Real Estate Terms: 50 Definitions You Need to Know

Are you buying a house but feeling lost in all the real estate lingo? We get it. This plain-English crash course covers 50 terms you’ll hear along the way, so you can crush your housing goals with confidence—no jargon and no judgment.

Here’s a map of the terms grouped by when you’ll hear them during the home-buying process. You can use the A–Z links to jump to any term.

Terms You’ll Hear When Searching for a Home

• Buyer’s agent
• Buyer’s market
• Comparative market analysis (CMA)
• Days on market
• Foreclosure
• Homeowners association (HOA)
• List price
• Listing agent
• Multiple listing service (MLS)
• REALTOR^® vs. real estate agent
• Seller’s market
• Short sale

Terms You’ll Hear When Getting a Mortgage

• Adjustable-rate mortgage (ARM)
• Amortization
• Appreciation
• Conventional vs. unconventional mortgages
• Equity
• FHA loan
• Fixed-rate mortgage
• Interest rate
• Loan estimate
• Loan-to-value (LTV) ratio
• Mortgage
• Mortgage discount points
• PITI
• Preapproved vs. prequalified
• Principal
• Private mortgage insurance (PMI)
• Underwriting
• VA loan

Terms You’ll Hear When Making an Offer

• Backup offer
• Counteroffer
• Down payment
• Due diligence
• Earnest money deposit
• Escalation clause
• Escrow
• Pending vs. contingent
• Seller concessions

Terms You’ll Hear Before Closing

• Appraisal
• Assessed value
• Closing costs
• Closing date
• Closing disclosure
• Contingencies
• Deed
• Final walk-through
• Home inspection
• Homeowners insurance
• Lien
• Property taxes
• Survey
• Title insurance

Jump to a term: A B C D E F H I L M P R S T U V

What Are the Most Common Real Estate Terms?

The most common real estate terms are the ones you’ll hear while searching for a home, getting a mortgage, making an offer, and preparing to close. Here are 50 terms in alphabetical order.

An adjustable-rate mortgage or ARM is a type of unconventional loan that tosses the risk of rising interest rates into the homeowner’s lap. While you may start out with a low interest rate, it can go up. And up. And up. An interest rate that shoots up and down like a pogo stick means an ARM can end up costing you way more money and stress than a fixed-rate mortgage.

Amortization is a fancy financial concept that simply means repaying a loan over a period of time. An amortization schedule is a way to see each repayment amount—like how much of each payment goes to principal (the original loan amount) and how much goes to interest over the life of the loan.

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A 15-year mortgage will amortize (or be paid off) in a shorter time than a 30-year mortgage because more of the monthly payment goes toward principal and less is wasted on interest.

An appraisal is an unbiased estimate of a home’s value. The estimate is based on recent sale prices of homes similar in size, quality and location. If you’re getting a mortgage, your lender will choose a licensed appraiser to determine the appraised value of the property you want to buy. This helps your lender make sure the home is worth enough to support the loan—and it can flag if you’re paying more than the home is worth.

Appreciation is the increase in a home’s value over time. If you buy a house for $300,000 and it’s worth $330,000 a few years later, it has appreciated by $30,000. Treat it as a bonus. Never buy more house than you can afford because you’re counting on the value going up.

This is similar to an appraisal because it’s an estimate of a home’s value. But the assessed value is given by a local or state government so you know how much you’ll pay in property tax. Once a value is given, the government slaps a property tax rate onto the assessed value.

A backup offer is an offer that waits in line behind one the seller already accepted. If the first deal falls through, the seller can move straight to your offer instead of relisting the house. If you love a home that’s already under contract, ask your agent about submitting a backup offer. Make it count by learning how to make a strong offer on a house.

A buyer’s agent is a real estate agent who represents you, not the seller, when you buy a home. They help you find houses, write offers, negotiate the price, and navigate closing. Before you tour homes with an agent, you’ll sign a buyer’s agent agreement that spells out how your agent gets paid, and that pay is negotiable.

A buyer’s market is a housing market with more homes for sale than buyers. Sellers compete for your attention, which gives you more room to negotiate on price and terms.

