Mortgage costs
2-1 buydown
A temporary buydown where the buyer's payment is calculated at an interest rate 2 percentage points lower in year one and 1 percentage point lower in year two before returning to the note rate.
Mortgage & Real Estate Terms
Mortgage and real estate terms, translated into plain English.
Buying, selling, refinancing, or investing gets easier when the language is clear. This glossary explains mortgage, escrow, title, offer, closing, and real estate terms in practical language for California buyers, homeowners, agents, and investors.
Use the right words
Clear definitions make better mortgage and real estate strategy possible.
Terms like APR, cash to close, appraisal contingency, title insurance, reserves, and condo warrantability can affect the offer you write, the payment you carry, and the risk you take on.
This page is built as a reference guide. It is not legal, tax, or credit advice, and actual loan approval depends on program rules, documentation, property details, and lender review.
Mortgage strategy
Loan types, rate locks, refinance options, buydowns, mortgage insurance, and payment structure.
Buying and selling
Offer terms, contingencies, escrow, disclosures, inspections, and closing milestones.
Costs and cash flow
Cash to close, credits, points, prepaid items, taxes, insurance, and reserves.
Title and property rules
Deeds, liens, easements, HOA details, condo warrantability, zoning, and ownership terms.
No matching terms found. Try a broader mortgage or real estate keyword.
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Real estate investing
1031 exchange
A tax-deferral strategy that lets an investor sell one investment property and buy another qualifying property while deferring capital gains taxes when IRS rules are followed.
A
Real estate contracts
Addendum
A written addition to a purchase agreement that changes, clarifies, or adds terms after the original contract is prepared.
Mortgage types
Adjustable-rate mortgage (ARM)
A mortgage with an interest rate that can change after an initial fixed period. The future rate usually adjusts based on an index, margin, caps, and the loan's adjustment schedule.
Real estate representation
Agency
The legal relationship between a real estate professional and a buyer or seller. Agency determines whom the agent represents and what duties they owe.
Mortgage payments
Amortization
The process of paying down a loan over time through scheduled payments that include interest and principal. Early payments usually go mostly toward interest.
Mortgage costs
Annual percentage rate (APR)
A broader cost measure that expresses the yearly cost of borrowing, including the interest rate and certain loan charges, so borrowers can compare loan offers more consistently.
Valuation
Appraisal
A licensed appraiser's opinion of a property's value, usually ordered by the lender to help confirm the home supports the loan amount.
Real estate contracts
Appraisal contingency
A contract condition that can let a buyer renegotiate or cancel if the property appraises below the agreed purchase price and the parties do not resolve the gap.
Valuation
Appraised value
The value assigned to a property in an appraisal report. Lenders commonly use it with the purchase price to calculate loan-to-value.
Real estate value
Appreciation
An increase in a property's value over time due to market demand, improvements, inflation, location, or other factors.
Real estate contracts
As-is sale
A sale where the seller does not agree upfront to make repairs. Buyers may still have inspection rights depending on the contract.
Mortgage types
Assumable mortgage
A mortgage that may be transferred from the seller to the buyer if the loan program, lender, and investor rules allow it.
B
Real estate contracts
Backup offer
An offer accepted by a seller only if the primary accepted offer cancels or fails to close.
Mortgage payments
Balloon payment
A large final payment due at the end of some loan terms because the regular payments did not fully pay off the loan balance.
Mortgage pricing
Basis point
One one-hundredth of one percentage point. Mortgage pricing and rate changes are often described in basis points.
Mortgage types
Bridge loan
Short-term financing that can help a homeowner buy a new property before selling an existing one.
Mortgage costs
Buydown
A strategy where money is paid upfront to reduce the borrower's interest rate or monthly payment, either temporarily or for the life of the loan.
Real estate representation
Buyer agent
A real estate agent who represents the buyer's interests in a home search, offer strategy, negotiations, and closing process.
C
Real estate investing
Capitalization rate
A common investment metric that compares a property's net operating income to its value or purchase price.
Closing costs
Cash to close
The estimated amount a buyer needs to bring to closing after down payment, closing costs, prepaid items, credits, deposits, and adjustments are considered.
Refinance
Cash-out refinance
A refinance where the new loan is larger than the payoff of the existing loan and the borrower receives some of the difference as cash.
Underwriting
Clear to close
The lender's confirmation that final underwriting conditions have been satisfied and the file can move toward closing documents and funding.
Closing process
Closing
The final step in a real estate transaction when documents are signed, funds are handled, title transfers, and the transaction is completed.
