Glossary

The home appraisal is the fair market value of a home determined by a professional appraiser and based on comparable recent home sales in the neighborhood. Appraisals are typically ordered by the buyer’s lender to protect the lender’s interests – by comparing the appraisal price to the final sale price to ensure the buyer is not borrowing more than the home is worth.

If the home value appraises for lower than the final sale price (see appraisal contingency), the buyer may be able to renegotiate with the seller. If the seller is unwilling to lower the price, the buyer’s lender may ask that the buyer increase the down payment in order to make up the difference.

The appraisal contingency allows a buyer to cancel the Purchase and Sale Agreement if a home’s appraised value is less than the final sale price, or it can require the buyer to increase the amount of their down payment by the difference between the appraised value and the final sale price. For more information, check out appraisal contingency explained.

A broker is an individual licensed to represent people in the purchase and sale of real estate, known respectively as a buyer’s broker/buyer’s agent or seller’s broker/seller’s agent. A broker is a real estate agent who has completed additional training and licensing requirements. A broker is not legally required to purchase or sell a home.

A buyer’s agent is a licensed real estate agent who represents the buyer in a transaction. The buyer’s agent has authority to act on behalf of the buyer in negotiating a Purchase and Sale Agreement with the seller’s agent. Buyer’s agents are not legally required to buy a home.

A buyer’s market is one in which the supply of homes significantly exceeds demand. Since supply is greater than demand, the price of homes is pushed lower, making them more attractive to buyers. In contrast, a seller’s market is one in which there are more buyers and relatively fewer homes for sale, which leads to multiple-offer situations that drive up prices.

Caveat emptor is a Latin phrase that translates to “let the buyer beware” in English. In real estate, caveat emptor means the buyer gets what they get, even if it has major flaws. If unknown problems turn up after the sale, the seller is not responsible for them, leaving the buyer on the hook.

A certificate of occupancy verifies that a newly constructed home is safe to live in and structurally sound. It is required in order to move into a brand new home and should be included with the home buying package from the builder.

Closing is the phase of the home selling process in which money and documents are transferred from buyer and seller in order to transfer ownership of the property to the buyer. For some markets in the US, the recording of the deed with the county clerk’s office is the ultimate and final step of closing. Once all items are completed, then a buyer’s access to the property is provided, and the buyer is considered the new homeowner. For more information, check out our guide to navigating the closing process.

Closing costs are the expenses and fees associated with the purchase and sale of a home, such as taxes, title insurance, appraisal, lender fees, and other services carried out during closing and typically paid by the buyer. For buyers taking out a mortgage loan, closing costs are listed on the Closing Disclosure statement the buyer should receive from the lender at least three days before closing. Closing cost amounts vary depending on the buyer’s loan program, but they typically range from 2%–5% of the sale price. For more information on closing costs, check out closing costs explained.

A Closing Disclosure is a final statement of loan terms and closing costs that the lender must provide to the borrower at a minimum of three business days before closing in most transactions that involve a loan. The closing disclosure statement lists the loan terms, projected monthly payments, cash necessary to close the sale, and a detailed accounting of the closing costs. The three-day review period allows the borrower to compare with the loan estimate, which the borrower should have received when they applied for the loan. For more information, check out closing disclosure explained.

Commissions are payments made directly to real estate brokers for services rendered in the sale or purchase of property. A commission is usually a percentage of the property’s selling price paid to the seller’s agent and split with the buyer’s agent. The total commission a seller pays is typically 5-6% of the property’s sale price.

Comparables (“comps”) are other homes of similar size, condition, age, and style that have recently sold in a certain neighborhood and whose prices are used to help determine a fair market value for a home.

Contingencies are legal conditions included in a home purchase contract that protect the buyer should issues arise with financing, the home inspection, appraisal, title, etc. For more information, check out contingencies explained.

If a home is listed as contingent, it means the seller has accepted an offer but the deal is still contingent on a home inspection, loan approval, or other contingencies contained in the Purchase and Sale Agreement.

