Real Estate Terms

The 1% rule is a screening heuristic for rental property holding that the monthly rent should be at least 1 percent of the purchase price. It has no issuing body and no evidence behind it, and it is arithmetically a threshold on the gross rent multiplier.

A 55+ community is housing that lawfully limits itself to older residents under a narrow exemption in the Fair Housing Act. The exemption relieves it of the Act's familial-status rules only, and it is conditional: at least 80 percent of occupied units must have someone 55 or older, and the community must publish policies showing that intent and verify ages.

A like-kind exchange lets an owner swap one investment or business real property for another without recognizing the gain now. Since 2018 it reaches real property only, and it runs on two deadlines that cannot be extended for any reason.

The ability-to-repay rule is the federal requirement that a mortgage lender make a reasonable, good-faith determination, from verified records, that the borrower can repay the loan according to its terms before making it. It sits in Regulation Z at 12 CFR 1026.43(c) and is the duty a qualified mortgage is presumed to satisfy.

An accessory dwelling unit is a second, smaller, self-contained home on the same property as a single-family house, with its own entrance and its own kitchen and bathroom. It ordinarily shares the parcel, the deed and the mortgage with the main house, so it is not sold on its own.

An adjustable-rate mortgage is a home loan whose interest rate is fixed for an introductory period and then resets periodically against a market index. The three questions worth answering before signing are what can change, by how much it can change, and how much warning you get.

Adverse possession is the rule that someone who occupies land openly, without permission, for long enough can end up owning it. It works by running out the clock on the true owner's right to sue for the property back.

Aging in place means staying in your own home and community as you get older and your care needs rise, rather than moving to assisted living or a nursing facility. It is a widely used policy and consumer phrase rather than a defined legal term.

Amortization is the process of retiring a debt through scheduled payments, each of which pays the interest accrued since the last one and applies the remainder to the balance. The payment stays level and the split inside it does not, which is why an early payment on a long-dated loan is mostly interest and a late one is mostly principal.

Ancillary probate is a second estate proceeding, opened in a state where the deceased person owned property but did not live. It usually exists because of real estate, and it is not always necessary: a state that has adopted the uniform provisions on foreign personal representatives lets the home state's representative act locally after a filing and a waiting period.

An appraisal contingency is a clause letting a buyer renegotiate or withdraw if the property is valued below the contract price. Two federal programs prescribe their own version of it, and neither one calls it an appraisal contingency.

An as-is home sale is one in which the buyer agrees to take the property in its current condition, with the seller undertaking no repairs. It shifts the cost of condition, and it is not a license for the seller to conceal.

An assumable mortgage is one a buyer can take over from the seller on its existing terms, including its interest rate, instead of getting a new loan. Whether a loan is assumable is decided by the program it was written under rather than by negotiation, and the buyer still has to qualify and still has to fund the seller's equity.

A balloon mortgage runs on a payment schedule longer than its own term, so a large balance falls due in one piece at maturity. Federal rules now permit one only in narrow circumstances, which is why they are rare on ordinary purchases.

A balloon payment is a scheduled payment far larger than the payments before it, left over because the loan's payment schedule was never set up to retire the balance by maturity. Federal rules define it by a ratio rather than by a dollar amount, and they do not all use the same ratio.

A bidding war is a sale in which several buyers compete for one property and bid against each other. The price is the visible part, and the terms buyers give up to win are usually the expensive part.

A biweekly mortgage payment plan has the borrower pay half a monthly mortgage payment every two weeks. Because there are 26 two-week periods in a year, that is 13 monthly payments rather than 12, and the extra one is where all of the benefit comes from.

A bridge loan is short-term financing that lets a buyer draw on the equity in a home they have not sold yet, in order to buy the next one. Regulation Z defines it by its term, 12 months or less, and excludes it from the ability-to-repay determination that governs an ordinary mortgage.

BRRRR stands for buy, rehab, rent, refinance, repeat: a rental-property strategy that aims to recover the money put into a property through a refinance, then use the same money again. It is not a lending product and no agency defines it, but the refinance rules that decide whether it works are written down.

A buyer's agent is a real estate professional working on the buyer's side of a home purchase. Since August 2024, a buyer working with an agent who participates in a multiple listing service must sign a written agreement setting that agent's compensation before touring a home.

A capital improvement is work on property that adds to its value, prolongs its useful life, or adapts it to a new use, so its cost is added to the property's basis rather than deducted as a repair. Federal tax law draws the line differently for a home you live in and for property you rent out.

A capitalization rate is a property's annual net operating income divided by its price or value, expressed as a percentage. It is a price restated as a yield, which is useful for comparing buildings and useless for describing what a particular buyer will earn, because financing sits outside the calculation.

A cash-out refinance replaces an existing mortgage with a larger one and pays the difference to the borrower. Legally it is an ordinary refinancing, but lenders and mortgage investors treat it as a separate product with its own seasoning rules, its own loan-to-value ceiling, and its own definition of what counts as taking cash out.