Closing costs
Closing costs
The fees and charges due around closing, which may include lender fees, title and escrow fees, recording charges, prepaid interest, insurance, and taxes.
Mortgage disclosures
Closing Disclosure
A final mortgage disclosure that details the loan terms, projected payments, closing costs, cash to close, and other key loan information before closing.
Mortgage ratios
Combined loan-to-value (CLTV)
A ratio that compares all loans secured by the property to the property's value. It is often used when there is a second mortgage or HELOC.
Valuation
Comparative market analysis (CMA)
An agent-prepared estimate of a home's likely market value based on recent comparable sales, active listings, property condition, and local market context.
Real estate contracts
Concession
A negotiated benefit one party gives another, such as a seller credit toward closing costs or a repair credit.
Condo financing
Condo questionnaire
A lender-requested document completed by an HOA or management company that helps determine whether a condo project meets loan program requirements.
Mortgage types
Conforming loan
A mortgage that meets the size, underwriting, and eligibility standards for sale to Fannie Mae or Freddie Mac.
Real estate contracts
Contingency
A contract condition that must be satisfied or waived for the transaction to move forward, such as financing, appraisal, inspection, or sale of another home.
Mortgage types
Conventional loan
A mortgage that is not insured or guaranteed by a government agency such as FHA, VA, or USDA.
Real estate contracts
Counteroffer
A response to an offer that changes one or more terms. The original offer is usually no longer binding once a counteroffer is made.
Underwriting
Credit score
A numerical measure of credit risk based on credit history. Lenders use credit scores when evaluating eligibility, pricing, and mortgage insurance.
D
Real estate investing
Debt service coverage ratio (DSCR)
A ratio that compares a property's income to its debt payment. Some investor loan programs qualify the property more than the borrower's personal income.
Mortgage ratios
Debt-to-income ratio (DTI)
A comparison of monthly debt obligations to gross monthly income. Lenders use DTI to evaluate whether a borrower can reasonably manage the proposed payment.
Title
Deed
A legal document that transfers ownership of real property from one party to another.
Title
Deed of trust
A security instrument used in many states, including California, that gives a lender an interest in the property until the loan is repaid.
Mortgage costs
Discount points
Optional upfront fees paid to the lender in exchange for a lower interest rate. One point usually equals 1 percent of the loan amount.
Mortgage basics
Down payment
The portion of the purchase price the buyer pays upfront instead of financing with the mortgage.
Real estate contracts
Due diligence
The buyer's investigation period or process for reviewing inspections, disclosures, title, HOA documents, financing, insurance, and other property details.
E
Real estate contracts
Earnest money deposit
A good-faith deposit a buyer places into escrow after an offer is accepted. It may be applied to the buyer's funds at closing.
Title
Easement
A legal right for someone to use part of another person's property for a specific purpose, such as access, utilities, or drainage.
Real estate value
Equity
The difference between a property's market value and the debt secured by it.
Mortgage payments
Escrow account
A lender-managed account used to collect and pay property taxes, homeowners insurance, and sometimes other housing-related bills.
Closing process
Escrow transaction
A neutral third-party process that holds funds, documents, and instructions until the purchase contract and closing requirements are satisfied.
F
Title
Fee simple
A broad form of real property ownership where the owner holds the land and improvements, subject to taxes, laws, liens, and recorded restrictions.
Mortgage types
FHA loan
A mortgage insured by the Federal Housing Administration, often used by buyers who need more flexible credit, down payment, or qualifying guidelines.
Underwriting
FICO score
A widely used credit scoring model. Mortgage lenders often use specific FICO versions when underwriting a loan.
Mortgage types
Fixed-rate mortgage
A mortgage with an interest rate that stays the same for the life of the loan, which keeps the principal and interest payment stable.
Mortgage pricing
Float down
A rate-lock feature that may allow a borrower to move to a lower rate if market rates improve before closing, subject to lender rules.
Closing process
Funding
The lender's release of loan proceeds so the transaction can record or the refinance can close.
G
Mortgage basics
Gift funds
Money given to a borrower by an eligible donor to help with down payment, closing costs, or reserves, subject to documentation and program rules.
Title
Grant deed
A deed commonly used in California to transfer real property ownership with certain implied assurances from the seller.
Underwriting
Gross monthly income
Income before taxes and deductions. Mortgage lenders often use gross monthly income when calculating debt-to-income ratio.
