Every homebuying term you'll come across, explained in plain English.
A secondary housing unit on the same lot as a primary home, like a garage apartment, backyard cottage, or basement suite. ADUs can be rented out for income, house family members, or serve as a stepping stone to buying a home you'll live in later. Many cities have loosened ADU rules in recent years to boost housing supply. Read more: House Hacking 101: Living with Roommates or Renters
A mortgage where the interest rate changes periodically after an initial fixed period (often 5, 7, or 10 years). Rates typically start lower than fixed-rate loans but can go up or down based on market conditions. Best for buyers who plan to sell or refinance before the rate adjusts.
An offer to purchase a home without a mortgage. Cash buyers are attractive to sellers because there's no financing contingency and closings are faster, which often gives them a competitive edge in bidding wars. Read more: How to Write a Competitive Offer in a Hot Market
The process of paying off a loan through scheduled monthly payments over time. Early payments go mostly toward interest; later payments go mostly toward principal. An amortization schedule shows exactly how much of each payment applies to each. Read more: Breaking Down Your Mortgage Payment (PITI)
The true annual cost of a mortgage, including the interest rate plus fees like origination, discount points, and mortgage insurance. APR is almost always higher than the interest rate, so use APR (not the interest rate) to compare loan offers side-by-side. Read more: Understanding Mortgage Rates and Points
A licensed professional's estimate of a home's market value, based on comparable recent sales and property condition. Lenders require an appraisal to make sure they're not lending more than the home is worth. Read more: Understanding the Appraisal Process
A clause in a purchase contract that lets the buyer back out (or renegotiate) if the appraisal comes in below the agreed purchase price. Protects buyers from overpaying for a home that won't appraise. Read more: What Happens If the Appraisal Comes In Low?
The difference between a home's contract price and its appraised value when the appraisal comes in lower. Buyers who waive the appraisal contingency may need to cover this gap in cash to close the deal. Read more: What Happens If the Appraisal Comes In Low?
A property sold in its current condition, with the seller making no repairs or improvements. Buyers can still inspect the home but can't ask for repairs. Common with foreclosures, estate sales, and fixer-uppers.
A mortgage that a home buyer can take over from the seller, inheriting the seller's interest rate and remaining loan balance. Most conventional loans aren't assumable, but FHA, VA, and USDA loans typically are. Very valuable when rates have risen since the seller's loan was originated.
A written offer accepted by the seller while another offer is under contract. If the first deal falls through, the backup offer becomes primary, with no need to re-list or start over. Read more: What Happens After You Make an Offer?
An offer made without touring the home in person, based only on photos and listing info. Common in ultra-competitive markets or with out-of-state buyers, but risky since there may be issues not visible in photos. Read more: How to Write a Competitive Offer in a Hot Market
A short-term loan that helps you buy a new home before selling your current one. You use the equity in your current home as collateral, then pay off the bridge loan when your existing home sells. Higher interest rates than a standard mortgage. Read more: Buying Before You Sell: Bridge Loans and Contingencies
A licensed real estate agent representing the buyer in a transaction. Their job is to find homes, negotiate on your behalf, and guide you through closing. Typically paid via commission from the sale (historically from the seller, though commission structures are changing). Read more: Understanding Buyer's Agents vs. Seller's Agents
A market where there are more homes for sale than buyers looking to buy. Buyers have more negotiating power. Sellers may accept lower offers, cover more closing costs, or make more repairs. Read more: Negotiation Strategies: How to Get the Best Deal
Refinancing your mortgage for more than you currently owe, taking the difference in cash. Common for accessing home equity to fund renovations, pay off debt, or invest. Increases your loan balance and monthly payment.
A specialized lender (usually a credit union, bank, or nonprofit) that serves low-income and underserved communities. CDFIs often offer more flexible underwriting, lower rates, and specialized products (like ITIN loans, small-dollar mortgages, or down payment assistance) that traditional banks won't touch. Find one at the CDFI Fund's website (ofn.org) or through a housing counselor.
