A
Amortization
FinancingThe process of paying off a debt over time through regular payments of principal and interest.
Example:
A 30-year mortgage is amortized over 360 monthly payments.
Appraisal
PropertyAn unbiased professional opinion of a home's value, typically required by lenders before approving a mortgage.
Example:
The appraisal came in at $350,000, matching the agreed purchase price.
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Assumable Mortgage
FinancingA mortgage that can be transferred from the seller to the buyer, allowing the buyer to take over the existing loan terms.
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B
Balloon Payment
FinancingA large, lump-sum payment due at the end of a balloon loan term.
C
Cap Rate
PropertyThe capitalization rate used to estimate the potential return on an investment property, calculated by dividing net operating income by property value.
Example:
A property generating $30,000 annually with a value of $500,000 has a 6% cap rate.
Closing Costs
Transaction ProcessFees associated with finalizing a real estate transaction, including loan origination fees, title insurance, appraisal fees, and taxes.
Example:
Closing costs typically range from 2-5% of the purchase price.
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Closing Disclosure
Transaction ProcessA five-page form that provides final details about the mortgage loan, including loan terms, projected monthly payments, and closing costs.
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CMA (Comparative Market Analysis)
PropertyAn estimate of a home's value based on recently sold, similar properties in the immediate area.
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Contingency
Transaction ProcessA condition that must be met for the contract to be binding, such as financing approval, satisfactory inspection, or appraisal.
Example:
The buyer included an inspection contingency allowing them to back out if major issues were found.
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Conventional Loan
FinancingA mortgage not insured or guaranteed by the federal government, typically requiring a higher credit score and down payment than government-backed loans.
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D
Debt-to-Income Ratio (DTI)
FinancingThe percentage of your gross monthly income that goes toward paying monthly debt payments, used by lenders to assess borrowing capacity.
Example:
A DTI of 43% means $4,300 of a $10,000 monthly income goes to debt payments.
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Down Payment
FinancingThe portion of the purchase price paid upfront by the buyer, typically expressed as a percentage of the total price.
Example:
A 20% down payment on a $400,000 home is $80,000.
Dual Agency
GeneralWhen one real estate agent or broker represents both the buyer and seller in the same transaction.
Due Diligence
Transaction ProcessThe process of thoroughly investigating a property before purchase, including inspections, surveys, and title searches.
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E
Earnest Money
Transaction ProcessA deposit made to a seller that represents a buyer's good faith to buy a home, typically 1-3% of the purchase price.
Example:
A $5,000 earnest money deposit on a $300,000 home shows the buyer is serious.
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Equity
FinancingThe difference between the market value of your home and the amount you owe on your mortgage.
Example:
If your home is worth $400,000 and you owe $250,000, you have $150,000 in equity.
Escrow
Transaction ProcessA neutral third party that holds funds and documents until all conditions of the transaction are met and the sale is closed.
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F
FHA Loan
FinancingA mortgage insured by the Federal Housing Administration, allowing lower down payments and credit scores than conventional loans.
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Fixed-Rate Mortgage
FinancingA mortgage with an interest rate that remains constant throughout the life of the loan.
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FSBO (For Sale By Owner)
GeneralA property being sold directly by the owner without a real estate agent.
H
HOA (Homeowners Association)
PropertyAn organization in a subdivision, planned community, or condominium that makes and enforces rules for the properties and their residents.
Example:
The HOA fees are $250/month and cover landscaping and pool maintenance.
Home Inspection
Transaction ProcessA limited, non-invasive examination of the condition of a home, typically performed during the option period.
Example:
The inspection revealed the HVAC system needed replacement within 2 years.
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I
Interest Rate
FinancingThe percentage charged by a lender for borrowing money, affecting your monthly mortgage payment.
Example:
A 6.5% interest rate on a $300,000 loan results in different payments than 5.5%.
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L
Lien
Legal/TitleA legal claim against a property as security for a debt or obligation.
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Loan-to-Value (LTV)
FinancingThe ratio of the loan amount to the appraised value or purchase price of the property, whichever is lower.
Example:
A $320,000 loan on a $400,000 home has an 80% LTV ratio.
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M
MLS (Multiple Listing Service)
GeneralA database established by cooperating real estate brokers to provide comprehensive data about properties for sale.
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O
Option Period
Transaction ProcessA specific period of time (typically 5-10 days in Texas) during which the buyer can terminate the contract for any reason, usually in exchange for a small fee.
Example:
During the 7-day option period, the buyer paid $100 for the right to walk away.
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P
PITI
FinancingPrincipal, Interest, Taxes, and Insurance - the four components of a monthly mortgage payment.
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PMI (Private Mortgage Insurance)
FinancingInsurance that protects the lender if you stop making payments, typically required if down payment is less than 20%.
Example:
With a 10% down payment, you will need to pay PMI until you reach 20% equity.
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Points
FinancingFees paid to a lender at closing to reduce the interest rate on a mortgage. One point equals 1% of the loan amount.
Example:
Paying 2 points ($6,000) on a $300,000 loan might reduce your rate from 6.5% to 6%.
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Pre-Approval
FinancingA document from a lender stating that the lender is tentatively willing to lend to you, up to a certain loan amount, based on a preliminary review of your credit and finances.
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Principal
FinancingThe amount of money borrowed or the amount still owed on a loan, separate from interest.
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R
REALTOR®
GeneralA licensed real estate professional who is a member of the National Association of REALTORS® and adheres to its strict Code of Ethics.
Recording
Legal/TitleThe process of filing documents with the county to make them part of the public record.
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Refinance
FinancingReplacing an existing mortgage with a new one, typically to get a better interest rate, change loan terms, or access home equity.
Example:
Refinancing from a 7% to a 5% rate can save hundreds per month.
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S
Seller's Disclosure
Transaction ProcessA document provided by the seller that lists known issues or defects with the property.
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Survey
PropertyA drawing that shows the precise legal boundaries of a property, the location of improvements, easements, rights of way, and encroachments.
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T
Title Insurance
Legal/TitleInsurance that protects the buyer and lender against losses due to defects in the title (ownership) of the property.
Example:
Title insurance protects you if someone claims they have ownership rights to your property.
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U
Underwriting
FinancingThe process by which a lender evaluates the risk of lending to a particular borrower and decides whether to approve the loan.
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V
VA Loan
FinancingA mortgage guaranteed by the Department of Veterans Affairs for eligible veterans, active-duty service members, and surviving spouses, typically requiring no down payment.
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W
Warranty Deed
Legal/TitleA deed that guarantees the seller holds clear title to the property and has the right to sell it.
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Z
Zoning
PropertyLocal laws that regulate how property in specific areas can be used (residential, commercial, industrial, etc.).
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