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There are some vocabulary words that go with home buying. Your real estate agent may use some of these words in their conversations with you.  Any agent would be happy to explain them to you. However, in the event that you don’t like to ask for explanations, I’ve created a list of commonly used vocabulary words for real estate conversations.


Adjustable Rate Mortgage (ARM): This is a type of home loan with an interest rate that is not a fixed rate. It may increase or decrease over the life of the loan resulting in a higher or lower monthly mortgage payment.

Annual Percentage Rate (APR): This number represents the total cost of the mortgage after all expenses are tallied up.

Appraisal: This is the value placed on a home by a licensed real estate appraiser.  A real estate agent can work up a Comparative Market Analysis (CMA) for you but only a licensed will be able to assign an actual value to the property.

Closing Costs: these are the costs and fees that buyers and sellers will have to pay at closing. There are lenders fees and expenses, taxes, points, property taxes and attorney fees. You can usually expect these costs to be around 3% (give or take a percent) of the purchase price.

Closing: It’s also known as the settlement. This is when you meet with the attorney and sign papers.

Contingency: Some external event that could affect the offer to purchase.

Disclosure: Important information about the property that could affect the buyers interest in the property.

Down Payment:  The part of the home purchase price that is not financed. It will be paid by the buyer usually at closing.

Earnest Money Deposit: This is a portion of the purchase price paid in advance of closing and usually held in escrow by the closing attorney to be applied to the purchase price when the transaction settles.

Escrow: This is usually an attorney but could be the real estate agency. This is a place to hold money towards a closing that is contracted and scheduled for a future date.

Fixed-Rate Mortgage: a mortgage with a rate that does not change over the life of the loan

Gross Income: Your total income before deductions and taxes.

Hazard Insurance: Protects the property from losses such as fire, storms or vandalism.

Homeowner’s Warranty: This is a warrantee on the home and appliances that would be part of a new home offering.  It can be (and often is) purchased on resale homes.

Inspection: An examination by a qualified (usually licensed) third party home inspector. This is a very important part of home buying, even if you are very familiar with home construction.

Loan Origination Fee: Fee charged by the originator of the loan to cover the administrative costs associated with the loan process.

Loan-to-Value Ratio (LTV): The amount of the loan compared to the total value of the property or purchase price, whichever is lower.

Market Value: the highest price that a seller can reasonably expect his property to sell for and the highest price that a buyer is willing to pay.

Net Income: Your gross income minus all of the deductions withheld.

Pre-Approval: A formal process of applying for a loan. Lenders should then provide you with a pre-approval letter.

Pre-Qualify: This is an Informal determination made based on the income and debt information that you supplied to the person qualifying you. (not necessarily a lender)

Principal: the amount actually borrowed from the lender. (after the down payment)

Private Mortgage Insurance: insurance that protects the lender in case the borrower defaults on the loan.

Qualifying Ratios: the calculations used to determine whether a borrower can qualify for a mortgage loan.

Title: the right of ownership of real property

Walk-Through: the final inspection conducted before a home sale is finalized


Chris VanDeWalker REALTOR®

Clayton Real Estate Agent