The federal agency that oversees mortgage lending and enforces consumer protection laws. Their website (consumerfinance.gov) has calculators, guides, and tools to help buyers understand mortgages and their rights.
The historical sequence of ownership for a property. A clean chain proves the seller has the right to transfer the property. Any gaps or unresolved claims can cloud the title and delay or block closing. Read more: Understanding Title Insurance
The final meeting where ownership legally transfers from seller to buyer. You sign a stack of documents, pay closing costs, and receive the keys. Usually takes 1-2 hours; can happen in person or remotely. Read more: What to Expect on Closing Day
Fees paid at closing to complete the home purchase, typically 2-5% of the loan amount. Includes lender fees, title insurance, appraisal, taxes, and prepaid items like homeowners insurance and property tax reserves. Read more: Closing Costs Explained: What to Expect
A 5-page document lenders must provide at least 3 business days before closing. Lists your final loan terms, monthly payment, closing costs, and cash needed to close. Compare it carefully to your original Loan Estimate. Read more: Reviewing Your Closing Disclosure
Buying a home with one or more partners who aren't your spouse: friends, siblings, parents, or even acquaintances. Lets you combine incomes, down payments, and monthly costs, opening up homes that would be out of reach solo. Requires a solid legal agreement upfront (see: Operating Agreement, Tenancy in Common) covering ownership shares, cost splits, and what happens if someone wants out. Read more: Co-Buying a Home with Friends or Family
Anyone buying a home with you as an equal or partial partner. Can be on the mortgage and title, on the title only, or in some flexible combinations. Choosing the right co-buyer is as important as choosing the right home, so think long-term compatibility, financial habits, and life goals. Read more: Co-Buying a Home with Friends or Family
Any arrangement where two or more people own a property together. Different structures (Tenancy in Common, Joint Tenancy, LLC ownership) offer different rules for shares, decision-making, and inheritance. Read more: Co-Buying a Home with Friends or Family
A nonprofit that owns the land while individuals own the home on top of it. Homes sold this way are much more affordable but come with resale restrictions to keep them affordable for future buyers. A permanent affordability model and a middle path between renting and traditional ownership.
An agent's analysis of recent nearby home sales to estimate what a property should sell for. Sellers use it to set list prices; buyers use it to decide what to offer. Less formal than an official appraisal. Read more: How to Determine Your Offer Price
A conventional loan that meets Fannie Mae and Freddie Mac's size and underwriting standards. As of 2026, the conforming loan limit is $806,500 in most areas (higher in expensive markets). Loans above this limit are "jumbo" loans.
A short-term loan to finance building or major renovation of a home. Funds are released in stages as construction progresses. Usually converts to a regular mortgage once the home is complete.
A condition in a purchase contract that must be met for the sale to move forward. Common contingencies include financing (buyer must get approved), appraisal (home must appraise at value), and inspection (buyer must be satisfied). If a contingency isn't met, the buyer can typically back out without losing earnest money. Read more: Understanding Contingencies: Protecting Yourself in an Offer
The window of time during which a buyer can exercise contingencies (typically 7-21 days). After this period, contingencies expire and backing out becomes much harder without losing earnest money. Read more: Understanding Contingencies: Protecting Yourself in an Offer
A mortgage not backed by a government agency (unlike FHA, VA, or USDA loans). Typically requires higher credit scores and down payments but avoids government mortgage insurance premiums. The most common type of mortgage. Read more: FHA vs. Conventional Loans: Which Is Right for You?
