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Glossary of Real Estate

Assessed value- The value placed on a property by a public tax assessor for the purpose of determining the properties taxes.

Appraisal- A written justification of the price paid for a property, primely based on an analysis of similar homes sold in the area. A lender may require an appraisal to ensure the money they are lending you to pay for a property is reasonable.

Chain of Title- An analysis of the transfer of title to a piece of property over the years.

Closing Costs- Closing costs are simply expenses of the sale of property, that must be paid in addition to the purchase price of the property.

Debt-to-income ratio- The relationship of a person's long term debt payments and their monthly income.

Equity- A home owners financial interest in a property. Equity is the difference between fair market value of a property and the amount that is still owed on the mortgage and other liens. Example: your house is worth $150,000. You owe $110,000 to your mortgage banker, therefore you have $40,000 in equity.  

Escrow- A process in which money and/or documents is held by a disinterested third party (a stake holder) until satisfaction of the escrow instructions have been achieved. An example could be: money to pay property taxes and insurance.

FICO- (Fair,Isaac & Company), FICO is the most commonly used credit scoring system used by lenders to derive credit scores for borrowers. You may hear, "What's your FICO score?" from time to time.

Fixtures- An article that was once personal property but has become affixed (installed, added to etc.) and is now part of the real estate. An example could be a chandelier in your dining room. NOTE: some fixtures can be removed if an agreement states so in writing.

Loan Origination Fee- The processing of a mortgage is known as loan origination. the "fee" is the expenses involved in generating that loan.

Market Value- The most probable price a property should bring in a competitive and open market under all conditions.

Offer- A promise made by one party, requesting something in exchange for that promise. The offer is made with the intention that the offeror is bound to the terms if the offer is accepted.

PMI- Private Mortgage Insurance, protects the lender against a loss in the event of a foreclosure and deficiency.

Points- A percentage of the principal conventional loan amount. A lender often charges a borrower "service charge points" for making a loan. Points may cover expenses in the origination of a loan to increase a lenders yield or to "buy down" the rate.

Principal- One of the main parties in a transaction. For example: The buyer and seller are principals in the purchase of real property.

Transfer Tax- A state imposed tax on the transfer or conveyance of realty or any realty interest by means of deed, lease, sublease, assignment, contract for deed or similar instrument.

Underwriter- A person who evaluates the risk of default by a mortgage loan applicant, and grants either approval or denial for a loan.

Zoning- The regulations of structures and uses of property within designated areas or "zones".

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