A conventional loan is a mortgage loan that is not insured or guaranteed by any government program (such as Fannie Mae or Freddie Mac). It is the most common type of mortgage loan. Unlike non-conventional (government-backed) loans, for which interest rates are set by statute, each mortgage lender, bank, or mortgage broker will offer different rates, terms, and fees for conventional loans, so it’s best to get a good faith estimate from a number of different lenders to determine the best loan.

Covenants, Conditions & Restrictions (CC&Rs) are specific limits and rules placed on a group of homes or condominium complex by a builder, developer, neighborhood association, or homeowners’ association. When living in a home or condominium that is governed by CC&Rs, an owner gives up certain rights in order to remain part of a shared community.

Your debt-to-income ratio (DTI) is the percentage of your gross monthly income that goes towards paying off total debts. Debts can include car payments, credit card bills, child support payments, and student loans. When determining how much money you can afford to borrow (how much house you can buy), your lender will factor in the total percentage of your income that you currently pay toward debt every month.

A deed is a legal document filed with your local county that documents the transfer of homeownership after a sale. The seller signs a deed in favor of the buyer when the deal closes. After recording, the original deed is provided to the buyer and the seller receives a copy. For more information, check out our guide to the closing process.

A discount point is a type of mortgage loan fee that enables a borrower to lower their monthly interest rate payments by fractions of a percentage point, by paying more upfront during closing. If a buyer expects to own the home for a long time, buyers will often consider paying more upfront to benefit from a lower interest rate for the life of the loan. On the other hand, if a buyer plans to refinance or sell the home, buyers are more likely to avoid discount points and accept the higher interest rate for the life of their (expected shorter) loan duration.

A down payment is the amount of money a buyer pays at closing to fund a home purchase usually expressed as a percentage of the total home price. The required down payment amount varies depending on the type of loan or financing requirements from the seller, ranging from as little as 3% for an FHA loan to more than 20% for some conventional loans. Mortgage insurance is always required for borrowers with a down payment of less than 20%.

Dual agency occurs when the buyer and seller are represented by the same real estate agent or broker. In most cases, it’s not a good idea for one agent to represent both parties in a real estate transaction. The listing agent’s job is to sell a home at the highest possible price, while the buyer’s agent aims to negotiate the lowest price for the buyer. In the case of dual agency, the agent and his clients’ interests aren’t well aligned. Dual agents (or agents of any kind) are not legally required to buy or sell a home.

Earnest money is the standard good faith deposit paid by the buyer to the seller after offer acceptance. This amount is generally 1%-3% of the sale price and will later be applied toward their down payment or closing costs. If a buyer backs out of the sale due to a failed contingency (e.g., inspection report), they can recover their earnest money in full. If a buyer backs out of the sale for reasons not covered by contingencies, they will forfeit their earnest money. For more information, check out earnest money explained.

An easement is a limited right to use another person’s land for a specific purpose. For example, an easement may be granted by a homeowner to a neighbor to cross the homeowner’s land for access to a road or the placement of utility poles, water lines, and sewer lines.  The easement allows the neighbor to use the land for that specific purpose only and does not give them the right of possession or the authority to build or plant on the land without the homeowner’s permission. Easements are documented in a title report and may affect a buyer’s use of the property.

An encroachment occurs when a fence, roof, or something else on a neighboring property crosses the property line, without permission. Encroachments usually occur by mistake, and disputes over encroachments can be resolved by a property line adjustment or by granting an easement that allows the encroachment on specific terms. Either solution is likely to be documented on the title.

An encumbrance is a claim against a property by a party that is not the owner. An encumbrance can impact the transferability of the property and restrict its free use until the encumbrance is lifted. The most common types of encumbrance apply to real estate; these include mortgages, easements, and property tax liens. 