Closing costs are the fees and prepaid items you pay to complete a mortgage, beyond the down payment. The phrase is not a legal category but a heading on a federally prescribed form, and the useful thing to know about the items under it is which ones a lender is allowed to change before you sign.

A Closing Disclosure is the five-page form stating a mortgage's final terms and costs, which you must receive at least three business days before you sign. Only three kinds of change restart that three-day clock, which is narrower than the rule is usually taken to be, so querying a late change rarely delays a closing.

A combined loan-to-value ratio is every debt secured by a property divided by the property's value. It is the figure a second-lien lender actually decides on, and an undrawn credit line can count against it in full.

A comparative market analysis is a broker's estimate of what a property would probably sell for, built from recent sales of similar homes. It is a pricing tool for a seller, and federal law bars the same document from being the primary basis of value for a purchase mortgage.

A condominium is a form of ownership rather than a type of building. Each owner holds a defined unit outright, together with an undivided share of everything that is not a unit, and the boundary between those two things decides what you own, what you pay for and what you insure.

A conforming loan is a mortgage small enough, and otherwise eligible, for Fannie Mae or Freddie Mac to buy. The label says nothing about the borrower's quality and nothing about the rate. It says only that a buyer exists for the loan in the secondary market, which is why the limit shapes so much of what lenders offer.

A construction loan funds the building of a dwelling in stages, advancing money as the work is completed rather than in one lump at closing. It comes in two shapes, and which one you have decides whether you close once or twice.

A continuing care retirement community is a campus that contracts to house a resident for life and to move them through independent living, assisted living and nursing care as their health requires. Residents typically pay a large entrance fee plus a monthly fee, and the promise is only as good as the operator's finances.

A contract for deed is an installment purchase of real estate in which the buyer takes possession and pays the seller directly over time, while the seller keeps legal title until the final payment is made. It goes by at least six names, and the deferred deed is what makes the buyer's position weaker than a mortgage borrower's.

A conventional loan is a mortgage that carries no federal guaranty or insurance, which makes it the residual category rather than a program with rules of its own. It is defined by what is absent, and the familiar twenty percent threshold turns out to come from the statutes governing Fannie Mae and Freddie Mac.

Cost segregation is the analysis that splits a building's cost among land, land improvements, personal property and the structure itself, so the shorter-lived pieces are depreciated over 5, 7 or 15 years instead of 27.5 or 39. Done after the fact it is a change of accounting method, not an amended return.

A debt-to-income ratio is your required monthly debt payments divided by your gross monthly income. Lenders use it to judge capacity to take on more debt, and because it runs on income before tax it flatters affordability.

A deed is the written instrument that transfers ownership of real property from one person to another. It is a different document from the loan, which is why paying off a mortgage does not change the deed and removing a name from the deed does not remove it from the debt.

A deed in lieu of foreclosure is a voluntary transfer of the property to the lender in place of a foreclosure. The lender does not have to accept one, and a junior lien is usually the reason it will not.

A deed of reconveyance is the recorded instrument that removes a lender's claim from a property's title after the loan is paid off. Paying the loan and clearing the record are separate events, and the second one has a deadline.

A deed of trust is a security instrument that pledges real property against a loan, using three parties instead of two. Despite the name it conveys nothing to a buyer and has nothing to do with an estate-planning trust.

Deed theft is the taking of ownership of a home on paper, without the owner's knowledge or genuine consent, by recording a deed that transfers title away from them. The thief then sells the property, borrows against it, or rents it out, leaving the real owner to prove in court that the transfer was invalid.

Depreciation is the tax deduction that spreads the cost of a business or income-producing asset over a set number of years instead of allowing it all at once. It is a timing deduction, not a free one: every dollar taken reduces the asset's basis and comes back when the asset is sold.

Depreciation recapture is how the tax code takes back the benefit of depreciation deductions when the asset is sold. Part of the gain is carved out and taxed under its own rule, either as ordinary income or at a rate ceiling of 25%, rather than at the ordinary long-term capital gains rates.

A down payment is the share of a purchase price you pay from your own funds instead of borrowing. On a house it sets the loan-to-value ratio, decides whether mortgage insurance is required, and takes cash out of reach in exchange for a smaller loan.

A due-on-sale clause lets a lender demand the entire mortgage balance at once if the property is sold or transferred without the lender's written consent. Federal law makes the clause enforceable despite contrary state law, and then bars the lender from using it on nine specific transfers that are mostly not sales.

Dwelling coverage is the part of a home insurance policy that pays for damage to the house itself and the structures attached to it. It is also the anchor number on the policy, because most of the other coverage limits are set as percentages of it.

Earnest money is the deposit a buyer puts up when a purchase contract is signed to show the offer is serious. It is credited toward what the buyer owes at closing rather than being an extra cost, and what protects it is the contingencies written into the contract.

Earthquake insurance covers shake damage to a home, which every standard homeowners policy excludes. It is bought as a separate policy or endorsement, its deductible is a percentage of the dwelling amount rather than a flat sum, and in California insurers are required by statute to offer it.