Closing costs are the fees and expenses you pay to finalize your home purchase. Your closing costs can include loan processing fees, the appraisal fee, title-related fees, taxes and insurance. Use EveryDollar to find the margin in your budget to cover these costs—never steal from your down payment or emergency fund for these.

The closing date is the day ownership of the home officially transfers from the seller to you. You sign the final paperwork, pay your closing costs, and get the keys. Your purchase contract sets the date, and your lender and agent will help you stay on track for it.

This disclosure is a final statement of closing costs and loan terms (like your monthly payment schedule). You can expect to receive the closing disclosure from your lender at least three business days before you close on the mortgage loan.¹ This time allows you to look over your final costs and terms and ask any questions.

A comparative market analysis is a report real estate agents use to help sellers set a price based on recent sales of similar homes. Your agent can pull one to show you whether the list price is fair before you make an offer.

Real estate contingencies are conditions the buyer and seller must meet before the contract becomes legally binding. If the contingencies aren’t met, the buyer or seller can back out of the deal, fair and square. Common contingencies in real estate contracts are a home inspection, appraisal and the ability to get financing.

A conventional loan is a deal between you and a lender that meets Fannie Mae’s mortgage approval guidelines. Unconventional loans include government-insured programs (like FHA and VA) that set their own approval guidelines to make it easier for people to buy a house with a super low down payment or poor credit score.

The problem with unconventional loans is that they end up costing you much more in interest and fees compared to a conventional loan.

Here’s how the three stack up:

A counteroffer is the seller’s response when they won’t accept your offer as written. They might change the price, the closing date or what’s included in the sale. You can accept it, counter again, or walk away. Your agent can help you decide—but let your budget have the final say.

Days on market is the number of days a home has been listed for sale. A house that’s sat for weeks might mean the seller is ready to negotiate, or it might mean something is wrong with the house. Ask your agent to find out which it is.

A deed is the legal document that transfers a property’s title from the seller to you. At closing, the seller signs it, and it’s recorded with the local government to document you as the new owner.

Down payment is the amount of cash a buyer pays for the home at closing (shown as a percentage of the total home price). It’s smart to save for the largest down payment possible so you can decrease the amount of interest you pay overall. Aim to put 20% down so you can skip private mortgage insurance (PMI). If you’re a first-time home buyer, a smaller down payment—at least 5%—is okay, but you’ll have to pay PMI. On a $300,000 home, 5% down is $15,000 and 20% down is $60,000.

Due diligence is the homework you do on a house before you’re locked into buying it. It covers the home inspection, the appraisal, the title search, any HOA documents and what you can learn about the neighborhood. Your contract usually sets a deadline for finishing it, so ask your agent what your deadline is.

An earnest money deposit is money you pay early in the buying process to show a seller you’re serious about buying their home—that you have skin in the game. The deposit is held in an escrow account and goes toward what you owe at closing.

Equity is your home’s value minus what you owe on it. For example, suppose your home is worth $300,000 and you owe $225,000 on the mortgage. Your equity is $75,000. If you sold the house, you would generally receive that equity after paying off the mortgage and selling costs.

An escalation clause is a way for home buyers to beat out other potential buyers. So if you find your dream home and there’s a ton of competition, you can add an escalation clause to your offer that says you’re willing to increase your offer by a certain amount if the seller receives higher offers.

An escrow account is like an ironclad vault for anything of value that’s involved in a real estate transaction. The account is managed by a trusted third party (usually a title company or lawyer) who holds on to things like money and important documents until the home buyer and seller seal the deal.

An FHA loan is a type of unconventional home mortgage from the Federal Housing Administration for first-time home buyers and folks who might have a hard time getting approved for a conventional mortgage. But here’s the catch: FHA loans usually cost way more in interest and extra fees in the long run than conventional loans do. That includes a mortgage insurance premium you could pay for the life of the loan.

The final walk-through is your last look at the home right before closing. You’re checking that the repairs the seller agreed to are done, nothing was damaged, and everything included in the sale is still there. If something’s off, tell your agent before you sign.

A fixed-rate mortgage means your interest rate stays the same for the life of the loan—you don’t have to worry about rising rates like you would with an adjustable-rate mortgage. The two most common loan terms for a fixed-rate mortgage are 15 and 30 years.

