Real estate glossary

A–E

• Adjustable-rate mortgage (ARM) — a mortgage with an interest rate that changes after an initial fixed period.
• Amortization — the process of gradually paying off a loan through regular payments that cover both principal and interest.
• Appraisal — a professional estimate of a property's market value, required by lenders before closing.
• Closing costs — fees and expenses (2–5% of purchase price) paid at the close of a real estate transaction.
• Down payment — the portion of a home's price paid upfront. Typically 3–20% for residential purchases.
• Equity — the difference between your home's current value and what you owe on the mortgage. Your ownership stake.
• Escrow — a third-party account that holds funds (for taxes and insurance) until specific conditions are met.

F–P

• FHA loan — a government-insured mortgage with lower down payment requirements (3.5%), designed for first-time buyers.
• Fixed-rate mortgage — a mortgage where the interest rate doesn't change for the life of the loan.
• HOA (Homeowners Association) — an organization that manages shared spaces in a community and charges monthly fees.
• Home inspection — a physical examination of a property's condition by a licensed inspector, done before closing.
• Jumbo loan — a mortgage that exceeds the conforming loan limits set by Fannie Mae/Freddie Mac.
• Pre-approval — a lender's conditional commitment to lend you a specific amount, based on preliminary underwriting.
• Price-to-rent ratio — a city's median home price divided by annual rent for a comparable property. Above 20 = renting is usually cheaper.

R–V

• Refinancing — replacing your existing mortgage with a new one, usually at a different rate or term.
• Title insurance — protects against ownership disputes or defects in the property's title history.
• VA loan — a mortgage guaranteed by the Department of Veterans Affairs. Zero down payment, no PMI.
• 1031 exchange — a tax-deferred swap of one investment property for another, avoiding immediate capital gains tax.
• Cap rate (capitalization rate) — a rental property's net operating income divided by its purchase price. A quick profitability measure.
• NOI (Net Operating Income) — rental income minus operating expenses (excluding mortgage payments).