One of the three companies that collect and report credit information: Experian, Equifax, and TransUnion. Lenders pull reports from all three when qualifying you for a mortgage, and use the middle score. Read more: Understanding Your Credit Score and Why It Matters
A detailed record of your credit history: accounts, balances, payment history, inquiries, and public records. You can pull yours free once a year at annualcreditreport.com. Read more: Understanding Your Credit Score and Why It Matters
A number from 300-850 predicting how likely you are to repay debt. Most mortgage lenders use FICO scores; 620 is typically the minimum for conventional loans, though FHA loans can go lower. Higher scores get better interest rates. Read more: Understanding Your Credit Score and Why It Matters
How long a listing has been active. Fresh listings (0-14 days) generate the most interest; long DOM (60+ days) can signal an overpriced or problem property, which is often a chance to negotiate. Read more: How to Determine Your Offer Price
Your total monthly debt payments divided by your gross monthly income, expressed as a percentage. Most lenders want DTI under 43% for a mortgage; the lower, the better your chances of approval and good rates. Read more: Understanding Debt-to-Income Ratio (DTI)
The legal document that transfers ownership of a property from seller to buyer. You receive it at closing and it's recorded with the county. Different types (warranty, grant, quitclaim) offer different levels of protection.
Fees paid to the lender at closing to reduce your interest rate. One point = 1% of the loan amount and typically drops the rate by ~0.25%. Worth it if you plan to keep the loan long enough to recoup the cost. Read more: Understanding Mortgage Rates and Points
State, county, or nonprofit programs that help homebuyers cover the down payment and/or closing costs. Comes as grants (free money), forgivable loans (forgiven after living in the home for X years), or low-interest second mortgages. Especially useful for first-time buyers. Read more: Down Payment Assistance Programs (State by State)
Programs that match your saved down payment dollar-for-dollar (or in some ratio), often through an employer, a special savings account, or a nonprofit. A newer category of homebuying assistance worth checking before you buy. Read more: Down Payment Assistance Programs (State by State)
When one agent represents both the buyer and the seller in a transaction. Legal in some states, banned in others. Creates a conflict of interest because the agent can't fully advocate for either side. Consider carefully. Read more: Understanding Buyer's Agents vs. Seller's Agents
The buyer's investigation of a property before closing: inspections, title search, review of disclosures, HOA documents, etc. The due diligence period is your chance to uncover problems while you can still back out. Read more: What "Under Contract" Really Means
Properties with 2, 3, or 4 separate housing units. Legally count as residential (not commercial) for mortgage purposes, so you can buy one with a normal owner-occupant loan if you live in one of the units. The gateway to "primary multi-family" investing. Read more: Buying a Multi-Family Property as Your First Home
Cash the buyer puts up when signing a purchase contract to show they're serious. Typically 1-3% of the purchase price. Held in escrow and applied toward the down payment or closing costs at closing. Buyers can lose it if they back out for reasons not covered by contingencies. Read more: What "Under Contract" Really Means
Increasingly common employee perk where your company contributes money toward your down payment, closing costs, or mortgage interest. Programs vary: some are grants, some are forgivable loans, some subsidize a partner's coaching or lender fees. Worth asking HR about. Read more: Down Payment Assistance Programs (State by State)
The difference between what your home is worth and what you owe on your mortgage. Grows as you pay down the loan and as the home's value appreciates. Can be tapped via HELOC, home equity loan, or cash-out refinance.
An account your lender uses to collect and pay your property taxes and homeowners insurance. You pay 1/12 of the annual bills each month with your mortgage payment; the lender pays the actual bills when they come due. Also called "impounds" or "reserves." Read more: Understanding Property Taxes and Escrow
A neutral third party (often a title company or attorney) that holds funds and documents during the purchase process. Coordinates the transaction, ensures both parties fulfill their obligations, and disburses funds at closing.
A government-sponsored enterprise that buys mortgages from lenders, packages them into securities, and sells them to investors. This process creates liquidity so lenders can keep issuing new loans. Sets guidelines for "conforming" conventional loans.
A mortgage insured by the Federal Housing Administration. Allows down payments as low as 3.5% and credit scores as low as 580. Popular with first-time and lower-credit buyers, but requires mortgage insurance (MIP) for the life of the loan (in most cases). Read more: FHA vs. Conventional Loans: Which Is Right for You?
