property's physical structure and systems by a licensed inspector. The inspection covers the roof, foundation, electrical, plumbing, HVAC, and more. Most home inspections cost $400 to $700.

An organization in a subdivision or community that makes and enforces rules for properties within its jurisdiction. HOAs collect fees to maintain common areas and amenities. Membership is typically mandatory, and rules govern exterior appearance, parking, and more.

Insurance that protects your home and belongings from damage, theft, and liability. Lenders require homeowners insurance as a condition of the mortgage. Coverage includes the dwelling structure, personal property, liability, and additional living expenses if displaced.

A mortgage that exceeds the conforming loan limits set by the Federal Housing Finance Agency. Jumbo loans have different requirements, typically including higher credit scores (700+), larger down payments (10-20%), and sometimes higher interest rates.

A legal claim against a property that must be paid when the property is sold. Mortgages are voluntary liens, but there are also involuntary liens such as tax liens, mechanic's liens, or judgment liens. All liens must be cleared before ownership can transfer.

The price at which a property is marketed for sale. The list price is set by the seller based on market analysis, condition, and motivation. Homes may sell above, at, or below list price depending on market conditions.

A real estate agent who represents the seller in marketing and selling their property. The listing agent determines pricing strategy, markets the home, holds open houses, reviews offers, and negotiates on the seller's behalf.

A standardized three-page form that lenders must provide within three business days of receiving your mortgage application. It details your estimated interest rate, monthly payment, and closing costs. The Consumer Financial Protection Bureau requires all lenders to use the same format.

The ratio of your mortgage amount to the home's appraised value or purchase price (whichever is less), expressed as a percentage. Lower LTV ratios typically result in better interest rates and may eliminate the need for PMI.

A loan used to purchase real estate, with the property itself serving as collateral. Mortgages are repaid over a set term (typically 15 or 30 years) through monthly payments that include principal and interest, plus escrow for taxes and insurance.

Insurance required on FHA loans that protects the lender if you default. MIP includes an upfront premium (1.75% of the loan) paid at closing and an annual premium (0.55% for most loans) paid monthly. Unlike PMI, MIP typically lasts the life of the loan.

A database used by real estate professionals to share information about properties for sale. The MLS contains detailed property information, photos, and listing history. Most consumer real estate websites pull their data from local MLS systems.

A formal proposal from a buyer to purchase a property at a specific price and terms. An offer includes the purchase price, earnest money amount, financing terms, contingencies, proposed closing date, and any special conditions.

A fee charged by the lender for processing and funding your mortgage. Origination fees typically range from 0.5% to 1% of the loan amount and cover administrative costs. Some lenders charge flat fees instead.

An acronym for Principal, Interest, Taxes, and Insurance, the four components that typically make up your total monthly housing payment. This is the number lenders use when calculating your debt-to-income ratio.

A lender's conditional commitment to loan you a specific amount based on verified financial information including your credit report, income, assets, and employment. Pre-approval carries significant weight with sellers.

A preliminary estimate of how much you might be able to borrow based on self-reported financial information. Pre-qualification does not verify your data and is not a commitment to lend. It provides a general idea of your budget.

Expenses paid in advance at closing to establish your escrow account or cover costs before your first regular payment. Prepaids typically include the first year of homeowners insurance, several months of property taxes, and prepaid interest.

Insurance that protects the lender if you default on a conventional loan with less than 20% down. PMI typically costs 0.3% to 1.5% of your loan amount annually. It can be canceled once you reach 20% equity in your home.

A legally binding contract between buyer and seller that outlines the terms of the real estate transaction, including purchase price, earnest money, contingencies, closing date, and what is included in the sale.

The process of replacing an existing mortgage with a new loan, typically to obtain better terms such as a lower interest rate, different loan term, or to access home equity. Refinancing involves closing costs similar to an original purchase.

Costs that the seller agrees to pay on behalf of the buyer, typically toward closing costs. Concessions reduce the buyer's cash needed at closing but are limited by loan type and cannot exceed actual closing costs.

Market conditions when buyer demand exceeds available housing inventory. In a seller's market, homes sell quickly, often above asking price, with multiple competing offers. Buyers may need to waive contingencies to compete.

A sale where the home is sold for less than the amount owed on the mortgage, with the lender's approval. Short sales occur when homeowners cannot afford their mortgage and want to avoid foreclosure. They often take longer to close.

The legal right to own, use, and dispose of property. A title search examines public records to verify the seller has the right to sell and to identify any liens, easements, or claims that could affect ownership.

Insurance that protects against financial loss from defects in title that were not discovered during the title search. There are two types: lender's title insurance (required) and owner's title insurance (optional but recommended). It is a one-time premium paid at closing.

The process by which a lender evaluates your mortgage application and determines whether to approve the loan. Underwriters verify your income, employment, assets, credit, and the property's value and condition.

A zero-down-payment mortgage guaranteed by the U.S. Department of Agriculture for eligible buyers in designated rural and suburban areas. USDA loans have income limits and property location requirements but offer competitive rates.

A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible active-duty service members, veterans, and surviving spouses. VA loans offer significant benefits including zero down payment, no PMI, and competitive rates.