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Real Estate Terminology in Alphabetical Order

An Application is the form used to apply for a mortgage loan, containing information about a borrower’s income, savings, assets, debts, and more.

An Appraiser is an individual qualified by education, training, and experience to estimate the value of real property and personal property. Although some appraisers work directly for mortgage lenders, most are independent.

Amortization is the payment of principal on a liability (including a mortgage), or the write-off of a non-depreciable asset over a scheduled term of years.

An Assessment is an extraordinary payment called for by the board of directors of a co-operative or condominium building for the purpose of making a capital improvement, or to provide some other essential service for which funds in the reserve account are inadequate.

An Assessor is a public official who establishes the value of a property for taxation purposes.

Asset is items of value owned by an individual. Assets that can be quickly converted into cash are considered “liquid assets.” These include bank accounts, stocks, bonds, mutual funds, and so on. Other assets include real estate, personal property, and debts owed to an individual by others.

Balloon Mortgage

A Balloon Mortgage is a mortgage loan that requires the remaining principal balance be paid at a specific point in time. For example, a loan may be amortized as if it would be paid over a thirty year period, but requires that at the end of the tenth year the entire remaining balance must be paid.

Biweekly Mortgage
A Biweekly Mortgage is a mortgage in which you make payments every two weeks instead of once a month. The basic result is that instead of making twelve monthly payments during the year, you make thirteen. The extra payment reduces the principal, substantially reducing the time it takes to pay off a thirty year mortgage. Note: there are independent companies that encourage you to set up bi-weekly payment schedules with them on your thirty year mortgage. They charge a set-up fee and a transfer fee for every payment. Your funds are deposited into a trust account from which your monthly payment is then made, and the excess funds then remain in the trust account until enough has accrued to make the additional payment which will then be paid to reduce your principle. You could save money by doing the same thing yourself, plus you have to have faith that once you transfer money to them that they will actually transfer your funds to your lender.

Board Approval
Board Approval is a condition in the bylaws of a co-operative requiring that the seller obtain approval from the Board of Directors as a prerequisite to transferring the shares or, in the case of a condominium, obtaining a waiver of the right of first refusal.

Building Codes
Building Codes are regulations established by the state or city government stating fully the structural requirements for a building.

By-Laws are the rules by which the co-operative corporation and condominium association operates.


Cancellation Clause
A Cancellation Clause is a provision in a lease or other contract which confers upon one or more of the parties to the lease the right to terminate the party’s or parties’ obligations thereunder upon the occurrence of the condition or contingency set forth in the said clause.

Cash-out Refinance
A Cash-out Refinance is when a borrower refinances his mortgage at a higher amount than the current loan balance with the intention of pulling out money for personal use, it is referred to as a “cash out refinance.”

Capital Improvement
A Capital Improvement is a permanent improvement to real estate, usually extending the useful life and value of a property.

Clear Title
Clear Title is a title that is free of liens or legal questions as to ownership of the property.

Closing costs
Closing costs are separated into what are called “non-recurring closing costs” and “pre-paid items.” Non-recurring closing costs are any items which are paid just once as a result of buying the property or obtaining a loan. “Pre-paids” are items which recur over time, such as property taxes and homeowners insurance. A lender makes an attempt to estimate the amount of non-recurring closing costs and prepaid items on the Good Faith Estimate which they must issue to the borrower within three days of receiving a home loan application.
closing statement.

Co-brokerage is an agreement between two brokerage firms to share listings and commissions. This is usually used when one of the brokers is the seller’s exclusive listing agent and the other broker represents the buyer.


Collateral is the security put up in exchange for a loan. It can be taken by the lender if the loan goes unpaid.

Commitment Letter
A Commitment Letter is the letter issued by a lending bank which legally binds it to provide funds as specified subject to written terms and conditions.

Common Areas
Common Areas are portions of a building, land, and amenities owned (or managed) by a planned unit development (PUD) or condominium project’s homeowners’ association (HOA or a cooperative project’s cooperative corporation) that are used by all of the unit owners, who share in the common expenses of their operation and maintenance. Common areas include swimming pools, tennis courts, and other recreational facilities, as well as common corridors of buildings, parking areas, means of ingress and egress, etc.

