REAL ESTATE TERMINOLOGY FOR HOME BUYERS

REAL ESTATE TERMINOLOGY FOR HOME BUYERS

Learn the key terminology--and, in some cases, jargon--involved in buying a house.

Here are some common real estate terms to know when getting ready to buy a home. For a more lighthearted look at real estate ad language, see What "As Is" and Other Real Estate Marketing Terms Really Mean. And for more obscure terminology, try searching Nolo's Legal Dictionary.

Acceptance: Agreeing to the terms of an offer, thereby creating a contract. As soon as the seller signs on to your purchase offer, you're in contract for the sale of the house, and neither of you can back out without facing consequences -- in your case, losing your earnest money deposit and, in the seller's case, a potential lawsuit.

Adjustable rate mortgage (ARM): A mortgage loan with an interest rate that fluctuates in accordance with a designated market indicator -- such as the weekly average of one-year U.S. Treasury Bills -- over the life of the loan. To avoid constant and drastic fluctuations, ARMs typically limit how often and by how much the interest rate can vary.

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Annual percentage rate (APR): A yearly interest rate that includes upfront fees and costs paid to acquire the loan, calculated by taking the average compound interest rate over the term of the loan. Mortgage lenders are required to disclose the APR so that borrowers can more accurately compare the actual cost of different loans with different fees.

Assumable mortgage: A home mortgage that allows the buyer to take over the seller's mortgage; that is, to step into the seller's shoes, make mortgage payments, and comply with other terms of the existing loan. Most Appraisal: A determination of the value of

lenders require the borrower to qualify for the mortgage

something, such as jewelry, stock, or, in this

in order to assume the mortgage.

case, the house you plan to buy. A professional appraiser -- who should be a qualified,

Balloon mortgage: A mortgage that is not fully paid off

disinterested specialist in real estate appraisals,

over the loan term (such as five, seven, or ten years),

with expertise in the local geographic area --

leaving a balance at the end. The borrower must either

makes an estimate by examining the property,

pay off the remaining mortgage or refinance the loan.

looking at the initial purchase price, and comparing it with recent sales of similar

Closing costs: All settlement or transaction charges

property. Your bank or other lender will require

(above and beyond the actual cost of the property) that

the appraisal in order to ascertain the worth of

home buyers (or sellers, depending on tradition in your

the house for lending purposes. And,

area and what you negotiate with the seller) need to pay

unfortunately, the lender may refuse to fund the

at the close of escrow when the property is transferred.

loan if the appraisal comes in lower than the

These typically include lender's fees and points or

loan amount. In such situations, if you can't

prepaid interest, a prorated share of the property taxes,

come up with additional down payment money

transfer taxes, credit check fees, homeowners' and title

or a better appraisal, deals have been known to

insurance premiums, deed filing fees, real estate agent

fall through.

commissions, inspection and appraisal fees, and

Appreciation: An increase in the value or worth of an asset or piece of property that's caused by external economic factors occurring over time, rather than by the owner having made improvements or additions. For example, increased market demand or inflation can cause property to appreciate. The term is commonly used in the context of real estate. The seller is probably hoping to cash in on any appreciation in the home's value since buying it -- but the opposite (called depreciation, defined below) is also possible.

attorneys' fees. Some closing costs are tax-deductible.