ADJUSTABLE-RATE MORTGAGE (ARM)
A mortgage loan in which the interest rate of a home may vary at specific intervals during the loan term.
AGENCY
A term used to describe the legal relationship between a seller and a broker or a buyer and a broker.
AGENT
A term used to describe a real estate salesperson licensed by the State who, under the supervision of a broker, represents a buyer or seller in the purchase or sale of a home.
AMORTIZATION
A payment plan by which the borrower gradually reduces the balance of the mortgage by making monthly payments of principal and interest.
ANNUAL PERCENTAGE RATE (APR)
The total costs (interest rate, closing costs, fees, points and additional costs) that are part of a borrower’s loan, expressed as a single percentage rate of interest. The total costs are amortized over the term of the loan.
APPRAISAL
A licensed appraiser’s opinion of property value at a specific point in time.
ASSESSED VALUE
An estimate of property value by a public tax assessor used as the basis for calculating property tax.
BALLOON MORTGAGE
A type of mortgage that is generally paid over a short period of time but is amortized over a longer period of time. The borrower typically pays a combination of principal and interest. At the end of the loan term, the entire unpaid balance must be repaid.
BROKER
A state licensed individual who acts as the fiduciary agent for the seller or buyer in a real estate transaction.
BUYER AGENCY
An agency relationship in which a buyer contracts with a broker to represent the buyer’s interest in a real estate transaction.
CAP
The maximum interest rate on an adjustable rate mortgage that may be charged.
CLOSING
The end of a transaction process where the deed is delivered, documents are signed, funds are dispersed and ownership is transferred.
CLOSING COSTS
Fees and expenses other than the cost of a property, charged by a lender or title company to transfer ownership.
CLOSING STATEMENT
The financial disclosure accounting for all funds received and expended at closing.
COMMISSION
The compensation paid to the listing brokerage by the seller for selling the property. A buyer agency agreement may require the buyer to pay a commission to his or her agent.
COMPARATIVE MARKET ANALYSIS
A study done by real estate sales agents and brokers using active, pending, and sold comparable properties to estimate a listing price for a property.
CONTINGENCY
A provision in a contract requiring certain acts to be completed before the contract is binding.
CONVENTIONAL MORTGAGE
A type of mortgage that has certain limitations placed on it to meet secondary market guidelines. Mortgage companies, banks, and savings and loans underwrite conventional mortgages.
CREDIT REPORT
A report compiled by one or more credit bureaus that details credit history, credit inquires, and facts about all credit accounts outlining on-time or late payment behavior.
DEED
A signed and delivered document in which one individual conveys title to real property to another individual.
DOWN PAYMENT
The amount of cash put toward a purchase by the borrower.
DUAL AGENT
A state-licensed individual who represents the seller and the buyer in a single transaction.
EARNEST MONEY
The money given to the seller at the time the offer is made as a sign of the buyer’s good faith.
EASEMENT
A right conferred by grant or agreement that allows use of another owner’s land for a specific purpose (roads, utilities, landlocked access, etc.).
EQUITY
An owner’s financial interest in a property, representing the property’s current market value less the mortgage balance.
ESCROW
An arrangement between a buyer and seller to place the down payment and other monies or documents with a third party until the completion of the contract closing. In addition, escrow is a portion of the monthly mortgage placed in a separate account to pay taxes and mortgage insurance.
EXCLUSIONS
Fixtures or personal property that are excluded from the contract or offer to purchase.
FHA LOAN
A mortgage loan guaranteed or insured by the Federal Housing Administration (FHA).
FIXED RATE MORTGAGE
A mortgage loan in which the interest rate will not change throughout the duration of the loan.
GOOD FAITH ESTIMATE
An estimate of closing costs provided by a lender to a potential borrower within three days of an application submission per the Real Estate Settlement Procedures Act.
HOMEOWNERS INSURANCE (HAZARD INSURANCE)
A type of insurance that covers physical damage to the property as well as theft and personal liability. This type of insurance does not cover flooding.
INCLUSIONS
Fixtures or personal property that are included in a contract or offer to purchase.
INSPECTION
A service performed by an inspector to identify any possible structural or mechanical problems.
LIEN
A legal hold or claim on property as security for a debt or charge.
LISTING CONTRACT
A broker’s written agreement to represent a seller and their property.
LOAN TO VALUE RATIO (LTV)
The comparison of the loan amount to the value of the property that is collateral for the loan.
MARKET VALUE
The highest price a buyer would pay and the lowest price a seller would accept.
MULTIPLE LISTING SERVICE (MLS)
A service that compiles available properties for sale by member brokers.
ORIGINATION FEE
The fee that is charged by the lender for their services in the evaluation, preparation and submission of a mortgage.
POINT
One percent of the loan amount paid to the lender, usually in exchange for a lower interest rate of the loan.
PRE-APPROVAL
A commitment by the lender to a mortgage loan applicant to make a loan for an amount specified based upon the applicant’s income and debt information, credit reports and funds available for down payment, with final approval subject to underwriter review of the borrower’s qualifications and collateral again at the time of purchase.
PRINCIPAL, INTEREST, TAXES, AND INSURANCE (PITI)
The four parts that make up a borrower’s monthly mortgage payment.
PRIVATE MORTGAGE INSURANCE (PMI)
A policy that protects the lender in the event of default and insures repayment of the loan in case of the borrower’s death or disability. PMI is generally required if the buyer’s down payment is less than twenty percent of the purchase price or appraised value.
RATE CAP
The limit of how much the interest rate may change on an Adjusted Rate Mortgage at the time of each adjustment as well as over the life of the loan.
RATE LOCK
A guarantee by the proposed lender of a specific current interest rate through the closing date if it occurs within a specific time period.
REAL ESTATE AGENT
An individual who is licensed by the State and who acts on behalf of his or her client, the buyer or seller. The real estate agent who does not have a broker’s license must work for a licensed broker.
REALTOR®
A licensed agent or broker who is a member of the National Association of Realtors® through local affiliates such as Houston Association of Realtors®. Realtor® membership is voluntary and represents a commitment to the highest levels of professionalism.
SELLER DISCLOSURE
A legal requirement that, and also the document on which, the seller discloses in writing any known defects or repairs that have been made to the property.
SURVEY
A process by which the property is measured and marked and a scaled blueprint drawn of the land, its property lines, structures and easements.
TITLE
A document that refers to the ownership of a particular piece of property.
TITLE INSURANCE
A policy that protects the holder from any loss resulting from defects in the title.
TITLE SEARCH
Research of public records to identify ownership, liens and encumbrances affecting the property.
VA LOAN
A mortgage loan guaranteed or insured by the U.S. Department of Veterans Affairs (VA)