15 Top Real Estate Terms Defined

Whether you are new to the real estate game or it has been a while since your last transaction, you will hear many terms referenced throughout the transfer of property that you may not know what each means. Here are 15 of the top terms that are outside of the more obvious that you will hear and may wish to have clarified. 

Approved for short sale 

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

Back-end ratio

This is one of the ways that a lender uses to qualify a homeowner’s eligibility for a loan. This takes the monthly debt payments including the proposed housing costs, any car or loan payments, child support etc. and compares it to the gross income.


This is simply the amount of money a buyer can afford to borrow for a loan.

Cash-value policy

This is the insurance policy that pays the replacement cost of a house less depreciation in the event that any damage should happen to the property.

Closing disclosure (CD)

This is the multi-paged document that is provided to the buyer a few days prior to closing. This identifies the terms of the loan including the interest rate, monthly payment, mortgage insurance escrow amount on a monthly basis as well as all closing costs.

Compliance agreement

This document is signed by the buyer upon closing which states that they agree to cooperate should the lender need to fix any mistakes within the loan documents. 

Conventional loan

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

Earnest money

This is a security deposit provided by the buyer to show intent to purchase.

Federal Housing Administration (FHA)

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

Housing ratio

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

Jumbo loan

This is a loan that is beyond the Fannie Mae/Freddie Mac limit which is usually $425,100 in most areas in the United States.

Mechanic’s lien

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

Origination fee

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

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

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


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