An easement is a right to use someone else's land for a stated purpose without owning or possessing it. Because it attaches to the land rather than to the person who granted it, it survives a sale and binds the next owner, who never agreed to it.

Eminent domain is the government's power to take private property for public use on payment of just compensation. The proceeding that exercises the power is called condemnation, and the two words are not interchangeable.

An encumbrance is a claim or right against property held by someone who is not its owner. Some encumbrances secure a debt and are paid off at a sale; others restrict how the land may be used and travel with it to the next owner.

Escrow is an arrangement in which a neutral third party holds money that is not its own until a stated condition is satisfied. In a home purchase the word names two different arrangements, one that ends at closing and one that lasts as long as the loan.

An escrow account is the account a mortgage servicer controls to collect property taxes and insurance premiums with the monthly payment and pay those bills when they fall due. Federal rules sort every imbalance in it into three differently defined conditions, and which one you have decides what the servicer may ask you to do about it.

Eviction is the legal process a landlord must follow to remove a tenant from a rental property. It runs through written notice, a court filing, a judgment, and enforcement by a law officer, and a landlord who bypasses it with a lockout or utility shutoff is doing what state landlord-tenant law generally treats as an illegal self-help eviction.

The Fair Housing Act is the federal law that bans discrimination in the sale, rental, and financing of housing on the basis of seven protected classes: race, color, national origin, religion, sex, familial status, and disability. It is enforced by the Department of Housing and Urban Development.

Farmland investing is owning agricultural land for the rent a farmer pays to use it plus any appreciation in the land's value. It is one of the few real assets that produces income every year and has published government data behind it, and one of the hardest to buy, because most farmland changes hands within families rather than on the open market.

Fee simple is the largest ownership interest a person can hold in land: ownership with no time limit, freely sellable and inheritable. It is what people mean by owning a property outright, and it does not mean the land is free of taxes, zoning, easements or liens.

An FHA loan is a mortgage made by an ordinary lender and insured by the Federal Housing Administration, which lets the lender accept a smaller down payment and a weaker credit profile than it otherwise would. The insurance is the whole point of the program, and the borrower pays for it twice, up front and annually.

A financing contingency is a clause letting a buyer withdraw if they cannot obtain the mortgage the contract describes. Almost every dispute about it turns on whether the buyer actually applied, and on what "obtain" was defined to mean.

First-time homebuyer programs are the assorted federal, state and local measures aimed at people buying their first home. There is no single national program and no federal first-time buyer tax credit, and the phrase "first-time homebuyer" is defined differently by different federal rules.

A fixed-rate mortgage is a home loan whose interest rate cannot change for the life of the loan. What the borrower is buying is not a low rate but certainty, and the lender prices that certainty into the rate it quotes.

Flood insurance is a separate policy covering damage from rising surface water, which standard homeowners and renters policies exclude. Most United States coverage is written through the federal National Flood Insurance Program, whose authority to enter new contracts is set by statute and has been extended repeatedly, with a private market alongside it.

A flood zone designation is the classification FEMA assigns to a piece of land on a published flood map. It decides whether a lender must require flood insurance, and it is not what sets the premium.

For sale by owner, or FSBO, means selling a property without engaging a listing broker. It is also the one arrangement the Fair Housing Act singles out, because a narrow exemption in that statute applies only where no broker was used.

Foreclosure is the legal process by which a lender enforces its lien on real property when the loan is not paid, ending in a forced sale. Almost every rule that governs it is state law, but one federal rule sets a floor on how soon it can start.

Fractional ownership is an arrangement in which several people own one asset together and divide its use and its running costs in proportion to their shares. In real estate it usually means a small number of owners of one property, each holding a real equity share rather than a right to book a week.

A government-sponsored enterprise is a privately owned corporation created by federal statute to channel credit into one sector, most visibly housing. Federal law defines the class by a test whose last words are that its borrowing "does not carry the full faith and credit of the Federal Government".

A gross rent multiplier is a property's price divided by its gross rent, used to compare income properties quickly. It is derived by looking at what comparable properties actually sold for relative to their rents, which makes it a comparison rather than a valuation.

Ground rent is the periodic payment a property owner makes for the land under their building when the land is held on a long lease rather than owned. The tenant owns the improvements; someone else owns the ground and collects the rent.

A high-cost mortgage is a loan secured by a borrower's principal dwelling whose rate, fees or prepayment terms cross one of three thresholds in Regulation Z. Crossing any one of them bans a list of loan terms, forces an extra disclosure, and requires the borrower to get counseling first.

A home appraisal is an independent written opinion of what a property is worth, obtained by the lender to test the collateral behind a mortgage. The borrower usually pays for it and is entitled to a free copy, but the appraisal is the lender's, and its purpose is to protect the loan rather than the buyer.