Comparable Sales
Comparable Sales are the recent sales of similar properties in nearby areas and used to help determine the market value of a property. Also referred to as “comps.”

A Condominium is an apartment building in which each apartment owner owns his or her own apartment plus a percentage of the ownership of the common areas of the entire property. Each owner receives a unit deed, proof of that ownership.

Condominium Apartments
Condominium Apartments, unlike cooperatives, are owned outright as actual property. At closing, the buyer receives a deed to the apartment. Each owner is billed directly and is responsible for making individual real estate tax and mortgage payments, if any. The common charges for maintenance and upkeep are billed to owners on a monthly basis.

Condominium Conversion
Condominium Conversion refers to changing the ownership of an existing building (usually a rental project) to the condominium form of ownership.

Usually, a Condop refers to a residential co-op that is operated pursuant to “condo style” rules. (Alternatively, this term refers to a hybrid form of co-op/condo ownership designed to shelter income, from commercial space owned by the building, for example.)

Construction Loan
A Construction Loan is a short-term, interim loan for financing the cost of construction. The lender makes payments to the builder at periodic intervals as the work progresses.

Contingency is a condition that must be met before a contract is legally binding. For example, home purchasers often include a contingency that specifies that the contract is not binding until the purchaser obtains a satisfactory home inspection report from a qualified home inspector.

A Contract, also known as a Purchase of Sales Agreement, is a written agreement between seller and purchaser in which the purchaser agrees to buy certain real estate and the seller agrees to sell upon conditions and terms set forth therein.

Conversion is a change in ownership type or status. Example: A rental housing building may be converted to co-operative or condominium ownership. A commercial loft building may be converted into residential apartments.

A Co-operative is a corporation that owns a building. Purchasers receive shares of stock in the corporation, and a Proprietary Lease for their apartment.

A Covenant is an agreement(s) written into deeds promising performance or nonperformance of certain acts or stipulating certain uses or non-uses of the property.

Deed of Trust
California does not record mortgages. Instead, records a Deed of Trust which is essentially the same thing.

Deed Restriction
A Deed Restriction is an imposed restriction in a deed for the purupose of limiting the use of the land.

Default is the act performed by either the buyer or seller that breaches the contract of t sale and permits a claim for damages.

A Deposit is a sum of money given in advance of a larger amount being expected in the future. Often called in real estate as an “earnest money deposit.”

A Depreciation is a decline in the value of property – the opposite of appreciation. Depreciation is also an accounting term which shows the declining monetary value of an asset and is used as an expense to reduce taxable income. Since this is not a true expense where money is actually paid, lenders will add back depreciation expense for self-employed borrowers and count it as income.

Discount Points
In the mortgage industry, Discount Points are usually used in only in reference to government loans, meaning FHA and VA loans. Discount Points refer to any “points” paid in addition to the one percent loan origination fee. A “point” is one percent of the loan amount.

Down Payment
Down Payment is the part of the purchase price of a property that the buyer pays in cash and does not finance with a mortgage.

An Easement is an interest in land/property owned by another that entitles its holder to a specific use or enjoyment.

Earnest Money
Earnest Money, also known as a Deposit or Down Payment, is made by a purchaser of real estate as evidence of good faith.

Equity is a homeowner’s financial interest in a property. Equity is the difference between the fair market value of the property and the amount still owed on its mortgage and other liens.

Escrow is the means by which money (a deposit or down payment) is held by one person in trust for another, for the purpose of assuring performance under an agreement. Normally, in a residential real estate sale, the attorney for the seller is the “escrow agent” for the deposit money securing the deal until closing.

Escrow Account
Once you close your purchase transaction, you may have an Escrow Account or impound account with your lender. This means the amount you pay each month includes an amount above what would be required if you were only paying your principal and interest. The extra money is held in your impound account (escrow account) for the payment of items like property taxes and homeowner’s insurance when they come due. The lender pays them with your money instead of you paying them yourself.


Fair Market Value
Fair Market Value is the highest price that a buyer, willing but not compelled to buy, would pay, and the lowest a seller, willing but not compelled to sell, would accept.

Fannie Mae (FNMA)
The Federal National Mortgage Association, which is a congressionally chartered, shareholder-owned company that is the nation’s largest supplier of home mortgage funds. For a discussion of the roles of Fannie Mae, Freddie Mac (FHLMC), and Ginnie Mae (GNMA), see the Library.

