The terms you hear when you are selling or buying a home may seem confusing.  Use this glossary to stay on top of the real estate lingo.

 
Agency - A legal relationship in which an owner-principal engages a broker-agent in the sale of property or a buyer-principal engages a broker agent in the purchase of property.

Amortization - The gradual repayment of a mortgage by installments.

Assessed Value - The valuation placed on property by a public tax assessor as the basis of property taxes.

Assumption of Mortgage - An agreement whereby the buyer assumes responsibility for a mortgage owed by the seller; the seller remains liable to the lender unless the lender agrees to release the seller from the liability.

Binder - An agreement, accompanied by a deposit, whereby the buyer evidences good faith.

Bridge Loan - A short term loan made until a longer term loan can be arranged; it's sometimes used when a persons needs money to build or purchase a home before the present  the present one has been sold.

Broker - A person licensed by a real estate commission to act independently in conducting a real estate brokerage business.  Although requirements for a broker's licenses may vary, an individual must usually have at least one year of experience in the industry and pass an examination.

Cap - The maximum amount an interest rate or monthly payment can change, either at adjustment time or over the life of the mortgage.

Cloud on Title - A lien or encumbrance that can prevent the seller from delivering clear title and the buyer from obtaining insurance.

Contingency - A condition that must be met before a contract is binding.

Deed - A legal document conveying title to a property.

Earnest Money - a portion of the down payment given to the seller by a potential buyer indicating the buyer's intent to complete the purchase of the property.

Equity Loan - A loan is based on the borrower's equity in their home rather than on their credit worthiness.

Escrow - The placement of money or documents with a third party for safe-keeping pending the fulfillment of a specified condition.

Graduated-Payment-Mortgage - A mortgage loan in which the monthly payments increase by a specific amount each year, with the "over payments" applied to the principal.

Lien - A legal claim against a property that must be paid when the property is sold.

Loan-To-Value-Ratio - The relationship between the amount of a home loan and the total value of the property.  Lenders may limit their maximum loan to 80-95 percent of value.

Lock-In-Rate - A commitment made by lenders on mortgage loan to "lock-in" a certain rate pending loan approval.  Lock in periods may vary.

Market Value - The highest price a buyer will pay for a property and the lowest price the seller will accept.
 
Mortgage Broker - An individual or company that obtains mortgages for others by finding lending institutions, insurance companies, or private sources to lend the money; may also handle collections and disbursements.

Mortgage Insurance - A policy that provides protection for the lender in case of a default and guarantees repayment of the loan if the borrower becomes disabled or dies.

Negative Amortization - An increase in the outstanding balance of a loan resulting from the failure of periodic debt service payments to cover required interest charged on the loan.

Points - A dollar amount paid to a lender for making the loan.  A point is 1 percent of the loan amount; also called discount points.

Private Mortgage Insurance (PMI) - Insurance issued to a lender to protect it against loss on a defaulted mortgage loan.  Its use is usually limited to loans with high loan-to-value ratios.  The borrower pays the premiums.

Realtor® - The registered collective membership marks the identity of real estate professionals who are members of the National Association of Realtors® and subscribe to its strict Code of Ethics.

Title - A document that's evidence of ownership.

Title Insurance - Protection for lenders and homeowners against financial loss resulting from legal defects in the title.