Home environmental hazards are the substances and conditions in or under a house that can harm the people living there. Lead-based paint in pre-1978 housing is the one that carries a federal disclosure duty at a sale, and the others are picked up by state law or by the contract if they are picked up at all.

Home equity is the difference between what a property is worth and what is owed against it. The arithmetic is simple and the inputs are not, because "what it is worth" means four different numbers depending on who is asking, and each one produces a different answer.

A home equity conversion mortgage is the reverse mortgage insured by the Federal Housing Administration. Its distinguishing feature is the menu of five ways it can pay out, and choosing a fixed rate collapses that menu to one.

A home equity line of credit is a revolving credit plan secured by your home, with a limit you draw against as needed and a variable rate tied to a public index. Federal law gives it its own regime, and the most important thing in that regime is the gap between what a lender may do to your credit limit and what it may do to a balance you already owe.

A home equity loan advances a lump sum secured by a home you already own, repaid on a fixed amortizing schedule, and usually recorded as a junior lien behind the existing mortgage. It carries a three-day right to cancel that a purchase mortgage does not, and none of the protections written for home equity lines of credit apply to it.

A home inspection is a paid, non-invasive assessment of a property's physical condition, arranged by the buyer for the buyer. On an ordinary purchase it is not required and the lender does not order it, which makes it the one step in the transaction that exists to answer the buyer's question rather than the lender's.

A home sale contingency is a clause making a buyer's purchase conditional on selling the home they already own. It is the least popular condition a buyer can ask for, and the version that turns on a signed contract is weaker than the version that turns on money actually changing hands.

Home sale costs are the expenses a seller pays to sell a house, including agent commissions, seller-paid closing costs, repairs and concessions, payoff of the existing mortgage, and any capital gains tax on profit above the home-sale exclusion.

Home staging is the practice of preparing a house for sale by clearing it out, arranging or renting furniture, and adjusting lighting and decor so it shows well in person and photographs well online. The seller pays for it up front, weeks before any sale proceeds arrive.

A home warranty is an annual service contract that pays to repair or replace covered home systems and appliances when they fail, in exchange for a fee per visit. It is not a warranty in the sense federal law uses the word, and in many states it is not regulated as insurance either.

A homeowners association is the body that owns and maintains the shared property in a common-interest community and enforces its recorded rules. Its authority comes from documents recorded against the land, which is why it binds an owner who never signed them.

Homeowners insurance bundles four separate coverages into one policy: the dwelling, your belongings, your personal liability, and the extra costs of living elsewhere while the home is unlivable. Two choices made at purchase, rather than the premium, decide what you actually collect after a loss.

A homestead exemption is a state or local provision that removes part of a primary residence's value from property taxation. It usually has to be applied for, the deadlines are early, and in many places it brings a cap on future assessment increases with it.

House flipping is buying residential property to resell it quickly, usually after repairs, at a profit. Federal tax law has no category called flipping. It has one question, whether the property is held primarily for sale to customers in the ordinary course of a business, and the answer to that question decides four separate things at once.

House hacking is buying a property with more living space than you need, occupying part of it and renting out the rest, so the rent covers some or all of the housing cost. The mechanism is not the rent. It is that an owner-occupant of a one- to four-unit property can borrow on owner-occupied terms.

Being house poor means owning a home whose costs consume so much income that little is left for anything else. It is a colloquial description rather than a defined status, and it usually describes a payment a lender was willing to approve.

Housing affordability, as a published measure, is an index comparing what homes cost in an area against what households there earn. The two best-known United States versions both read 100 at the point they call affordable, and they get there by counting different incomes, different costs and different thresholds, so they can move apart.

A housing bubble is a period in which home prices rise well beyond what local incomes, rents and building costs would justify, sustained largely by the expectation that they will keep rising. The term is applied after the fact, and the closest thing to a formal test, published by a Federal Reserve Bank, deliberately avoids calling its findings bubbles.

A housing cooperative is a corporation that owns a residential building, in which a resident buys shares and receives a proprietary lease entitling them to occupy one apartment. You own a piece of the company that owns the building rather than the apartment itself.

An iBuyer is a company that buys homes directly from their owners for its own account and resells them, using automated valuation to make a fast offer. The seller is trading price for speed and certainty, and the category is smaller than it was.

The implied warranty of habitability is the rule that a residential landlord must keep the rented home fit to live in, whether or not the lease says so. What "fit to live in" means is set by each state, usually as a list of things that must work, and so are the remedies a tenant has when it does not.

An inspection contingency is a clause giving a buyer a defined window to have a property examined and then object, renegotiate or withdraw. Federal law guarantees only one inspection opportunity, it is about lead paint, and most buyers have never heard of it.

An installment sale is a sale of property in which the seller receives at least one payment after the year of the sale and reports the gain as the payments come in, rather than all at once. It spreads the tax over time but comes with several traps written into Internal Revenue Code section 453.

An interest-only mortgage lets the borrower pay only accrued interest for a set opening period, so the balance does not fall. When that period ends the same principal has to amortize over fewer remaining years.