An FHA loan that lets you finance both the purchase and renovation costs of a fixer-upper in a single mortgage. Good for buyers who want to buy a home that needs work but don't have separate cash for repairs. Read more: How to Evaluate a Fixer-Upper
An FHA rule for 3-4 unit properties: the projected rental income from the units you don't live in must cover the entire monthly mortgage payment. Aimed at ensuring buyers can afford these larger properties, but it can be hard to pass in high-cost markets. Read more: Buying a Multi-Family Property as Your First Home
A legal obligation to act in the client's best interest. Real estate agents have a fiduciary duty to the party they represent (buyer or seller). Homebuying coaches also operate under a fiduciary-like standard, though with no commission tied to a transaction. Read more: Homebuying Coach vs. Real Estate Agent
The buyer's last look at the home before closing, usually within 24 hours of closing. Purpose: confirm the property is in the agreed condition, any negotiated repairs are done, and included items (appliances, fixtures) are still there. Read more: Final Walkthrough: Your Last Chance to Check Everything
Federally defined as someone who hasn't owned a primary residence in the past 3 years. Qualifies for special programs (DPA, FHA loans, tax credits in some states) even if you've owned a home before. Read more: How to Know If You're Ready to Buy a Home
A mortgage with an interest rate that stays the same for the entire loan term (usually 15 or 30 years). Predictable monthly payments; you're locked in even if market rates fall (though you can refinance).
A home that needs significant repairs or renovations. Usually priced below market to reflect the work needed. Can be a great value if you have the budget, time, and skills, or a money pit if you don't. Read more: How to Evaluate a Fixer-Upper
Insurance covering flood damage, which isn't included in standard homeowners policies. Required for homes in FEMA-designated high-risk flood zones. Increasingly recommended even in low-risk zones as flood patterns change. Read more: When to Change Your Homeowners Insurance
The house you plan to live in long-term, often for 15+ years or through raising a family. In contrast to a "starter home" you'll outgrow. Bigger, more customized, and usually more expensive per square foot. Don't confuse "forever" with "the only home you'll ever buy." Read more: Am I Settling? How to Know If This House Is Right
Like Fannie Mae, a government-sponsored enterprise that buys mortgages from lenders and repackages them for investors. Together they underpin most conventional mortgage lending in the U.S.
Money from a family member (usually) that a buyer uses toward the down payment or closing costs. Most loan programs allow gift funds but require a signed gift letter confirming the money is a gift, not a loan. Read more: Gift Funds and Down Payment Help from Family
A signed document stating that money from a family member is a gift, not a loan, and won't need to be repaid. Required by lenders to document the source of down payment funds. Read more: Gift Funds and Down Payment Help from Family
Your total income before taxes and deductions. Used to calculate DTI and how much home you can qualify for. Different from take-home pay (net income), which is what actually hits your bank account. Read more: How Much House Can I Actually Afford?
A short-term, high-interest loan from a private lender (not a bank), typically used by real estate investors for flips or bridge financing. Approval is based on the property's value, not the borrower's credit. Fast to close but expensive.
A revolving credit line secured by your home's equity. It works like a credit card, but with your house as collateral. Variable rate, flexible borrowing. Common for renovations, debt consolidation, or emergency funds.
A clause that lets the buyer back out if they can't sell their current home within a specified time. Common for move-up buyers but weakens the offer, since sellers usually prefer buyers without this contingency. Read more: Buying Before You Sell: Bridge Loans and Contingencies
A dedicated advisor who guides you through the full homebuying journey (education, financial planning, strategy, team-building, decision support, and emotional support) from before you're ready through after closing. Unlike a real estate agent (whose income depends on you closing a deal), a coach has no financial incentive tied to whether or when you buy. Coaches charge flat fees, hourly, or offer free coaching funded through partnerships. Best paired with a great agent, not instead of one. Read more: What is a Homebuying Coach?
A plan for how you'll buy: what type of home, in what timeline, using what financing, with what down payment source, and how the purchase fits into your broader life and financial goals. A coach helps you develop one before house-hunting begins. Read more: Do I Need a Homebuying Coach?
The group of professionals supporting your purchase, typically a real estate agent, mortgage lender, home inspector, insurance agent, and (increasingly) a homebuying coach. Not everyone needs all five, but knowing who does what helps you build the right team for your situation. Read more: Building Your Homebuying Team: Who Do You Really Need?