Equity is the amount of a home’s value that the owner actually owns, calculated by taking the final sale price of the home and subtracting the amount the owner still owes on the mortgage loan. This amount goes up over time, but in the early years of your loan, you are likely to pay a higher proportion of interest than principal.  

Escrow is a neutral third party or attorney that handles the exchange of money and documents in compliance with the Purchase and Sale Agreement and any escrow instructions. Escrow handles the transfer of the buyer’s loan documents and property taxes and works with a buyer’s lender and real estate agent (if one is involved) to make sure the title of the home is clear of any liens before the transfer of ownership. For more information, check out escrow explained.

An escrow account is an account required by a lender and funded by a buyer’s mortgage payment to pay for the buyer’s homeowners insurance and property taxes. Typically this initial amount is enough for the first year of insurance, property taxes and includes a small excess for adjustments.

Fair market value is the home price that a willing and informed buyer and seller would be willing to agree upon on the open market.

The Federal National Mortgage Association (FNMA), commonly known as Fannie Mae, is a government-sponsored enterprise that buys loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the open market. This increases the supply of money available for mortgage lending and increases the money available for new home purchases. Fannie Mae loans do not exceed “jumbo loans” over $860,000.

The Federal Housing Administration (FHA) is a government agency that provides insurance for loans granted by FHA-approved lenders throughout the US. The FHA insures banks that provide loans to borrowers with low down payments, usually 3.5%–5%, and competitive interest rates. The FHA sets guidelines for the various types of loans it makes available to borrowers. As part of their monthly loan payments, borrowers must pay a mortgage insurance premium that goes to the FHA. The premiums are used to pay lenders if the borrower defaults on the loan and the home goes into foreclosure.

Like a Veterans Affairs loan, a Federal Housing Administration (FHA) loan is one alternative to a conventional loan. FHA loans are insured by the FHA. If the buyer can’t pay the loan, the government pays the lender for any losses. Because of the government’s insurance, lenders are willing to offer FHA loans with smaller down payments, as low as 3.5%. To pay for FHA mortgage insurance, the buyer is charged a monthly mortgage insurance premium and an upfront mortgage insurance premium, which can be financed into the monthly mortgage payments.

Fiduciary refers to a legal relationship of confidence that gives one the right to act on behalf of another person or entity (the principal). A fiduciary relationship gives rise to specific duties of loyalty, disclosure, good faith, and due care. In a real estate transaction, real estate agents are in a fiduciary relationship with their clients. When a buyer or seller signs an agency agreement, he or she puts trust in the agent to handle the transaction and keep his or her best interests in mind, although an agent is not legally required to buy or sell a home.

A financing contingency is a clause or addendum (also known as a mortgage or loan contingency) in an offer contract that allows a buyer to back out of a deal and keep their deposit if they are unable to secure a mortgage with specified terms during a fixed period of time. For more information, check out financing contingency explained.

A fixed-rate mortgage is a loan with a set interest rate throughout the life of the loan, regardless of whether the market for rates go up or down. The most common mortgage is known as a 30-year fixed, which means the loan is paid over a 30-year period and the interest rate is fixed at the time of the purchase. Most FHA loans and VA loans are fixed-rate mortgages. The other main type of mortgage is an adjustable-rate mortgage (ARM), which has a variable interest rate and is more common if buyers intend to sell or refinance.

For sale by owner (FSBO) refers to a home that the owner is selling without the services of a licensed real estate agent. Selling a home FSBO allows the seller to  avoid paying both a listing agent and buyer’s agent commission. As a result, buyer’s agents are not incentivized to show the property to their clients, and the home cannot appear in the Multiple Listing Service (MLS) which is a broker-maintained and incentivized database of homes for sale.

Foreclosure is a legal process that transfers the ownership of a home from the owner to a bank or lender if the owner defaults on his loan. Once an owner receives a notice of default, they usually have an opportunity to make up the missed mortgage payments, get out of default, and continue making monthly payments before the bank officially forecloses on the home. Foreclosure is a costly process and can have negative impacts on the homeowner’s credit score.