Joint tenancy is a form of co-ownership in which each owner's share passes automatically to the surviving owners when one of them dies, by operation of the title rather than through the estate. It is never the default: state law treats co-owners as tenants in common unless a joint tenancy is expressly declared.

A jumbo loan is a mortgage larger than the limit at which Fannie Mae or Freddie Mac may buy it. It is a market word: Regulation Z uses it exactly once, in quotation marks. Its real consequence is that the loan leaves the standardized market, and one federal protection attaches to it a full percentage point later.

A lady bird deed is a deed that transfers a home at death while reserving to the owner the power to sell, mortgage or give away the property during life, alone, and to cut the named beneficiary out entirely. Whether it is available at all is a question of the law of the state where the property sits.

A land loan finances a parcel with no building on it. The terms are tighter than a mortgage on a house, and the reason is written down: federal banking guidance ranks bare land as the riskiest real estate collateral there is.

Landlord insurance is the market name for the property coverage an owner buys on a dwelling that someone else lives in. No insurer files a form by that name: the coverage is usually written as a dwelling policy, and the most important thing to know about it is that liability is often not included unless it is added.

A lease agreement is the contract by which a property owner gives another person the right to exclusive possession of the property for a period, in exchange for rent. It is not only a contract: it transfers an interest in the property for the length of the term, which is why the tenant, not the owner, has the right to be there.

A lease break fee is a charge a residential lease imposes on a tenant for ending the tenancy before the term is up. It is a term of the contract rather than a right the law gives either side, and where a lease has no such clause the tenant's exposure is the rent that keeps falling due until the unit is re-let.

A lease guarantor is a third party who signs a separate promise to the landlord to answer for a tenant's obligations if the tenant does not. The guaranty is its own contract, it usually covers more than the rent, and in many cases it outlives the original term of the lease it was signed for.

A lien is a legal interest in specific property that secures a debt or an obligation. Liens arise in three different ways, by agreement, by statute, or by court judgment, and how one arose decides whether you consented to it and what it takes to get rid of it.

A life estate is ownership of property that lasts for a lifetime rather than forever. The holder can live in it, rent it and take the income, and at their death it ends automatically and the remainder holder owns the property outright without probate.

A listing agent is the licensee who represents the seller in a home sale. The agreement that creates the relationship is signed with the agent's brokerage rather than with the agent personally, and which version of it you sign decides what you owe if you find the buyer yourself.

A Loan Estimate is the three-page form a mortgage lender must give you within three business days of your application, setting out the rate, the payments and every charge in a prescribed order. Its less-known value is what it triggers: until you have received it and said you want to proceed, almost no fee may be charged to you at all.

A loan modification permanently changes the terms of an existing mortgage by agreement with the servicer, rather than replacing it with a new loan. It is the main way a borrower in lasting trouble keeps the house.

A loan-to-value ratio is the loan balance divided by the value of the property or vehicle securing it, expressed as a percentage. It is the lender's measure of how much of the collateral it has advanced, and the argument is almost never about the loan amount but about which value goes in the denominator.

A manufactured home is a factory-built dwelling constructed to a federal construction and safety code administered by the Department of Housing and Urban Development, rather than to the local building code where it is placed. That federal standard preempts conflicting state construction requirements, which is what separates the category from every other kind of house.

The median home price is the middle price in a set of home sales: half sold for more, half for less. It is a statistic about which homes sold, not a measure of what any particular home is worth, and it moves when the mix of homes sold changes as well as when prices do.

A mortgage is a loan to buy real estate or to borrow against real estate you already own, secured by the property itself. Two documents create it, and the security is what makes default a foreclosure rather than an ordinary collections matter.

A mortgage credit certificate turns part of a borrower's annual mortgage interest into a dollar-for-dollar federal tax credit, every year the loan is held and the home is lived in. State and local housing agencies issue them, and they do so by giving up bond authority they could have used instead.

Mortgage forbearance is an agreement with the servicer to pause or reduce mortgage payments for a set period. It pauses the payment and not the debt, so the only question that decides whether it helps is how the missed amounts have to come back.

The mortgage interest deduction is the itemized deduction for interest on debt used to buy, build or substantially improve a home and secured by that home. Both conditions have to hold, which is why what the money was spent on matters as much as what secured the loan.

A mortgage note is the borrower's signed promise to repay a home loan on stated terms. It is a separate document from the one that pledges the house, and it is the document that makes the debt personal.

A mortgage payoff statement is the figure a lender or servicer must supply showing what it takes to retire the loan in full as of a stated date. Federal law gives the borrower a right to an accurate one, and the figure expires.

Mortgage points are charges a borrower pays a lender at closing, most often to buy the interest rate down. One point is one percent of the loan amount. Three separate rulebooks use the word to mean three different things, which is why the same charge can be a price, a threshold, and prepaid interest at once.

A mortgage preapproval is a letter from a lender saying it is generally willing to lend up to a stated amount on stated assumptions. It is not a loan offer, and the word on the letter tells you very little, because lenders use preapproval and prequalification to mean different things.

