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Real Estate Transaction Terminology 

Real estate terminology can make an overwhelming process become even more daunting. We have compiled a list of common real estate related terms to help buyers and sellers feel more comfortable and less confused.

Your real estate agent is a great resource for explaining the entire real estate process from beginning to end and beyond, including any terminology you may not understand. 

Connect with your community real estate expert through The Agent Circle. 

Acceleration Clause

Clause that gives a lender the right to declare the entire loan balance due immediately because the borrower defaulted on the contract conditions.

Adjustable Rate Mortgage (ARM)

A mortgage that permits the lender to periodically adjust the interest rate based on an index which reflects the cost of the money.


The legal relationship resulting from an agreement that the agent is authorized by a principal to perform certain acts on behalf of the principal in dealing with a third party.


A licensed professional who represents the principal (buyer or seller) in real estate transactions. Agents work under a broker.


The process of paying off debt in equal payments over a scheduled period of time including principal and interest. 

Annual Percentage Rate (APR)

The yearly cost of borrowing money for a mortgage. Expressed as percentage, the APR includes the interest rate and other fees associated with the loan.


A professional estimate or opinion of the value of a piece of property (parcel of land), supported by objective data.


A person who estimates the value of property, especially a licensed expert qualified to do so by education and experience.

Balloon Payment

A final lump-sum payment at the end of a loan term to pay off the entire remaining balance.


A licensed professional who can negotiate real estate transactions for a commission or fee. Brokers can operate independently.


A real estate broker's business.

Buyer's Agent

The real estate agent who represents the buyer's best interest in a real estate transaction.

Chain of Title

A clear and unbroken chronological record of the ownership of a specific piece of property.


A party (buyer or seller) who has signed an agreement with a real estate professional, and the agreement creates a fiduciary relationship.


The process of finalizing the real estate transaction. This includes all documents being signed by all parties to the transaction and monies being conveyed. The deed will need to be recorded at the clerk of court’s office to have an official public record of the sale.

Closing Costs

Fees associated with a home purchase in addition to the purchase price that are paid at the closing of a real estate transaction. The costs may include appraisal fees, broker's commission, credit report charges, discount points, loan origination fees, recording fees, surveys, transfer taxes, title searches, and title insurance premium.

Closing Disclosure

A five-page document that provides final details about the borrower's mortgage loan, including purchase price, loan fees, interest rate, estimated real estate taxes, insurance, closing costs, and other expenses.

Cloud on Title

A claim, encumbrance, or defect that makes the title to real property unmarketable.


Property pledged as security to a debt.

Conforming Loan

A mortgage loan with underlying terms and conditions that meet the funding criteria to be sold in the secondary market.


Individual who obtains, or has obtained, a financial product or service from a financial institute for a personal, family, or household reason.

Consumer Financial Protection Bureau (CFPB)

A U.S. government agency dedicated to helping consumers by providing educational materials and accepting complaints to ensure consumer protection and fair treatment by banks, lenders and other financial institutions.

Conventional Loan

A loan usually made by a bank or institutional lender that is not insured or guaranteed by a government entity or agency.

Credit History

A record of a borrower's debt repayment.

Credit Score

A number assigned to a person that indicates to lenders their capacity to repay a loan.


A person who is provided services by a real estate professional, but who is not a client.


Any recurring monetary obligation that will not be canceled.

Debt-to-income Ratio

A ratio that compares the borrower's monthly debt expenses (long-term debts) to the borrower's monthly gross income. Total debt divided by income equals ratio.


A document that transfers the title of property from one owner to another.

Discount Points

A fee paid by the borrower to the lender to reduce the interest rate on the loan. One point equals one percent of the loan amount.

Down Payment

The amount a buyer pays to obtain a property in addition to the money that the buyer finances.

Dual Agent

A real estate agent represents both sides (buyer and seller) in the same real estate transaction.


A residential structure or mobile home, which contains up to four family housing units, or individual units of condominiums or cooperatives.

Earnest Money

A sum of money a buyer puts down to demonstrate their seriousness about buying a home. Typically delivered with the purchase agree and held by a third party until closing.

Homeowners Association (HOA)

An organization in a subdivision, planned community, or condominium building that makes and enforces rules for the properties and their residents.


A contract where one party pays the other party rent in exchange for possession of real estate.

Listing Agent (Seller's Agent)

The real estate agent who represents the seller's best interest in a real estate transaction.

Loan Estimate

A three-page document given to a potential borrower after applying for a mortgage with important details about the loan.

Loan-to-value (LTV)

The relationship between the unpaid principal amount of a mortgage and the appraised value (or sales price, whichever is lower) of the property.


An instrument that creates a voluntary lien on real property to secure repayment of a debt. The parties to a mortgage are the mortgagor (borrower) and mortgagee (lender).

Origination Fee

A fee paid to a lender to process a loan application.


A mortgage payment including principal, interest, taxes, and insurance.


The process by which a lender determines how much a potential borrower can finance through the lender.

Prepaid Expenses

Upfront payments made at closing for certain mortgage expenses: homeowner's insurance, property taxes, mortgage interest, and initial escrow deposit.

Prepayment Clause

The clause giving a lender the right to charge a borrower a penalty for paying off the loan early, such as when refinancing a loan.


(1)The employers of an agent or broker. (2) A sum of money owed as a debt upon which interest is calculated.

Private Mortgage Insurance (PMI)

Insurance offered by a private company to insure a lender against default on a loan by a borrower.

Promissory Note

A written, legally binding promise to repay a debt.

Residential Sales and Purchase Agreement

a legally binding contract between two parties that outlines the details of a home sale transaction.

Single-Family Dwelling

A residence consisting of a one-family dwelling unit.


A legal right to ownership of a property, including the right to sell.


The process of evaluating documentation, borrower information, and various risk factors associated with a loan in order to make a loan decision.

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