EVERYTHING YOU NEED TO KNOW

Glossary of term and most frequently asked questions about real estate.

Loans  •  Listing, Purchase and Sale  •  Escrow - Title

Loans

Adjustable-Rate Mortgage (ARM)

Interest rates on this type of mortgage are periodically adjusted up or down monthly, semi- annually, annually, or can remain fixed for a period of time before it adjusts.

Amortization

A method of equalizing the monthly mortgage payments over the life of the loan, even though the proportion of principal to interest changes over time. In the early part of the loan, the principal repayment is very low, while the interest payment is very high. At the end of the loan, the relationship is reversed.

Annual Percentage Rate (APR)

An APR is an actual finance charge for a loan, including points and fees, in addition to the stated interest rate.

Balloon Payment

A large principal payment due all at once at the end of some loan terms.

Cap

A limit on how much the interest rate can change in an adjustable- rate mortgage.

Down Payment

A percentage of the purchase price that the buyer must pay in cash and may not borrow from the lender.

Interest

The cost of borrowing money, usually expressed as a percentage rate.

Fixed-Rate Mortgage

Interest rates on this type of mortgage remain the same over the life of the loan.

Lien

A security claim on a property until a debt is satisfied.

Mortgage

Defined as a temporary, conditional pledge of property to a creditor as security for performance of an obligation or repayment of a debt.

Origination Fee

An application fee(s) for processing a proposed mortgage loan.

PITI

Principal, interest, taxes, and insurance, forming the basis for monthly payments.

Point

One percent of the loan principal. It’s charged in addition to interest and fees.

Prepayment Penalty

Loans containing prepayment penalty clauses allow a lender to collect extra money from the home owner if the loan is prepaid above a certain percentage.

Principal

One of the parties to a contract; or the amount of money borrowed, for which interest is charged.


Listing, Purchase and Sale

Appraisal

A real estate appraisal helps to establish a property's market value – the likely sales price it would bring if offered in an open and competitive real estate market.

Assessed Value

The value placed on a property by a municipality for purposes of levying taxes. It may differ widely from appraised or market value.

Commission

A fee (usually a percentage of the total transaction) paid to an agent or broker for services performed.

Comparative Market Analysis (CMA)

A survey of the attributes and selling process of comparable homes on the market or recently sold; used to help determine a correct pricing strategy for a seller’s property.

Contingency

A condition in a contract that must be met for the contract to be binding.

Contract

A binding legal agreement between two or more parties that outlines the conditions for the exchange of value (for example: money exchanged for title to property).

Listing Contract

An agreement whereby an owner engages a real estate company for a specified period of time to sell a property, for which, upon the sale, the agent receives a commission.

Market Price

The actual price at which a property sold.

Market Value

The price that is established by present economic conditions, location, and general market trends.

Northwest Multiple Listing Service (NWMLS)

A system that provides detailed information about properties in Washington state for sale to its members.

Purchase And Sale Agreement

A contract between buyer and seller that outlines the details of the property purchase and transfer.


Escrow - Title

Certificate Of Title

A document, signed by a title examiner, stating that a seller has an insurable title to the property.

Closing

The deed to a property is legally transferred from seller to buyer, and documents are recorded.

Closing Costs

Costs associated with the closing of a home sale transaction, above and beyond the price of the property itself.

Deed

A legal document that formally conveys ownership of a property from seller to buyer.

Earnest Money

An earnest payment (sometimes called earnest money or simply earnest) is a good- faith deposit towards the purchase of real estate.

Equity

The value of the property actually owned by the homeowner: purchase price, plus appreciation, plus improvements, less mortgages and liens.

Escrow

A fund or account held by a third- party custodian until conditions of a contract are met.

Fixture

A recognizable entity (such as a kitchen cabinet, drape, or light fixture) that is permanently attached to a property and belongs to the property when it is sold.

Hazard Insurance

Compensates for property damage from specified hazards such as fire and wind.

Prorate

To divide, distribute, or calculate proportionately.

Settlement

All financial transactions required to make the contract final.

Title

A formal document that serves as evidence of ownership.

Title Search

Detailed examination of the entire document history of a property title to make sure there are no legal encumbrances.

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