A mortgage rate lock is a lender's commitment to hold a quoted interest rate, and the points that go with it, for a stated period ending at a stated date and time. Regulation Z does not require a lender to offer one, but it does require the lender to say whether the rate is locked and exactly when the lock runs out.

A mortgage recast re-amortizes an existing loan over its remaining term after the borrower makes a large lump-sum principal payment, lowering the monthly payment. The rate, the loan and the payoff date all stay the same, which is what separates it from a refinance.

A mortgage servicer is the company that collects your mortgage payments, administers the escrow account and handles default. It is usually neither the lender that made the loan nor the investor that owns it, and it can change without your consent.

A mortgage statement is the document a servicer must send for each billing cycle on a closed-end home loan, showing what is due, how the last payments were applied, and what the loan looks like now. Regulation Z sets out what has to be on it and where.

Mortgage underwriting is the process by which a lender decides whether to make a loan and on what terms. Federal law does not define the word, but it does define the duty the process discharges: a reasonable, good-faith determination that the borrower can repay, built on information verified from third-party records rather than taken on the borrower's word.

A mortgage-backed security is a tradable claim on the payments from a pool of home loans. Investors receive the borrowers' interest and principal as it arrives, which makes the timing of the cash flow depend on when thousands of strangers refinance, sell or default.

Moving costs are what a household pays out of its own pocket to move: the mover or the truck, packing and materials, storage, travel, the deposits the new address requires, and anything the old lease charges for leaving early. On an interstate move by a professional carrier, federal rules control how the price is quoted and how much of it can be demanded on the day.

A multigenerational household is one containing three or more generations, which is how the Census Bureau defines it. The financial consequence is that living under one roof does not make the residents one household for tax, benefit or housing purposes, because each program applies its own test.

A multiple listing service is a shared regional database through which real estate brokerages publish properties for sale to each other. Most are affiliated with the National Association of Realtors and follow its rules, but the database and the trade association are not the same thing.

Negative equity is owing more on a secured loan than the thing securing it is worth. It arrives two different ways, as the expected consequence of financing a depreciating asset or as the unexpected consequence of a market falling under a durable one, and in neither case does the condition by itself change what the borrower owes each month.

The passive activity loss rules stop losses from activities you do not materially participate in, and from rentals whether you participate or not, from reducing your salary or business income. The losses are suspended and carried forward rather than lost, and a fully taxable sale of the whole interest releases them.

A piggyback loan is a second mortgage closed at the same time as the purchase loan, so the first lien stays at or below 80 percent of the price. It is usually taken to avoid mortgage insurance, jumbo pricing, or both.

A prepayment penalty is a charge imposed for paying off all or part of a loan before it is due. On a mortgage, federal rules allow one only in narrow circumstances, cap it, limit it to the first three years, and require the lender to also offer a version of the loan without one.

The price-to-rent ratio compares what it costs to buy a home with what it costs to rent a comparable one, usually as the purchase price divided by a year of rent. The same name is also used for a published index built from two separate price indexes, and the two numbers are not comparable.

Private mortgage insurance is a policy a conventional mortgage lender requires when the borrower puts down less than 20 percent. The borrower pays the premium, the lender is the party insured, and federal law sets out when the requirement has to end.

A promissory note is a signed written promise to pay a fixed amount of money, and it is the document that creates the debt itself rather than the collateral behind it. Where the note meets four tests it is negotiable, which changes who can enforce it and which defenses the borrower keeps.

A property manager is the person or firm an owner hires to run a rental property: marketing it, selecting tenants, signing leases, collecting rent, arranging repairs and handling compliance. The manager acts as the owner's agent, which is why hiring one moves the work without moving the liability.

A property survey is a licensed surveyor's determination of where a parcel's boundaries actually run on the ground and what sits inside them. It answers a different question from a title search, an appraisal or an inspection.

A property tax is an annual charge based on the value of property, imposed by local government. Its defining feature is that it attaches to the property rather than to the person, which is what explains the lien, the tax sale, the escrow account, and why the obligation survives a change of owner.

A property tax appeal is a formal challenge to the value a local assessor has placed on a property, or to how the property has been classified. It contests one of the two numbers behind a tax bill, and it is the only one an individual owner can usually argue about.

A property tax assessment is the value a local assessor places on a property for tax purposes. It is not a market value, it is not what you paid, and in many places it is designed not to match either.

Public housing is federally assisted rental housing owned and operated by a local public housing agency. Federal law defines it by exclusion, as assisted housing other than the Section 8 voucher program, which is what makes the two legally distinct.

A qualified mortgage is a home loan that meets a federal checklist of features and limits set out in Regulation Z, and in return gives the lender a legal presumption that it checked the borrower's ability to repay. Most mainstream mortgages are written to fit inside it.

A quitclaim deed transfers whatever interest the signer happens to hold in a property, and promises nothing about what that interest is. It is a real conveyance with no warranty attached.