An organization in a planned community, condo, or townhouse development that maintains common areas and enforces rules. Charges monthly or quarterly fees (HOA dues). Rules can affect what you can do with your property. Read more: Condos vs. Single-Family Homes: What's the Difference?
Insurance covering damage to your home and belongings (fire, theft, some weather events) plus liability if someone's injured on your property. Required by lenders. Doesn't cover flood or earthquake; those need separate policies. Read more: When to Change Your Homeowners Insurance
Buying a property and living in one part of it while renting out the rest: a spare bedroom, an ADU, a basement, or (with a multi-family property) other units. The rental income offsets your mortgage, sometimes covering it entirely, letting you live in a nicer home for less than you'd spend renting. One of the most powerful ways for first-time buyers to enter homeownership. Read more: House Hacking 101: Living with Roommates or Renters
A HUD-approved advisor who provides free or low-cost help with home purchasing, mortgage decisions, financial preparation, and foreclosure prevention. Funded by federal grants and available in every state. Find one at hud.gov/findacounselor.
The federal department that oversees housing programs, including FHA loans and public housing. HUD's website (hud.gov) has resources for first-time buyers and links to approved housing counselors.
A professional evaluation of a home's condition: structure, roof, HVAC, plumbing, electrical, appliances. Costs $300-$600 and usually takes 2-4 hours. You should attend if possible to learn about the home firsthand. Read more: The Home Inspection: What to Expect
A clause giving the buyer the right to inspect the property and back out (or request repairs/credits) based on the findings. One of the most important protections in a purchase contract. Read more: Understanding Contingencies: Protecting Yourself in an Offer
A home you buy primarily to rent out or resell for profit, not to live in yourself. Different loan rules and rates apply (typically 20-25% down, higher interest rates). Contrast with an "owner-occupied" property.
A tax-processing number for people who aren't eligible for a Social Security Number. Some lenders offer ITIN mortgages for non-citizen borrowers, often at slightly higher rates than conventional loans.
A mortgage larger than the conforming loan limit ($806,500 in most areas as of 2026, higher in expensive markets). Not eligible for Fannie Mae or Freddie Mac purchase, so stricter underwriting and larger down payments are typical.
An arrangement where you own the home but lease the land it sits on from someone else (often for 50-99 years). Common in Hawaii, some California developments, mobile home parks, and Native American trust lands. Reduces upfront purchase price but adds monthly lease payments, and financing can be harder to get. Read the lease terms carefully: what happens when the lease expires, how do renewals work, can the ground rent be raised?
An arrangement where you rent a home for a set period (typically 1-3 years) with the option or obligation to buy it at the end. A portion of your rent may go toward the eventual down payment. Useful for buyers who need time to build credit, save, or wait out a life transition, but the terms can be complex and unfavorable if not structured carefully. Get an attorney to review before signing. Read more: Rent-to-Own: Does It Ever Make Sense?
A legal claim against a property, often for unpaid debts (mortgage, taxes, contractor bills). Liens must be resolved before the property can be sold with a clean title.
The real estate agent representing the seller. Sometimes called the "seller's agent." Their fiduciary duty is to the seller, so buyers should have their own agent for representation. Read more: Understanding Buyer's Agents vs. Seller's Agents
A Limited Liability Company can hold title to real estate, which is useful for investors, co-buying groups, and anyone wanting liability protection. Requires an Operating Agreement, comes with tax and financing implications (LLC-held property usually needs an investment-property loan rather than an owner-occupant loan), and adds complexity. Worth exploring with an attorney if you're co-buying or investing.