Financing Loan
A Financing Loan is secured by personal property. The stock and lease of a co-operative corporation constitute such personal property. Real estate brokers often refer to these financing loans as mortgages, though technically they are not.

Fixed-rate Mortgage
A Fixed-rate Mortgage is a mortgage in which the interest rate does not change during the entire term of the loan.

Fixtures are personal property attached to the land or improvements so as to become part of the real property.

Flip Tax
A Flip Tax is a levy issued on the transfer of ownership by a co-operative corporation or condominium association against either the buyer or seller.

Flood Insurance
Flood Insurance is an insurance that compensates for physical property damage resulting from flooding. It is required for properties located in federally designated flood areas.

Foreclosure is the legal process by which a borrower in default under a mortgage is deprived of his or her interest in the mortgaged property. This usually involves a forced sale of the property at public auction with the proceeds of the sale being applied to the mortgage debt.

Government Loan

Government Loan is a mortgage that is insured by the Federal Housing Administration (FHA) or guaranteed by the Department of Veterans Affairs (VA) or the Rural Housing Service (RHS). Mortgages that are not government loans are classified as conventional loans.

The Grantee is the party to whom the title to real property is conveyed.

Home Equity Line of Credit
Home Equity Line of Credit is a mortgage loan, usually in second position, that allows the borrower to obtain cash drawn against the equity of his home, up to a predetermined amount.

Home Inspection
Home Inspection is a thorough inspection by a professional that evaluates the structural and mechanical condition of a property. A satisfactory home inspection is often included as a contingency by the purchaser.

HOA (Homeowners’ Association)
HOA is a nonprofit association that manages the common areas of a planned unit development (PUD) or condominium project. In a condominium project, it has no ownership interest in the common elements. In a PUD project, it holds title to the common elements.
homeowner’s insurance
An insurance policy that combines personal liability insurance and hazard insurance coverage for a dwelling and its contents.

HUD Median Income
HUD Median Income is a median family income for a particular county or metropolitan statistical area (MSA), as estimated by the Department of Housing and Urban Development (HUD).

HUD-1 Settlement Statement
HUD-1 Settlement Statement is a document that provides an itemized listing of the funds that were paid at closing. Items that appear on the statement include real estate commissions, loan fees, points, and initial escrow (impound) amounts. Each type of expense goes on a specific numbered line on the sheet. The totals at the bottom of the HUD-1 statement define the seller’s net proceeds and the buyer’s net payment at closing. It is called a HUD1 because the form is printed by the Department of Housing and Urban Development (HUD). The HUD1 statement is also known as the “closing statement” or “settlement sheet.”


Joint Tenancy
Joint Tenancy is a form of ownership or taking title to property which means each party owns the whole property and that ownership is not separate. In the event of the death of one party, the survivor owns the property in its entirety.

Jumbo Loan
Jumbo Loan is a loan that exceeds Fannie Mae’s and Freddie Mac’s loan limits. Also called a nonconforming loan. Freddie Mac and Fannie Mae loans are referred to as conforming loans.

A Landmark is a designation given to a building which places it under protection for the purpose of preservation.

A Lease is a written agreement between the property owner and a tenant that stipulates the payment and conditions under which the tenant may possess the real estate for a specified period of time.

A Lender is a term which can refer to the institution making the loan or to the individual representing the firm. For example, loan officers are often referred to as “lenders.”

Liabilities is a person’s financial obligations. Liabilities include long-term and short-term debt, as well as any other amounts that are owed to others.

Liability Insurance
Liability Insurance is an insurance coverage that offers protection against claims alleging that a property owner’s negligence or inappropriate action resulted in bodily injury or property damage to another party. It is usually part of a homeowner’s insurance policy.

A Lien is a legal right or claim upon a specific property which attaches to the property until a debt is satisfied.

A Listing is the term used by brokers for an apartment for sale after it has been “listed” by the broker in its system.

Listing Agent
A Listing Agent, also known as the Exclusive Broker, is the broker who represents the interests of the seller.

Loan Officer
The Loan Officer serves several functions and has various responsibilities: they solicit loans, they are the representative of the lending institution, and they represent the borrower to the lending institution.