H
Insurance
Hazard insurance
Insurance that helps protect the home against certain physical damage risks. It is usually part of a homeowners insurance policy.
Condo and HOA
HOA dues
Regular payments owners make to a homeowners association. Lenders typically include HOA dues when qualifying a borrower.
Mortgage types
Home equity line of credit (HELOC)
A revolving line of credit secured by home equity. Borrowers can draw, repay, and draw again during the draw period under the loan's terms.
Due diligence
Home inspection
A professional evaluation of a home's condition, including major systems and visible defects. It is separate from the lender's appraisal.
Condo and HOA
Homeowners association (HOA)
An organization that manages a community, condo project, or planned development and enforces rules, collects dues, and maintains shared areas.
Insurance
Homeowners insurance
Insurance that generally protects the home, certain belongings, and liability risks. Lenders usually require it before closing.
I
Mortgage payments
Impound account
Another name for an escrow account used to collect and pay property taxes and insurance with the monthly mortgage payment.
Mortgage pricing
Index
A benchmark rate used to calculate future interest rate adjustments on an adjustable-rate mortgage.
Mortgage pricing
Interest rate
The percentage charged by the lender for borrowing the principal balance. It is not the same as APR.
Mortgage types
Interest-only mortgage
A mortgage that allows payments of interest only for a set period. Principal is not reduced during the interest-only period unless extra payments are made.
J
Mortgage types
Jumbo loan
A mortgage larger than the conforming loan limit for the area. Jumbo loans often have different underwriting, reserve, and pricing requirements.
L
Real estate contracts
Leaseback
An arrangement where the seller remains in the home for an agreed period after closing, usually paying rent or receiving a negotiated occupancy term.
Mortgage costs
Lender credit
A credit from the lender that can reduce closing costs, often in exchange for accepting a higher interest rate.
Title
Lien
A legal claim against a property, often tied to a debt such as a mortgage, tax bill, judgment, or contractor claim.
Real estate representation
Listing agent
The real estate agent who represents the seller and markets the property for sale.
Mortgage disclosures
Loan Estimate
A mortgage disclosure that shows estimated loan terms, payments, closing costs, cash to close, and other comparison details early in the application process.
Mortgage process
Loan officer
The mortgage professional who helps a borrower review options, structure the loan strategy, submit an application, and move through approval and closing.
Mortgage ratios
Loan-to-value ratio (LTV)
A ratio comparing the loan amount to the property's value or purchase price. Lower LTV usually means more equity or a larger down payment.
Mortgage pricing
Lock period
The length of time a mortgage rate lock is valid. Common lock periods may be 30, 45, or 60 days, depending on lender options.
M
Mortgage pricing
Margin
The fixed amount added to an ARM index to determine the adjusted interest rate after the initial fixed period.
Mortgage costs
Mortgage insurance
Insurance that protects the lender if a borrower defaults. It may be required on conventional, FHA, USDA, or other loan programs depending on structure.
Mortgage documents
Mortgage note
The legal promise to repay the mortgage debt. It states the loan amount, interest rate, payment terms, and other repayment obligations.
Real estate market
Multiple Listing Service (MLS)
A database real estate professionals use to share property listings, status changes, sale data, and compensation or showing details.
N
Mortgage types
Non-QM loan
A non-qualified mortgage that does not fit standard Qualified Mortgage rules. These loans may use alternative documentation or different underwriting methods.
O
Real estate contracts
Offer
A buyer's written proposal to purchase a property, including price, financing terms, contingencies, timing, deposit, and other contract terms.
Mortgage costs
Origination charges
Lender charges for processing, underwriting, or originating the mortgage. These appear in the loan cost section of mortgage disclosures.
P
Real estate market
Pending
A listing status showing the seller has accepted an offer and the property is under contract, though it may not have closed yet.
Mortgage payments
PITI
Principal, interest, taxes, and insurance. It is a common shorthand for the core monthly housing payment components.
Mortgage costs
Points
Upfront mortgage charges expressed as a percentage of the loan amount. Points may be used for pricing, origination, or rate reduction depending on the context.
Mortgage process
Pre-approval
A lender review of a buyer's credit, income, assets, and loan scenario before making an offer. Strong pre-approval can help the buyer and agent write with confidence.
Mortgage process
Pre-qualification
An early estimate of borrowing ability, often based on limited or self-reported information. It is usually less complete than a true pre-approval.
Title
Preliminary title report
A report showing current ownership, liens, easements, restrictions, and title exceptions that may affect the property before closing.