A rate-and-term refinance replaces an existing mortgage with a new one whose proceeds pay only the old liens and the costs of the transaction, so the borrower takes essentially no cash out. Each program defines "essentially" differently.

A real estate agent commission is the compensation paid to the brokerages involved in a home sale. Since August 2024 it can no longer be offered to a buyer's side through a multiple listing service, and a buyer has to agree their own agent's fee in writing before touring a home.

Real estate crowdfunding is the market name for buying an interest in property or property debt through an online platform. It names a distribution channel rather than a type of investment, and the same phrase covers at least three different legal structures with different rules.

A real estate investment trust is a company that owns or finances income-producing property and, in exchange for meeting a set of statutory tests, pays no corporate tax on the income it distributes. The requirement to distribute is what makes the yield high and the tax treatment awkward.

A real estate syndication is a private arrangement in which a sponsor forms a company to buy and operate a specific property and sells passive ownership interests in that company to investors. What the investor buys is an interest in the entity, which is generally a security, rather than any direct interest in the building.

Real estate wire fraud is the diversion of a property closing payment by an impostor using compromised email. The FBI classifies it as business email compromise rather than as real estate fraud, and the compromised mailbox can belong to any professional in the transaction rather than to the buyer.

Recoverable depreciation is the part of a property claim an insurer withholds from the first payment and pays later, once conditions are met. It is the difference between what the repair costs today and the depreciated value of what was damaged, and on a replacement cost policy it is the policyholder's money waiting on paperwork rather than the insurer's to keep.

Refinancing is taking out a new loan to pay off an existing one, on different terms. It is a new loan rather than an amendment to the old one, which is why it has its own closing costs, its own clock, and in some cases a three-day right to cancel that the original loan never had.

Rent is the payment a tenant makes for the use of property they do not own, under a lease. It buys occupancy and nothing else, which is both the complaint and the point: no equity accrues, and no repair bill, property tax bill or price risk lands on the tenant either.

Rent control is a law limiting what a landlord may charge or how much the rent may rise for covered housing. In New York, where the oldest such program runs, the phrase names the narrower of two schemes, and the umbrella term is rent regulation.

Rent reporting is an arrangement under which a landlord, property manager, or third-party service furnishes rental payment history to a consumer reporting agency. It is opt-in, it usually reaches fewer than all three nationwide agencies, and where it reports the good months it generally reports the bad ones too.

A rent-to-own home deal is a lease combined with an agreement to sell the property to the tenant later at a set price, with part of the rent credited toward the eventual purchase. The tenant pays toward an asset whose title, taxes and mortgage stay entirely under the seller's control until the sale actually happens.

A rental application fee is a charge a landlord collects from a prospective tenant to cover the cost of screening them, chiefly a credit and background report. It is normally nonrefundable, and a handful of states regulate what it may cover, what the landlord must give back, and when it may not be charged at all.

Rental cash flow is what is left from a rental property after every cost of operating it and after the mortgage payment. It is not net operating income, it is not taxable rental income, and it is not the rent minus the mortgage payment.

Rental income is any payment received for the use or occupation of property, which the tax code reads far more broadly than the monthly check. Advance rent, lease-cancellation payments, expenses a tenant pays on the owner's behalf and property received instead of money are all rent.

A rental property is a dwelling unit held to produce rental income rather than to live in. Federal tax law decides which one it is by counting days of personal use, and the answer changes which deductions exist at all.

Renters insurance covers a tenant's own belongings, their personal liability, and the cost of living elsewhere if the unit becomes uninhabitable. It exists because the landlord's policy covers the building and nothing of the tenant's, and the liability half is the part that matters most.

Replacement cost coverage is a property-insurance settlement basis that pays what it costs to repair or replace damaged property with new property of like kind and quality, with no deduction for depreciation. It is bought as a level of coverage rather than being automatic, it comes in three tiers, and on most policies it does not pay in full until the work is actually done.

Residential energy credits were the two federal tax credits for making a home more efficient or generating your own power: the energy efficient home improvement credit and the residential clean energy credit. Both were terminated at the end of 2025, and one of them left an unused balance that can still be carried forward.

A reverse mortgage is a loan against home equity that requires no monthly repayment while the borrower lives in the home, so the balance grows instead of shrinking. It comes due when the last borrower dies, sells, or stops living there.

The SALT deduction is the itemized deduction for state and local taxes paid, covering real property tax, personal property tax, and either income tax or general sales tax. A dollar cap applies, and for higher earners the cap itself shrinks as income rises.

Schedule E is the attachment to Form 1040 for income that is not wages and not an active business. Its official title is "Supplemental Income and Loss", and it collects rental real estate, royalties, and the income that arrives on a Schedule K-1 from a partnership, an S corporation, an estate or a trust.

A second home is a residence other than the one you mainly live in. The phrase has no single meaning: the tax code, the mortgage market and FHA each define it differently, and the same property can be a second home for your interest deduction and not a second home for the loan that bought it.