The Federal Home Loan Mortgage Corporation, known as Freddie Mac, similar to Fannie Mae, is a government-sponsored enterprise that buys loans from mortgage lenders, packages them together, and sells them as a mortgage-backed security to investors on the open market. This increases the supply of money available for mortgage lending and increases the money available for new home purchases.

A Good Faith Estimate (GFE) explains the terms and costs associated with a loan. Lenders are required by law to give a GFE within three business days of receiving a loan application.

Allows the buyer to review and approve of the Homeowners Association and its requirements. If the buyer does not approve they may cancel the Purchase and Sale Agreement.

A home sale contingency gives the buyer the ability to sell their current home in order to fund the purchase of the seller’s home. If the buyer is unable to sell their current home, then they may cancel the Purchase and Sale Agreement.

A homeowners association (HOA) is a nonprofit organization that manages a shared housing complex, such as condos, co-ops, and other planned developments. The HOA provides funding for repairs, upgrades, grounds maintenance, and security by collecting money from homeowners, usually in the form of monthly dues.

Homeowners insurance is a combination of both property insurance, which protects homeowners from future damages to a home, and liability insurance, which protects homeowners from claims by third parties for accidents that happen in the home. Lenders require that buyers obtain homeowners insurance so insurance premiums will automatically be included in monthly mortgage payments and the transaction closing costs.

An inspection is a thorough investigation of a home by a licensed inspector. A thorough inspection is necessary to discover any material defects or necessary repairs before buying the home. In addition, if there is an inspection contingency, buyers have a chance to negotiate with sellers to cover the costs of certain repairs, ask for concessions, or back out of the sale.

The inspection contingency grants the buyer up to 10 days from offer acceptance to perform any necessary inspections and approve or disapprove of the property’s condition. If the buyer disapproves they can attempt to negotiate repairs or cancel the Purchase and Sale Agreement. For more information, check out inspection contingency explained.

The lead Paint contingency must be included if the property was built before 1978. It requires the buyers acceptance of any lead paint found on the property as part of the final sale. If the buyer does not accept, the buyer may cancel the Purchase and Sale Agreement if lead paint is discovered.

A legal description is the geographical description of real estate that identifies its precise location, boundaries and any easements for the purpose of a legal transaction, such as a transfer of ownership. A legal description is kept with the deed and filed with the county clerk or county tax assessor.

A lien is a legal claim against the property of another, usually to secure an unpaid debt. Liens commonly arise when a homeowner pledges his or her home as collateral to borrow money. Buyers should review title reports closely with this in mind. If the report contains any liens, the buyer should consult an escrow agent or attorney to investigate. Such liens may need to be cleared before the buyer can legally own the home.

A lis pendens is a recorded document that gives notice that a home is subject to a pending legal action, such as a judicial foreclosure. Buyers should review lis pendens closely with this in mind. If the report contains any the buyer should consult an escrow agent or attorney to investigate.

A list price is the price of a home for sale set by the seller. The list price can be reduced throughout the life of the listing. While the list price does not go up, the price of the home can be bid above the list price if there are multiple offers.

A listing agent is the real estate agent that represents the seller. Listing agents list homes for sale on the regional Multiple Listing Service (MLS) and negotiate the best possible price and terms for their clients. Listing agents are not legally required to sell a home.

A loan commitment letter contains a lender’s binding promise to provide a buyer with a loan at both agreed-upon interest rate and terms. The buyer provides this letter to the seller once they’ve reached mutual acceptance in order to satisfy the financing contingency.

A Loan Estimate is a three-page form that provides a borrower with important details about a loan the borrower has applied for, including an estimate of the interest rate, monthly payment amount, and total closing costs. The lender is required to provide a borrower with this form within three business days after receipt of the loan application. All lenders are required to use the same Loan Estimate form in order to allow borrowers to easily compare mortgage loans. The Loan Estimate is not an approval or denial of a loan application but instead shows a borrower the terms they may be given by the lender if the borrower decides to move forward with the loan.