Closing costs
Prepaid items
Costs collected at closing for items that apply after closing, such as prepaid interest, homeowners insurance premiums, and initial escrow deposits.
Mortgage costs
Prepayment penalty
A fee some loans may charge if the borrower pays off the mortgage early. Many residential mortgage loans do not have one, but it should always be checked.
Mortgage payments
Principal
The loan balance borrowed and still owed, not including interest. Principal also describes the portion of a payment that reduces the loan balance.
Mortgage costs
Private mortgage insurance (PMI)
Mortgage insurance on many conventional loans when the borrower has less than 20 percent equity or down payment, subject to loan and investor rules.
Real estate contracts
Purchase agreement
The written contract between buyer and seller that sets the price, terms, contingencies, deadlines, and obligations for the home purchase.
R
Mortgage pricing
Rate lock
An agreement from the lender to hold a specific mortgage rate and pricing for a defined period, subject to loan and lock conditions.
Refinance
Rate-and-term refinance
A refinance focused on changing the interest rate, loan term, or loan type without taking significant cash out.
Real estate market
Real estate owned (REO)
Property owned by a lender or institution after foreclosure or a failed foreclosure auction.
Mortgage payments
Recast
A payment recalculation after a borrower makes a large principal reduction. The loan balance drops and the payment may be re-amortized without a full refinance.
Closing process
Recording
The official filing of documents such as deeds and deeds of trust with the county recorder, making the transaction part of the public record.
Refinance
Refinance
Replacing an existing mortgage with a new one, usually to change the rate, payment, term, loan type, or available equity strategy.
Underwriting
Reserves
Assets left after closing that could cover future mortgage payments. Some loan programs require a specific number of months of reserves.
Mortgage types
Reverse mortgage
A mortgage available to eligible older homeowners that can convert home equity into loan proceeds, with repayment usually due when the borrower sells, moves, or passes away.
S
Mortgage types
Second mortgage
A loan secured by the property behind the first mortgage, such as a HELOC or home equity loan.
Closing costs
Seller credit
A credit the seller agrees to give the buyer toward allowed closing costs, prepaid items, or other eligible expenses.
Due diligence
Seller disclosure
Seller-provided information about known property conditions, defects, repairs, hazards, or other facts that may affect the buyer's decision.
Real estate market
Seller market
A market condition where demand is strong relative to available homes, often giving sellers more leverage in price and terms.
Mortgage process
Servicer
The company that collects mortgage payments, manages escrow accounts, sends statements, and handles loan administration after closing.
Real estate market
Short sale
A sale where the lender agrees to accept less than the amount owed on the mortgage, usually because the seller has financial hardship and limited equity.
Real estate contracts
Subject to inspection
Contract language or a contingency structure that gives the buyer time to inspect the property and respond according to the agreement.
Title
Survey
A professional drawing or report showing property boundaries, improvements, easements, encroachments, and other physical property details.
T
Mortgage costs
Temporary buydown
A buydown that lowers the borrower's payment for an initial period, usually funded by the seller, builder, lender, or buyer at closing.
Title
Title
The legal concept of ownership rights in a property. Clear title generally means ownership can transfer without unresolved claims or defects.
Title
Title insurance
Insurance that protects against covered title defects, liens, or ownership claims that existed before the policy date.
Mortgage disclosures
Total Interest Percentage (TIP)
A disclosure showing the total amount of interest paid over the loan term as a percentage of the loan amount, assuming scheduled payments are made.
Closing costs
Transfer tax
A state, county, or city tax charged when real estate ownership transfers. Responsibility for payment depends on local custom and contract terms.
U
Mortgage process
Underwriting
The lender's review of credit, income, assets, property, title, insurance, and loan program rules to determine whether the mortgage can be approved.
Mortgage types
USDA loan
A mortgage backed by the U.S. Department of Agriculture for eligible rural or suburban properties and borrowers who meet program requirements.
V
Mortgage types
VA loan
A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible service members, veterans, and surviving spouses.
W
Closing process
Walk-through
A buyer's final visit before closing to confirm the property condition, agreed repairs, and included items are as expected.
Condo financing
Warrantability
A condo project's ability to meet loan program standards. Warrantability can be affected by HOA budget, insurance, litigation, investor concentration, commercial space, and other factors.
Z
Property rules
Zoning
Local rules that govern how land can be used, what can be built, density, setbacks, parking, and other property restrictions.
Definitions are general and may vary by loan program, contract, state law, county custom, property type, lender, investor guideline, and timing.