Loan Origination
How a lender refers to the process of obtaining new loans.

Lock-in is an agreement in which the lender guarantees a specified interest rate for a certain amount of time at a certain cost.

Lock-in Period

Lock-in Period is the time period during which the lender has guaranteed an interest rate to a borrower.

Loft Buildings
With large open spaces and high ceilings, Loft Buildings are typically found in former commercial manufacturing and office districts, although many new “Loft-style” apartments are being developed city-wide.

Maintenance is the monthly charge paid by the co-operative tenant/shareholders to cover the building’s operative costs, real estate taxes and debt service on the building’s underlying mortgage.

Market Value
The Market Value is the most probable price that a property should bring if exposed for sale in the open market for a reasonable period of time, with both the buyer and seller aware of current market conditions, neither being under duress.

Mortgage is a legal document that pledges a property to the lender as security for payment of a debt. Instead of mortgages, some states use First Trust Deeds.

Mortgage Insurance (MI)
Mortgage Insurance is an insurance that covers the lender against some of the losses incurred as a result of a default on a home loan. Often mistakenly referred to as PMI, which is actually the name of one of the larger mortgage insurers. Mortgage insurance is usually required in one form or another on all loans that have a loan-to-value higher than eighty percent. Mortgages above 80% LTV that call themselves “No MI” are usually a made at a higher interest rate. Instead of the borrower paying the mortgage insurance premiums directly, they pay a higher interest rate to the lender, which then pays the mortgage insurance themselves. Also, FHA loans and certain first-time homebuyer programs require mortgage insurance regardless of the loan-to-value.

Mortgage Broker
A Mortgage Broker is the real estate professional who represents an array of banks seeking to issue mortgages. This person meets with a customer, assists with the mortgage application and effectuates the mortgage process on behalf of the borrower and the bank. Generally, the mortgage broker is paid a fee by the bank for this service.

Net Worth
Net Worth is one’s assets, less one’s liabilities. Liquid net worth (that which is cash or can be immediately converted to cash) is what cooperatives focus on.

No-cost Loan
Many lenders offer loans that you can obtain at “no cost.” You should inquire whether this means there are no “lender” costs associated with the loan, or if it also covers the other costs you would normally have in a purchase or refinance transactions, such as title insurance, escrow fees, settlement fees, appraisal, recording fees, notary fees, and others. These are fees and costs which may be associated with buying a home or obtaining a loan, but not charged directly by the lender. Keep in mind that, like a “no-point” loan, the interest rate will be higher than if you obtain a loan that has costs associated with it.

Notice of Default
Notice of Default is a formal written notice to a borrower that a default has occurred and that legal action may be taken.


Origination Fee
On a government loan the loan Origination Fee is one percent of the loan amount, but additional points may be charged which are called “discount points.” One point equals one percent of the loan amount. On a conventional loan, the loan origination fee refers to the total number of points a borrower pays.

Owner Financing
Owner Financing is a property purchase transaction in which the property seller provides all or part of the financing.

A Point is 1 percent of the amount of the mortgage.

Points are a payment made to a bank as consideration for issuing a mortgage. These are usually based upon a percentage of the loan amount.

Power of Attorney
Power of Attorney is a written instrument duly signed and executed by a person who authorizes an agent to act on his/her behalf to the extent indicated in the instrument.

Pre-approval is a loosely used term which is generally taken to mean that a borrower has completed a loan application and provided debt, income, and savings documentation which an underwriter has reviewed and approved. A pre-approval is usually done at a certain loan amount and making assumptions about what the interest rate will actually be at the time the loan is actually made, as well as estimates for the amount that will be paid for property taxes, insurance and others. A pre-approval applies only to the borrower. Once a property is chosen, it must also meet the underwriting guidelines of the lender. Contrast with pre-qualification.

Prepayment is any amount paid to reduce the principal balance of a loan before the due date. Payment in full on a mortgage that may result from a sale of the property, the owner’s decision to pay off the loan in full, or a foreclosure. In each case, prepayment means payment occurs before the loan has been fully amortized.

Prepayment Penalty

Prepayment Penalty is a fee that may be charged to a borrower who pays off a loan before it is due.