A loan-to-value ratio (LTV) is the ratio of the amount of money borrowed over the appraised value of the home, expressed as a percentage. The difference between these two numbers is the amount of the buyer’s down payment. The LTV is a key risk factor that lenders consider when evaluating a loan application. If a borrower’s LTV is greater than 80%, the lender will most likely require the borrower to purchase mortgage insurance.

A mortgage broker is a middle-man between borrowers and mortgage lenders who shops around to find the best rate and fees for the borrower. While mortgage brokers may handle some of the funding paperwork, the mortgage lender is ultimately responsible for underwriting approval.

Mortgage fees are what lenders charge for securing a mortgage loan. When you apply for a loan, the lender will outline these costs in the Good Faith Estimate. Make sure you thoroughly read and understand your estimate as lenders and brokers have been known to try and tack on extra costs.

Mortgage insurance protects the lender against loss if a borrower defaults on a loan. Private mortgage insurance is required for borrowers of conventional loans with a down payment of less than 20%. Mortgage insurance costs are included as part of the monthly loan payment. 

Lenders are banks, mortgage banks, or other financial institutions that issue loans. Lenders can control the whole process—from application to underwriting to funding your mortgage—if borrowers apply directly to the lender for a loan rather than going through a broker.

A mortgage loan covers the funds borrowed from a mortgage lender to finance the purchase of a home. Conventional loans, FHA loans, and VA loans are different types of mortgage loans available. For more information, check out our home financing explained.

A multi-family building or home has multiple units owned by one or more parties. Condo buildings and duplexes can be considered multi-family residences, but with a duplex, both the property and the land are recorded on one deed. With a condo, the owners own their individual units and have a tenancy in common with all of the owners in the complex for the shared space.

The Multiple Listing Service (MLS) is a local or regional service that compiles available real estate for sale submitted by member brokers and agents, along with detailed information that brokers and agents can access online. Local MLS organizations have their own rules and systems for providing listing information. Some MLSs publish their own websites for consumers to access listing data directly from the MLS, but most share data by offering a data feed so that member brokerages can build their own websites.

Mutual acceptance is when both the buyer and seller agree on the price and terms of a deal and enter into a binding agreement by mutually signing the Purchase and Sale Agreement. This is also known as offer and acceptance.

Net proceeds is the actual amount of money a seller makes from selling their home. Net proceeds is different from homeowner’s equity because it takes into account agent commissions and closing costs, which are paid by the seller and subtracted from the sale price.

Offer and acceptance are the key elements to a binding contract. Offer and acceptance occur when the seller accepts a buyer’s offer on the home, usually by signing a Purchase and Sale Agreement already signed by the buyer. This concept is also known as mutual acceptance.

An origination fee is the fee charged by a broker or lender, to initiate and complete the home loan application process.

Points are prepaid interest owed at closing, with one point representing 1% of the loan. Paying for points, which are tax deductible, will lower the monthly mortgage payment.

“Possession: Close of Escrow” refers to the transfer of ownership from the seller to the buyer. When the sale is recorded with the local government, and the purchase funds have been received by the seller, ownership of the home is transferred to the buyer and the buyer has the right to possess the home.

A pre-approval is a document from a lender or mortgage broker confirming they’ve reviewed a buyer’s finances and are willing to lend a specific amount of money to buy a home. It tells the buyer how much he or she can afford. Getting pre-approved does not guarantee a loan.

Pre-qualification is an informal estimate of how much a buyer can afford to borrow for a mortgage. The main difference between pre-qualification and pre-approval is that for a pre-qualification, the lender doesn’t verify any information the borrower provides. For pre-approval, which is the next step, lenders verify credit, income, employment, and assets.

A preliminary title report reveals any issues with a title that need to be dealt with by the seller in order to deliver a clear title. It gives details such as ownership history, liens, and easements. The title company gathers this report by searching existing property records at the county recorder’s office. This report is required for a title insurance company to issue a title insurance policy.

