Real Estate Terms and Definitions

Balloon Mortgage A mortgage that typically offers low rates for an initial period of time (usually 5, 7, or 10) years; after that time period elapses, the balance is due or is refinanced by the borrower. Default The inability to pay monthly mortgage payments in a timely manner or to otherwise meet the mortgage terms. Amortization Repayment of a mortgage loan through monthly installments of principal and interest; the monthly payment amount is based on a schedule that will allow you to own your home at the end of a specific time period (for example, 15 or 30 years) Flood insurance Insurance that protects homeowners against losses from a flood; if a home is located in a flood plain, the lender will require flood insurance before approving a loan. Earnest money Money put down by a potential buyer to show that he or she is serious about purchasing the home; it becomes part of the down payment if the offer is accepted, is returned if the offer is rejected, or is forfeited if the buyer pulls out of the deal. Down payment The portion of a home's purchase price that is paid in cash and is not part of the mortgage loan. Annual Percentage Rate (APR): Calculated by using a standard formula, the APR shows the cost of a loan; expressed as a yearly interest rate, it includes the interest, points, mortgage insurance, and other fees associated with the loan. Foreclosure A legal process in which mortgaged property is sold to pay the loan of the defaulting borrower. PMI Private Mortgage Insurance; privately-owned companies that offer standard and special affordable mortgage insurance programs for qualified borrowers with down payments of less than 20% of a purchase price. Home inspection An examination of the structure and mechanical systems to determine a home's safety; makes the potential homebuyer aware of any repairs that may be needed.

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	Did You Know?
	Covenant condition restriction is an agreement, usually included in the deed to a property This tool acts as restricting the manner in which the property can be used. For example, a deed for a residential property may contain a covenant that the owner won’t permit “noxious uses” on the property, or any of a lengthy list of particular offenses such as stables, factories and so forth.