Real Estate Terms Every Buyer Should Know

Buying a home comes with its own vocabulary. Here are the terms you are most likely to run into between your first showing and the closing table — in plain English.

Keep this page handy. When something in a document does not make sense, look it up here, then call me at 801-231-8179 and we will talk it through.

A

Acceptance
The moment a deal becomes a deal. It is the date both you and the seller have signed or initialed every term of the contract, with nothing left outstanding. Your contract deadlines start counting from here.

Adjustable Rate Mortgage (ARM)
A mortgage whose interest rate can move up or down over time. The rate is tied to a published index, and the loan spells out how often it can change and by how much. Lower to start than a fixed rate, but your payment is not locked in.

Amortized Loan
A loan you pay off in equal installments over its term, with each payment covering both interest and a slice of the principal. Most home loans work this way.

Annual Percentage Rate (APR)
The true annual cost of borrowing, expressed as a percentage. Unlike the interest rate, APR folds in discount points, origination fees, broker commissions and other finance charges — which is why it is the number to use when comparing two loan offers side by side. Required disclosure under the Truth in Lending Act.

Appraisal
A licensed appraiser’s professional opinion of what a property is worth, based mostly on what comparable homes nearby have recently sold for. Your lender orders it to confirm the home is worth what they are lending against. An appraisal is not an inspection — it speaks to value, not condition.

Assumable Mortgage
A mortgage a buyer can take over from the seller, stepping into the existing loan and becoming responsible for the remaining balance rather than getting a new loan. Rare, but valuable when the existing rate is well below market.

B

Bill of Sale
The document that transfers ownership of personal property — appliances, furniture, a hot tub — as opposed to the real estate itself, which transfers by deed.

C

Closing Disclosure
The itemized financial statement showing every dollar coming in and going out at closing, for both buyer and seller. Federal rules require you receive it at least three business days before you sign, so read it early and ask about anything that surprises you. (This replaced the older HUD-1 Settlement Statement.)

Cloud on Title
Any claim, lien, or irregularity in the public record that casts doubt on who really owns a property. Clouds have to be cleared before clean title can pass to you.

Comparable Sales (Comps)
Recently sold homes similar to the one you are looking at in size, age, condition and location. Comps are the backbone of both an appraisal and a pricing conversation.

Consideration
Something of value each side gives up to make a contract binding — usually money, but it can be services or a promise. Your earnest money is consideration.

Contract
A legally enforceable agreement to do, or not do, a particular thing. In Utah, the purchase contract is the REPC (Real Estate Purchase Contract).

D

Deed
The written instrument that actually transfers ownership of real property from one party to another. It must be properly executed and delivered to be effective, and it gets recorded with the county.

Discount Points
An up-front fee you can pay the lender to buy down your interest rate. One point equals one percent of the loan amount. Whether points pay off depends on how long you plan to keep the loan.

Due Diligence Period
The window after acceptance when you inspect, investigate and evaluate the property — and, if what you find changes your mind, cancel or renegotiate. In Utah this deadline is written into the REPC, and it is the single most important date on your calendar.

E

Earnest Money
The deposit you put up when your offer is accepted, showing the seller you are serious. It is held by a neutral third party and credited toward your down payment and closing costs at settlement.

Easement
A legal right for someone else to use part of your land for a specific purpose — a shared driveway, a utility line, a neighbor’s access path. Easements run with the land and survive a sale.

Encumbrance
Anything that limits or burdens ownership of a property: a lien, an easement, a deed restriction. Encumbrances do not necessarily stop a sale, but you need to know about them.

Equity
What the property is worth minus what is owed against it. If your home is worth $500,000 and your mortgage balance is $380,000, your equity is $120,000. It grows as you pay down principal and as values rise.

Escrow Payment
The portion of your monthly mortgage payment the lender sets aside to pay property taxes, hazard insurance and mortgage insurance when they come due. It is why your payment is larger than principal and interest alone.

F

Fannie Mae (FNMA)
The Federal National Mortgage Association. It buys mortgages from lenders on the secondary market, which frees those lenders up to make more loans. You will rarely deal with Fannie Mae directly, but its underwriting standards shape the loan you qualify for.