A clause letting the buyer back out if they can't secure financing within the agreed timeframe. Protects buyers from losing earnest money if their loan falls through. Read more: Understanding Contingencies: Protecting Yourself in an Offer
A standardized 3-page document lenders must provide within 3 business days of your mortgage application. Details your loan terms, projected monthly payments, and estimated closing costs. Compare LEs across lenders to shop for the best deal. Read more: How to Choose a Lender
The person at a bank or mortgage lender who works with you through the loan process. Different from a mortgage broker (who shops multiple lenders on your behalf). Read more: How to Choose a Lender
The loan amount divided by the property value, expressed as a percentage. LTV of 80% means you're borrowing 80% and putting 20% down. LTV above 80% usually triggers mortgage insurance (PMI).
An independent professional who shops mortgages from multiple lenders on your behalf. Different from a loan officer (who works for one bank). Can save you time and money, but check that they're licensed and reputable. Read more: How to Choose a Lender
Insurance that protects the lender if you default. Required for loans with less than 20% down: PMI on conventional loans, MIP on FHA loans, funding fee on VA loans. Adds to your monthly payment. Read more: What Is PMI and How Can You Avoid It?
A document from a lender stating they've verified your income, assets, and credit and are willing to lend you up to a specific amount. Strengthens your offer because sellers know you're financeable. Read more: How to Get Pre-Approved for a Mortgage
A residential building with 2-4 separate housing units (duplex, triplex, or fourplex). Buying one as your primary residence (living in one unit and renting the others) is a Nestment favorite: it uses residential financing (not investor loans), often qualifies for owner-occupant assistance, and builds equity while other people help cover the mortgage. Read more: Buying a Multi-Family Property as Your First Home
A shared database of homes for sale, accessible to real estate agents. Public sites like Zillow and Redfin pull most of their data from MLS feeds. Not all listings are on MLS; some are "off-market" or "pocket listings." Read more: Making Sense of Online Listings (What the Photos Don't Show)
The trade association for real estate professionals. Agents who join are called "Realtors" (a trademarked term). Not all licensed agents are Realtors, though most in major markets are.
A report identifying whether a property is in a designated hazard zone: flood, fire, earthquake, seismic, or airport noise. Required in some states (like California). Buyers should read carefully, since insurance costs and risks can be significant. Read more: Understanding Neighborhood Fit: Beyond the House Itself
A "non-qualified mortgage," a loan that doesn't meet the strict standards set by the Consumer Financial Protection Bureau for traditional mortgages. Serves buyers who don't fit the standard box: self-employed with complex income, investors using bank statements or rental income to qualify, ITIN borrowers, or buyers with recent credit events. Higher rates and larger down payments are typical, but non-QM opens the door when conventional financing won't. Read more: How to Buy a Home While Self-Employed
A buyer's proposal to purchase (price, terms, contingencies) and the seller's response. Negotiations can go back and forth multiple times until both agree on all terms, and then it becomes a binding contract. Read more: What Happens After You Make an Offer?
The legal document governing an LLC or co-ownership arrangement. For co-buyers, this is where you spell out ownership shares, decision-making rules, cost splits, dispute resolution, and (critically) what happens if someone wants to sell their stake or move out. Draft it before you close, not after. Read more: Co-Buying a Home with Friends or Family
A short window (typically 7-10 days, mostly used in Texas) where the buyer can back out of the contract for any reason, in exchange for a small non-refundable fee. Like a "free look" period on top of standard contingencies.
A fee charged by the lender for processing your loan, typically 0.5-1% of the loan amount. Shows up on your Loan Estimate and Closing Disclosure. Sometimes negotiable. Read more: Closing Costs Explained: What to Expect
A property where the borrower lives in the home as their primary residence. Owner-occupied loans get the best rates and lowest down payments, the opposite of investment-property loans. For multi-family properties, you qualify as owner-occupied if you live in one of the units.
The four components of a typical monthly mortgage payment. Lenders use PITI (not just the mortgage payment) to calculate DTI and affordability. Add HOA dues if applicable. Read more: Breaking Down Your Mortgage Payment (PITI)
A financing structure where you take out a first mortgage for 80% of the price, a second mortgage for 10%, and put 10% down. Lets you avoid PMI without a full 20% down. Less common today but sometimes worth exploring. Read more: What Is PMI and How Can You Avoid It?