A 30-year fixed-rate mortgage takes twice as long to pay off and usually carries a higher interest rate than a 15-year mortgage, so you’ll pay much more for your house over the life of the loan. You’ll be debt-free faster and pay much less for your home with a conventional 15-year (or less) fixed-rate mortgage—as long as your payments aren’t more than 25% of your monthly take-home pay (including principal, interest, property taxes, insurance, PMI and HOA fees).

According to our Mortgage Payoff Calculator, a $300,000 loan financed with a 15-year fixed-rate mortgage at 7% has a principal-and-interest payment of nearly $2,700 and costs about $185,000 in total interest. A 30-year mortgage at 7.5% has a lower principal-and-interest payment of nearly $2,100, but it costs about $455,000 in total interest. That’s roughly $270,000 more.

Foreclosure is the legal process a lender uses to take back a home if the owner stops making mortgage payments. The lender then sells the house to recover what’s owed. It’s the worst-case outcome of a mortgage you can’t afford, and it’s why we teach you to keep your payment at no more than 25% of your take-home pay.

A home inspection is a professional’s top-to-bottom look at a home’s condition, from the roof and foundation to the electrical and plumbing. You hire the inspector and cover the cost. The report gives you leverage to ask the seller for repairs or walk away if your contract has an inspection contingency.

An HOA is an organization that sets and enforces rules for a neighborhood or condo community and collects fees to maintain shared spaces. Those fees get added to your monthly housing costs, so ask for the fee, the rules and the HOA’s financials before you make an offer.

Usually included in the monthly mortgage payment, this insurance can cover the cost to repair, rebuild or replace items in your home. Since a house is likely your biggest investment, it’s no wonder homeowners insurance is so important.

Your interest rate is the percentage a lender charges you each year to borrow money. A lower rate means a lower payment and less total interest. With a fixed-rate mortgage, your rate stays put for the life of the loan.

A lien is a legal claim against a property for money the owner owes, like an unpaid mortgage, contractor bill or property taxes. Before closing, a title search looks for liens that could affect your ownership. The seller’s liens are usually paid off or cleared at closing so you can receive a clean title. Title insurance can protect you against certain undiscovered liens or ownership claims.

The list price is what the seller asks for the home when it goes on the market. It’s a starting point, not a final price, and your agent can use recent sales to tell you whether it’s fair.

A listing agent represents the seller. They help price the home, market it, hold showings, and negotiate offers on the seller’s behalf. Don’t use the listing agent as your own agent. Their job is to get the seller the best deal, not you.

A loan estimate is a form your lender must send within three business days of receiving your loan application.⁴ It lays out your interest rate, monthly payment and estimated closing costs so you can compare lenders. When you get your closing disclosure, compare it to your loan estimate and ask your lender to explain any changes in the final numbers.

Loan-to-value ratio is how lenders measure how much debt you’re using to purchase a home, shown as a percentage. To find your LTV ratio, divide the amount of the mortgage loan by the home’s value or purchase price.

For example, if you take out a $240,000 mortgage to purchase a $300,000 home, you have an LTV ratio of 80%, which means you’re putting 20% down. Lenders use the LTV ratio to make decisions about a buyer’s loan application. High LTV ratios (usually anything above 80%) mean a high risk to lenders and often a higher interest rate for the buyer.

A mortgage is a loan you use to buy a home, with the home itself as collateral. If you stop making payments, the lender can foreclose and take the house.

Mortgage discount points are up-front fees you pay a lender at closing to “buy down” (or lower) the interest rate. One point equals 1% of the loan amount.⁵ For example, two points on a $200,000 loan would equal $4,000.

Because you paid those points, your lender reduces the interest rate and your monthly payment amount. This really just means you’re prepaying the interest. You usually don’t want to pay mortgage points because it takes a long time to break even. Instead, put that extra money toward a higher down payment and reduce your loan amount.

The MLS is a home-listing database that’s exclusively operated by real estate professionals. That means the home listings are usually more accurate and up to date than websites where nonprofessionals list homes. The MLS helps sellers match with buyers faster and makes it easier for buyers to find their dream home for the right price.