Principal, Interest, Taxes, and Insurance (PITI) make up the monthly mortgage payment. Principal is the amount borrowed from a lender, not including interest or additional fees. Depending upon the lender’s requirements, property taxes, homeowners insurance, HOA dues, and mortgage insurance may also be calculated into the monthly mortgage payments.

Private mortgage insurance protects the mortgage lender against loss if a borrower defaults on a loan. Private mortgage insurance is required for borrowers of conventional loans with a down payment of less than 20%.

A proof of funds is provided by the buyer to the seller when an offer is made. A proof of funds proves that the buyer has the money available to purchase the home. For financed buyers, this is the amount of the down payment and closing costs. For cash buyers, this is the amount of the purchase price and closing costs.

Property tax is a tax on property paid by owners to state or local governments. The amount of the tax is determined by an assessment. Homeowners pay this tax annually, semi-annually, or as part of a monthly mortgage payment. Depending on what time of year the buyer closes on the loan, some of this property tax may be due at the time of closing.

A Purchase and Sale Agreement (PSA) is a written contract to buy and sell real estate, which contains all of the agreed-upon terms for the transaction, such as the final sale price. The specific items in this contract vary by transaction and state, but will almost always include the following:

• Final sale price
• Earnest money amount, deposit method, and due date
• Closing date
• Title company information
• Title condition
• Contingencies commonly included for financing, inspection, appraisal, and title
• Addendums explaining any additional terms of the offer not included in the actual document

A real estate agent is an individual who helps people buy and sell homes in exchange for a commission. Agents who work with sellers to list homes are called listing agents, and agents who work with buyers to find and purchase homes are called buyer’s agents or selling agents. Both listing and agents and buyer’s agents are not legally required to buy or sell a home.

Refinancing is the process of paying off one loan to get another with better terms. There are many reasons borrowers may refinance: lower interest rates, improved credit, debt consolidation, or to decrease home equity to free up cash. Loan refinancing includes fees for appraisals and title insurance, so it’s important to talk with a lender about the costs and benefits of refinancing.

The sale-to-list ratio is the final sale price (what a buyer pays for the home) divided by the last list price expressed as a percentage. If it’s above 100%, the home sold for more than the list price. If it’s less than 100%, the home sold for less than the list price. Looking at sale-to-list percentages can help buyers and sellers get a sense of how to negotiate on pricing.

Sellers may offer concessions to incentivize buyers to purchase the home, or sweeten the deal. Concessions are most commonly seen as a contribution towards the buyer’s closing costs.

The Seller’s Disclosure is a set of documents completed by the seller of a home, listing any known issues with the property and any remodel projects completed during the time they owned the home. In most states, the seller is required to provide this disclosure within a few days of mutual acceptance. In turn, the buyer has a certain number of days to review the disclosures. This information is useful but is no substitute for an inspection by a licensed inspector. For more information, check out our seller’s disclosure explained.

A seller’s market is one in which there are more buyers than homes for sale. Since supply is less than demand, homes are higher priced and more attractive to sellers in the market. In contrast, a buyer’s market is one in which there are lots of sellers and relatively few buyers, which leads to lower prices.

The septic contingency provides buyer access to review and approve of the onsite sewage system report, and grants the buyer the right to an inspection and pumping (if necessary). If the buyer does not approve of the onsite sewage system they may cancel the Purchase and Sale Agreement.

A single family residence (SFR) is the most common type of home listed in the MLS. Also known as single family detached, this means the home is a stand-alone structure with its own lot intended for one family. Single family residences differ from condominiums, townhomes, cooperatives, and multi-family homes, which are all attached residences.

A survey refers to the process of locating and measuring a property’s boundary lines to determine the exact amount of land that a homeowner owns. A survey will also locate and measure any easements or encroachments on a property, which will be noted on a home’s chain of title. Buyers can have a property surveyed after making an offer to make sure any issues with easements or encroachments are documented and resolved before closing.

