Definitions of important home buyer terminology
Use this list to help you understand the definitions of important home buyer terminology.
Adjustable-Rate Mortgage (ARM)
A loan with an interest rate that changes based on a financial index causing monthly payments to rise and fall.
Paying off your debt in incremental payments, instead of one full payment.
A professional report from a 3rd party that estimates the value of a property for you.
The final meeting where both parties sign the required paperwork and ownership of the property is transferred from the home seller to you.
Additional fees associated with the transaction, not including the cost of the home.
Required conditions that must be met before the closing. The contract can be cancelled if these conditions are not met.
The ratio between your income and debt. A loaner will use this ratio to determine the amount of money they are willing to loan you.
The upfront cash payment for a property, the remaining is paid through a mortgage.
The deposit you pay when you sign the contract to show you’re a serious buyer.
A clause in a contract that increases your offer when a new offer is made.
Money, deed, or other documents kept in the custody of a 3rd party – closes once all contingencies are met.
The value of the property minus the amount left on your mortgage.
The last inspection of the property before signing the closing documents.
The opposite of ARM – a loan with an interest rate that stays consistent.
When ownership of a property transfers to the lender due to failed payments by the buyer.
A report by a professional that examines the issues of the property, structure, roof, etc.
An entity, usually a bank, that issues a loan for you to purchase a home.
The loan from a lender or bank used to purchase your home.
Multiple Listing Service (MLS)
The list of properties that are for sale – the most reliable source for listing information
When an offer was accepted, the contract is signed, and all contingencies are met.
The lender’s process of accessing your financial capabilities – based on your income, debts, credit score, employment history and assets.
A lender has pre-determined that you qualify for a loan to purchase a property.
The local taxes you’re required to pay – included in your total monthly mortgage payment.
Settlement Statement (aka HUD)
The document with your sales transaction and closing costs.
Title (aka Title Deed)
The legal document that shows the history of ownership and transfers of a property – proves you are the current and rightful owner of the property.
The seller and buyer have agreed to a contract, but contingencies have not been met.
Mortgages issued to United States veterans – issued by the Department of Veteran Affairs.