Insurance required on conventional loans when your down payment is less than 20%. Protects the lender if you default. Typically 0.5-1.5% of the loan annually. You can request removal once you have 20% equity, or it auto-drops at 22%. Read more: What Is PMI and How Can You Avoid It?
See Discount points. Also can refer to "origination points," which are fees charged by lenders for processing the loan. Read more: Understanding Mortgage Rates and Points
A verified evaluation by a lender that you qualify for a specific loan amount. Requires documentation (income, assets, credit). Stronger than pre-qualification and often required to submit offers. Read more: How to Get Pre-Approved for a Mortgage
An informal, self-reported estimate of how much you might qualify to borrow. No documents or credit check required. Useful for early ballpark planning but not strong enough to make offers. Read more: Understanding Pre-Qualification vs. Pre-Approval
A title company's initial report on a property, identifying any liens, easements, or issues that could affect title. Buyers should read carefully during due diligence.
Costs paid at closing to fund your escrow account, typically prorated property taxes, homeowners insurance, and mortgage interest. Not "fees" but real bills you'd owe anyway. Adds to cash needed to close. Read more: Closing Costs Explained: What to Expect
Buying a 2-4 unit property to live in as your primary residence while renting out the other units. Combines the benefits of owner-occupant financing (low down payment, better rates, DPA eligibility) with the income potential of a rental property. A gateway to real estate investing without the higher barriers of a pure investment property. Read more: Buying a Multi-Family Property as Your First Home
The home you live in most of the time: your main home for tax, insurance, and mortgage purposes. Gets the best loan rates, biggest tax benefits, and qualifies for owner-occupant assistance programs. You can only have one at a time.
The amount you actually borrowed (before interest). Also refers to the portion of each mortgage payment that reduces your loan balance (vs. going to interest).
A home sale that goes through court supervision because the owner died without clear inheritance instructions. Longer process, sometimes discounted price, but with restrictions and court approval requirements.
Annual tax on real estate paid to local government (usually county). Amount is based on the property's assessed value and local tax rate. Usually paid via your escrow account with your mortgage. Read more: Understanding Property Taxes and Escrow
Documentation showing you have the cash to close (down payment + closing costs). Sellers often ask for it alongside your pre-approval letter, especially on all-cash offers.
The main legal contract between buyer and seller, detailing price, terms, contingencies, timelines, and what's included. Once signed by both parties, it's binding.
A lender's commitment to hold your interest rate for a set period (usually 30-60 days) while your loan is processed. Protects you if rates rise; you can lose it if closing is delayed. Some lenders offer "float-down" options if rates fall. Read more: Understanding Mortgage Rates and Points
A property owned by a bank after an unsuccessful foreclosure auction. Often sold "as-is" at a discount but can require significant repairs. Banks are usually motivated to sell.
A real estate agent who is a member of the National Association of Realtors (NAR). Trademarked term. NAR members agree to a code of ethics, though enforcement varies. Not all agents are Realtors. Read more: Do I Need a Real Estate Agent? (And How to Find a Good One)
Replacing your existing mortgage with a new one, usually for a better rate, different term, or to cash out equity. Involves closing costs (typically 2-3% of loan amount). Worth it if you'll recoup the costs within your break-even timeline.
An arrangement where the seller stays in the home after closing (renting from the new owner) for a short period. Common when sellers need time to move. Usually documented in the purchase contract.
Renting where you want to live (often an expensive city) while buying an investment property somewhere more affordable. Lets you build equity and get real estate exposure without giving up your preferred lifestyle location. Popular with younger buyers priced out of their local markets.
The federal law that regulates closing costs and mortgage disclosures. Requires lenders to give you a Loan Estimate and Closing Disclosure, and bans kickbacks between service providers.
An arrangement where the seller acts as the lender: you pay them monthly instead of a bank, often at higher interest but with more flexible qualifying. Useful when a bank won't lend (unusual property, thin credit) or when the seller wants to spread out capital gains. Requires a promissory note and clear terms.