Federal Housing Administration (FHA)
A part of the U.S. Department of Housing and Urban Development. The FHA does not lend money — it insures loans made by private lenders, which lets those lenders accept smaller down payments and lower credit scores than they otherwise would.

FHA-Insured Mortgage
A mortgage from a private lender that the FHA insures against default, subject to FHA rules on the property, the borrower and the loan amount.

Fixed Rate Mortgage
A loan whose interest rate stays the same for its entire term. Your principal-and-interest payment never changes, which makes budgeting predictable.

Foreclosure
The legal process a lender uses to force the sale of a property when the borrower stops paying, in order to recover what is owed.

Freddie Mac (FHLMC)
The Federal Home Loan Mortgage Corporation. Like Fannie Mae, it buys and sells residential mortgages on the secondary market to keep money flowing to lenders.

G

Graduated Payment Mortgage
A loan that starts with lower payments that step up on a set schedule until they are high enough to fully pay off the loan over its term. Designed for buyers who expect their income to rise.

I

Investor
In mortgage terms, the party that ultimately holds your loan and receives the payments — often not the company you originally borrowed from, and not the company that services the loan.

J

Joint Tenancy
A way for two or more people to own property together with right of survivorship. When one owner dies, their share passes automatically to the surviving owners — no will needed, no probate. Common between spouses and between a parent and child.

L

Lease Purchase Agreement
An arrangement where you lease a property now and buy it later, usually putting down a deposit that applies toward the eventual purchase.

Loan-to-Value Ratio (LTV)
The loan amount divided by the property’s appraised value or price, whichever is lower. Borrow $400,000 against a $500,000 home and your LTV is 80 percent. Lenders watch this number closely — above 80 percent on a conventional loan usually triggers mortgage insurance.

M

Mortgage
The legal document that pledges your property to the lender as security for the loan. If you stop paying, it is what gives them the right to foreclose. (In Utah the equivalent instrument is usually a Trust Deed.)

Mortgage Insurance Premium (MIP)
What a borrower pays for mortgage insurance on an FHA loan. It protects the lender — not you — against loss if the loan defaults.

Mortgagor
The borrower. The one who signs the mortgage and owes the money. (The lender is the mortgagee.)

N

Note
Your written promise to repay a specific amount of money on specific terms. The note is the debt; the mortgage or trust deed is the security behind it.

O

Origination Fee
What the lender charges for processing your loan application, usually stated as a percentage of the loan amount.

P

Private Mortgage Insurance (PMI)
Mortgage insurance on a conventional loan, typically required when you put down less than 20 percent. Unlike FHA’s MIP, PMI can usually be removed once you have built enough equity — ask your lender what it takes.

Promissory Note
A written contract promising to pay a set amount of money at a set time. See Note.

R

REALTOR®
Not just any real estate agent. A REALTOR® is a member of the National Association of REALTORS® and their local and state boards, and is bound by its Code of Ethics.

Rent With Option
A lease that gives the tenant the right — but not the obligation — to buy the property at an agreed price by an agreed date.

S

Second Mortgage (Junior Lien)
An additional loan secured by a property that already has a first mortgage on it. Because the first lender gets paid first in a foreclosure, second mortgages carry more risk — and usually a higher rate and shorter term.

Severalty Ownership
Ownership by one person alone. Sole ownership.

Settlement
The day you sit down and sign. Note that settlement and closing are not the same thing: closing happens when the loan funds and the deed records with the county, usually within a business day of settlement.

Survey
A measurement of a parcel of land establishing its exact boundaries and area.

T

Tenancy in Common
Co-ownership where each owner holds an undivided share with no right of survivorship. If one owner dies, their share goes to their heirs rather than to the other owners — the opposite of joint tenancy.

Title Insurance
A policy that protects you, or your lender, against loss from defects in the title that nobody caught before closing — a forged signature, an unknown heir, a missed lien. Unlike other insurance you pay once, at closing, and it covers you for as long as you own the home.

These definitions are general explanations for Utah home buyers and are not legal, tax, or lending advice. Your contract and loan documents control. For advice specific to your situation, consult the appropriate professional.