A tax lien he government’s legal claim against property if the homeowner neglects or fails to pay a tax debt.

The WDI (wood-destroying insect) report, also known as the Termite Report, includes a diagram of the property and the location of active and/or previous WDI activity. The report can also include what may be necessary to resolve such possible infestations such as spraying or tenting.

Title is the right to, or ownership of, a specific real estate property. Buyers get a preliminary title report from an escrow agent or attorney within a week after they reach mutual acceptance on an offer. The report identifies: a. all parties with a legal claim to the property, b. what items need to be cleared from title before the new buyer can take possession, and c. if there are any recorded easements or encroachments on the property. Once the transaction closes, the buyers will receive a final title policy recording their names as the new legal owners, along with the amount of title insurance. This information becomes part of a county’s public records.

The title contingency grants the buyer the right to review the title report before closing to ensure that the home is clear of any liens or encumbrances. If the title is not clear, the buyer has the option to cancel the contract. For more information, check out title contingency explained.

Title insurance compensates the insured buyer or lender if any title defects, liens, or competing claims of ownership on a property arise after closing. For example, if you have title insurance and you lose your home due to a title dispute, an owner’s policy could compensate you for that loss and help cover legal fees related to the dispute.

A title search is an examination of public records by a title company, lawyer, or escrow agent to determine the history of ownership of a particular piece of property and identify any liens, encroachments, easements, restrictions, or other factors that might affect the title. This step must always be completed before a buyer can purchase title insurance.

Fees imposed by the state, county or municipality on transfer of title.

The Truth-in-Lending Act is a set of U.S. government guidelines for lending practices to ensure that borrowers receive information about their loans. As part of the Consumer Credit Protection Act, it requires lenders to disclose information regarding loan origination fees, payment schedules, and APR, along with borrowers’ limited rights to rescind their application within a certain time frame without being charged. The Truth-in-Lending Act requires lenders to give borrowers a Loan Estimate within three business days of a loan application.

Turn-key is a term used by real estate agents to indicate that a home is “move-in ready.” This means that all appliances are in working condition and there are no obvious structural or electrical issues with the home. However, this doesn’t mean that an inspection is unnecessary, if you decide to make an offer on a home marketed in turn-key condition.

A home is under contract when a buyer’s offer has been accepted by the seller  but the sale has not closed. In order for a home to close and no longer be “under contract,” all contingencies must be satisfied or waived. When the home successfully closes, the home is listed as “sold” rather than under contract.

An underwriter is an individual working for a mortgage lender who determines whether or not a borrower’s loan is approved. When a borrower receives a loan from a mortgage broker, the broker sends the loan documents to the lender’s underwriter. The underwriter evaluates the entire loan application, including the appraisal of the home, and decides whether to approve or decline the application based on the risk presented by the loan.

Costs the buyer pays after mutual acceptance. Upfront costs can include earnest money, inspection fee, and appraisal fee.

Earnest money: typically 1%–3% of the home’s sale price, paid within 3 days of the offer being accepted.

Inspection fee: typically $300–$500, paid during the inspection.

Appraisal fee: typically $300–$500, paid before closing.

A Veterans Affairs loan, commonly known as a VA loan, is a special type of loan guaranteed by the US Department of Veterans Affairs and only available to eligible veterans, their spouses, and other beneficiaries. As with FHA loans, the risk is lower for the lender because the loan is guaranteed by the government, so this mortgage type offers a competitive interest rate, without requiring a down payment or private mortgage insurance.

A walkthrough is the final inspection of a home by the buyer before closing. Buyers complete a final walkthrough to make sure any agreed upon repairs have been made by the seller before the closing papers are signed. A walkthrough can take place anytime from a few days to a few hours before closing. In some regions, a final walkthrough is not a guaranteed step, and it must be written into the Purchase and Sale Agreement.