Money the seller agrees to give the buyer at closing, usually to help with closing costs or repairs. Effectively reduces the buyer's cash-to-close without reducing the sale price. Read more: Negotiation Strategies: How to Get the Best Deal
A form the seller fills out disclosing known material issues with the property: past leaks, HOA disputes, prior repairs, code violations, etc. Required in most states. Read carefully. Read more: Red Flags to Watch for During Home Tours
A market with more buyers than available homes. Sellers have leverage: homes sell quickly, often over asking, and buyers may need to waive contingencies to compete. Read more: How to Write a Competitive Offer in a Hot Market
Another word for closing. In some regions, "settlement" is preferred; in others, "closing" is standard. Same thing: the day ownership transfers. Read more: What to Expect on Closing Day
A financing arrangement where a third party (a nonprofit, investor, or specialized lender) contributes part of your down payment or monthly payment in exchange for a share of your home's future appreciation. If your home value goes up, you split the gain when you sell or refinance; if it doesn't, the partner shares the risk. Opens up homeownership for buyers who couldn't otherwise afford the down payment. An emerging category worth watching.
A sale where the seller owes more on the mortgage than the home is worth, and the lender agrees to accept less than the full loan balance. Long, uncertain process (3-9 months), but can be a good deal.
A smaller, more affordable first home meant to build equity for a few years before trading up. Not a permanent home; the assumption is you'll sell in 3-7 years. In today's market, "starter homes" are harder to find as inventory has shifted, but the concept still shapes how many first-time buyers approach their search. Read more: Am I Settling? How to Know If This House Is Right
A contract clause making the sale conditional on satisfactory inspection results. Similar to an inspection contingency: the buyer can renegotiate or back out based on inspection findings. Read more: The Home Inspection: What to Expect
Value you add to a property through your own labor rather than paying contractors: DIY renovations, painting, landscaping, finishing an unfinished space. Can dramatically improve a fixer-upper's value if you have the skills, time, and tolerance for chaos. Read more: How to Evaluate a Fixer-Upper
A form of shared ownership where two or more people each own a defined percentage of a property. The default and usually the best structure for co-buying: each owner can sell their share independently, and on death, their share passes to their heirs (not automatically to co-owners). Contrast with Joint Tenancy, which has right of survivorship. Read more: Co-Buying a Home with Friends or Family
A pest inspection specifically for termites and other wood-destroying insects. Required in some states (like California) for financing. May trigger repair requirements before closing. Read more: The Home Inspection: What to Expect
A company that researches property title history, issues title insurance, and often handles the closing. Sometimes doubles as the escrow holder. Buyers can usually choose their title company.
Insurance protecting against undiscovered title defects (unknown heirs, forgeries, filing errors). Two types: owner's policy (protects you) and lender's policy (protects the lender, required). One-time premium at closing. Read more: Understanding Title Insurance
A review of public records to trace ownership history and find any liens, easements, or other issues affecting the property. Done by the title company before closing to ensure the seller can transfer clean ownership. Read more: Understanding Title Insurance
A tax charged by state or local government when property changes hands. Varies wildly by location and can be a few hundred dollars or several thousand. Usually paid at closing.
A sale where the owner is a trust (often after the original owner's death). Similar to a probate sale but often faster. Trustees have authority to sell without court approval.
The lender's process of evaluating your loan application: verifying income, checking credit, assessing the property (via appraisal), and confirming everything meets loan program guidelines. Can take 1-4 weeks. Read more: What "Under Contract" Really Means
A zero-down mortgage backed by the U.S. Department of Agriculture, available in eligible rural and some suburban areas. Income limits apply. Great for buyers in qualifying areas.
The percentage of your available credit you're using. Under 30% is good; under 10% is great. Keeping utilization low boosts your credit score, which matters for mortgage rates. Read more: Understanding Your Credit Score and Why It Matters
A mortgage backed by the Department of Veterans Affairs, available to eligible veterans, active-duty service members, and some spouses. Zero down payment, no PMI, competitive rates. One of the best loan options if you qualify.
Talk to a Nestment coach and get plain-English answers about your situation.