Both labels mean a seller has accepted an offer, but the deal isn’t done. A contingent listing still has conditions to meet, like a home inspection or financing, and sellers sometimes keep taking backup offers. A pending listing has cleared those conditions and is moving toward closing. The labels can vary by area, so ask your agent what they mean in your market.

Pronounced like the word pity, this acronym stands for principal, interest, taxes and insurance—the four core parts of a monthly mortgage payment. It’s also important to know how much property taxes, homeowners insurance, PMI and HOA fees will add to your monthly payment so you don’t buy a home you can’t afford.

When buyers are preapproved for a mortgage, it means a lender has already approved them for a specific loan amount. When you make an offer on a house, including a preapproval letter with it puts you ahead of other buyers who aren’t approved yet. It shows the seller you’re a serious buyer and means the closing process should move faster.

Prequalification is less official than preapproval. It means a lender has given an opinion on your ability to be approved for a loan—kind of like a quote for how much money a lender might give you. Think of prequalified as a “maybe” and preapproved as a “yes.” Always get preapproved before you start house hunting.

Principal is the amount you borrow, not counting interest. Every mortgage payment includes some principal and some interest, and the principal part is what shrinks your loan balance. Paying extra toward principal helps you pay off your home faster.

PMI is extra insurance coverage you’re required to buy if you finance more than 80% of your home’s value. The coverage protects the lender if you can’t pay your loan, but it doesn’t go toward paying off your home. In other words, it’s an extra fee that does you no favors. FHA loans charge a similar fee called a mortgage insurance premium (MIP).

You can avoid PMI if you save up a down payment of 20% or more of the home’s purchase price. If you already bought your home and put down less than that, not all hope is lost. You can ask your lender to cancel PMI once your balance drops to 80% of your home’s original value, rather than waiting for it to end automatically at 78%.⁶

Property taxes are what you pay your local government each year based on your home’s assessed value. Your lender may collect a monthly portion with your mortgage payment and hold it in your escrow account until the bill is due.

A REALTOR^® is a real estate professional who is a member of the National Association of REALTORS^® (NAR) and bound by its Code of Ethics. Not every real estate agent is a REALTOR^®. The title doesn’t tell you how good an agent is, so look for someone with experience and the heart of a teacher. That’s what we look for in RamseyTrusted® agents.

Seller concessions are closing costs or other expenses the seller agrees to pay on your behalf. You negotiate them as part of your offer, and the seller may ask for a higher price in return. Run the numbers with your agent to see whether the deal still works.

A seller’s market is a housing market with more buyers than homes for sale. Homes sell fast and sometimes above the asking price. In a seller’s market, it’s especially important to be preapproved, decisive and disciplined about your budget.

A short sale is when a seller sells a home for less than they owe on the mortgage and the lender agrees to take the lower amount. The lender has to approve the sale, which can slow the process down, so ask your agent how long it’s likely to take.

A survey is a professional measurement of a property’s boundaries. It shows where the lot lines are and whether a fence, shed or driveway crosses onto a neighbor’s land. Your lender or title company may require one.

Title insurance allows you to transfer the risk of an unclean title (that means there are competing claims of legal ownership on your home). For example, let’s say the house you buy was once inherited by three siblings. If two of the siblings sold you the house without consulting the third sibling, that third sibling could come at any time to claim their legal portion of the inheritance. Title insurance pays off that legal owner and protects your homeownership.

Underwriting is when the lender verifies your income, debts, savings and the home’s value before giving final approval. If the underwriter asks for more documents, respond quickly. Don’t take on new debt or make big purchases before closing. And after closing, stay out of debt—other than the mortgage you’re working to pay off.

A VA loan is a type of unconventional home mortgage offered by private lenders and backed by the U.S. Department of Veterans Affairs. These loans make it easier for veterans to buy a home—but not easier for them to afford the home! Loaded with fees, VA loans also let you buy with no money down, which means you start with zero equity and can easily owe more than the home is worth.⁷

Ready to Buy a Home?

If you’re ready to put these real estate terms into action, work with an agent. Don’t navigate the lingo alone. Find a RamseyTrusted agent who speaks plain English and puts your interests first. We only recommend agents who explain what to expect at every step, so you can feel confident on your home-buying journey.

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