Top 15 Real Estate Terms for You to Know

December 29, 2022
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If you are new to buying or selling real estate or it has been a long time since your last property transaction, you will hear many terms spoken throughout the process and you may not know what they all mean. Here are 15 of the top terms that may be less obvious that you will hear and may want to have defined.

Approved for short sale

This means that the current homeowner’s bank has approved a lowered price for the home and it is ready to be sold to the public.

Back-end ratio

This is one of the procedures that a lender uses to qualify a homeowner for a loan. This employs the monthly debt payments including the forecasted housing costs, any auto or loan payments, child support etc. and weighs it against the gross income.


This is the total amount of money a buyer can afford to take out for a home loan.

Cash-value policy

This is the insurance policy that pays for the replacement cost of a home minus depreciation if any damage happens to the property.

Closing disclosure (CD)

This is the official document that is given to the buyer a few days before closing. This covers the terms of the loan including the rate, monthly payment, mortgage insurance escrow amount on a monthly basis as well as outlines all of the closing costs.

Compliance agreement

This document is signed by the buyer at closing which explains that they agree to cooperate should the lender need to correct any mistakes within the loan documents. 

Conventional loan

A conventional loan is one that is not guaranteed or backed by a government agency like FHA or VA loans.

Earnest money

This is the security deposit provided by the buyer to show intent and good faith to purchase.

Federal Housing Administration (FHA)

This is a government agency that insures and backs loans made by private lenders. 

Housing ratio

This is one of two debt-to-income ratios that a lender will utilize to identify a buyer’s eligibility for a home mortgage that compares the total housing costs to the gross income.

Jumbo loan

This is a loan that exceeds the Fannie Mae/Freddie Mac limits which usually amounts to $425,100 in most areas in the United States.

Mechanic’s lien

This is a lien or hold against a property that was filed in the county by an individual or company who had done work on a home but was not paid for it. Should the homeowner refuse to pay it, the lien allows for a foreclosure.

Origination fee

This fee is charged by the mortgage broker or lender to begin and complete the loan application process.

Principal, interest, property taxes and homeowners insurance (PITI)

These are the primary core components that make up your monthly mortgage payment. 


This is a model some lenders use to make their qualifying decisions for lending. The borrower’s score is based on factors like bill paying pattern, outlying debt balances, credit accounts, number of inquiries on credit reports and age.