Pre-qualification usually refers to the loan officer’s written opinion of the ability of a borrower to qualify for a home loan, after the loan officer has made inquiries about debt, income, and savings. The information provided to the loan officer may have been presented verbally or in the form of documentation, and the loan officer may or may not have reviewed a credit report on the borrower.

Prime Rate
Prime Rate is the interest rate that banks charge to their preferred customers. Changes in the prime rate are widely publicized in the news media and are used as the indexes in some adjustable rate mortgages, especially home equity lines of credit. Changes in the prime rate do not directly affect other types of mortgages, but the same factors that influence the prime rate also affect the interest rates of mortgage loans.

Principal is the amount borrowed or remaining unpaid. The part of the monthly payment that reduces the remaining balance of a mortgage.

Principal Balance
Principal Balance is the outstanding balance of principal on a mortgage. The principal balance does not include interest or any other charges. See remaining balance.

Pre-payment Clause
A Pre-payment Clause is a clause in the mortgage which gives a mortgagor the privilege of playing the mortgage indebtedness before it becomes due.

Proprietary Lease
A Proprietary Lease is the lease issued by a co-operative corporation to each tenant/shareholder prescribing the right to occupy a specific apartment pursuant to guidelines mandated by the building.

Rate Lock
Rate Lock is a commitment issued by a lender to a borrower or other mortgage originator guaranteeing a specified interest rate for a specified period of time at a specific cost.

Real Estate Agent
Real Estate Agent is a person licensed to negotiate and transact the sale of real estate.

Real Property
Real Property is land and generally whatever is erected upon or affixed thereto.

Right of First Refusal
A Right of First Refusal is a condition found in many condominium by-laws which permits the board to review any party seeking to purchase or rent an apartment. It gives the board permission to refuse the applicant. If the applicant is refused, the condominium must purchase or rent the apartment under the terms and conditions stipulated in the contract or lease.

Right of Survivorship
A Right of Survivorship in joint tenancy, the right of survivors to acquire the interest of a deceased joint tenant.

Second Mortgage
A Second Mortgage is a mortgage that has a lien position subordinate to the first mortgage.

Secondary Market
A Secondary Market is the buying and selling of existing mortgages, usually as part of a “pool” of mortgages.

Secured Loan
A Secured Loan is a loan that is backed by collateral.

Schedule A
Schedule A is the list in the Offering Plan of all the apartments being sold in a newly-constructed building or one that is in conversion. It presents allocated shares or unit percentage interest, room count, prices, and other material cost elements including the projected maintenance charges and the tax-deducible portion of the maintenance.

Schedule B
Schedule B is the projected estimated cost of operative a co-operative or condominium during its first year.

Subject to Financing
Subject to Financing, also known as Financing Contingency, is a term stipulating that the agreement is conditioned upon the buyer obtaining financing from a financial institution in an agreed-upon amount.

Tax Abatement
A Tax Abatement is the reduction in the amount of real estate tax due over a period of time.

A Title is a legal document evidencing a person’s right to or ownership of a property.

Title Company
A Title Company is acompany that specializes in examining and insuring titles to real estate.

Title Insurance
Title Insurance is an insurance polity which indemnifies the holder for any loss sustained by reason of defects in the title.

Title Search
A Title Search is an examination of the public records to determine the ownership and encumbrances affecting real property.

Transfer of Ownership
Transfer of Ownership is any means by which the ownership of a property changes hands. Lenders consider all of the following situations to be a transfer of ownership: the purchase of a property “subject to” the mortgage, the assumption of the mortgage debt by the property purchaser, and any exchange of possession of the property under a land sales contract or any other land trust device.

Transfer Tax
A Transfer Tax is a state or local tax payable when title passes from one owner to another.

A Townhouse is a type of home that’s usually constructed as a two or three-story unit with a common wall or walls bordering the adjacent unit. The common form of ownership is similar to a condominium.

A Waiver is the renunciation, abandonment or surrender of some claim, right or privilege.

The contents of this document are provided “AS IS”. This information could contain technical inaccuracies, typographical errors and out-of-date information. This document may be updated or changed without notice at any time. Use of the information is therefore at your own risk. In no event shall Lily Garipova be liable for special, indirect, incidental or consequential damages resulting from or related to the use of this document.

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