Section 8 housing is the federal rental-assistance program, officially the Housing Choice Voucher Program, that pays part of a low-income household's rent to a private landlord through a local housing agency.

The section 121 exclusion keeps up to $250,000 of gain on the sale of a principal residence out of gross income, or $500,000 for a married couple filing jointly. It requires owning and using the home as a main residence for periods totaling two years within the five years before the sale, and it can be used repeatedly rather than once in a lifetime.

A security deposit is money a tenant gives a landlord at the start of a tenancy to stand behind the tenant's obligations under the lease, refundable to the extent it is not used. What the lease says the money is for matters more than what it is called, because a sum contracted to be used as the final payment of rent is not a deposit at all.

A seller disclosure is the statement a home seller gives a buyer about problems with the property that the seller knows of. It reports knowledge rather than condition, and both the duty and the form are state law.

Seller financing is an arrangement in which the seller of a property extends the credit that buys it, taking a note and a security interest instead of the full price in cash at closing. Federal mortgage rules treat a seller who does this occasionally very differently from one who does it as a business.

A seller's market is a period in which buyers competing for a limited number of homes give sellers the stronger negotiating position, and a buyer's market is the reverse. Both are informal labels for one underlying balance, and the statistical agencies that publish the usual measure of that balance attach no label to any level of it.

A short sale is a sale of a home for less than the amount owed on it, which every lienholder has to approve because each is agreeing to release its lien for less than full payment.

A snowbird is someone who lives seasonally in two places, typically wintering in a warmer state and returning north for the summer. The financial problem is not one rule but many: health coverage, property insurance, vehicle registration and property-tax relief each apply their own residence test, on their own clock, and the answers do not have to agree.

A special assessment is a one-off charge levied on specific properties rather than on everyone. The phrase names two different things: a charge a homeowners association levies on its members for a cost the reserves cannot cover, and a charge a local government levies on the properties benefited by a public improvement.

A starter home is the small, lower-priced end of the owner-occupied housing stock, the segment a first-time buyer can reach. No agency or statute defines it, so the term names a position in a local price distribution rather than a type of building.

A teaser rate is a starting rate set below the rate that will actually apply, designed to expire. It is a marketing label rather than one legal category, and it turns up on credit cards, adjustable-rate mortgages and promotional savings accounts, each governed by a different rule with different protections.

Tenancy by the entirety is a form of co-ownership available only to married couples, in which the spouses hold the property as a single owner rather than as two. Neither can sell or mortgage their share alone, and in states that recognize it, a creditor of one spouse generally cannot reach the property.

Tenancy in common is co-ownership in which each owner holds a separate, transferable share with no right of survivorship, so at death a share passes under that owner's will or by intestacy rather than to the other owners. It is the default: state statutes treat co-owners as tenants in common unless a joint tenancy is expressly declared.

Tenant rights are the legal protections a renter has against a landlord, including a habitable home, the return of a security deposit, required notice before entry or termination, freedom from retaliation, and protection from housing discrimination. Most of the specifics are set by state and local law.

A tenant screening report is the background file a landlord buys about a rental applicant, typically combining credit data, rental and eviction history, employment verification and criminal records. It is a consumer report under the Fair Credit Reporting Act, so the applicant has the right to see it and to dispute what it says.

A timeshare is a purchased right to occupy accommodation for a defined part of each year, over a period of years. The purchase price is the smaller half of the commitment: the annual assessment continues for as long as the interest is held, and it is the part that decides the economics.

A timeshare exit scam is a fraud in which a company takes a large up-front fee to get an owner out of a timeshare, guarantees a result it cannot deliver, and frequently does nothing. The Federal Trade Commission names it as its own category of scam.

A title defect is a problem in a property's ownership record that casts doubt on the owner's right to sell or mortgage it. The same problem is called a cloud on title when it appears of record and impairs marketability.

Title insurance is a policy that pays if someone turns up with a claim against a property arising from before you bought it. A purchase almost always involves two separate policies, and the one your lender requires protects the lender's loan rather than your equity.

A title search is an examination of the public real-property records to establish who owns a parcel and what recorded claims are attached to it. It can only find what was recorded, which is why it is not the same as insurance.

A townhouse is a house that shares one or more walls with the houses next to it and usually occupies its own narrow footprint over two or more floors. The word describes the building, not the ownership, and the same row can be sold as separately owned lots or as units in a condominium.

A transfer on death deed is a recorded deed that transfers real property to a named beneficiary at the owner's death and does nothing before then. Under the Uniform Real Property Transfer on Death Act it is revocable whatever the deed says, it is not a will, and the beneficiary takes the property subject to every mortgage and lien on it.

"USDA loan" is the everyday name for rural home financing from USDA Rural Development, and it covers two different programs: a guaranteed loan made by a private lender and a direct loan made by the government itself. Which one a borrower means decides who lends the money, what the income ceiling is, and whether a payment subsidy is available.

A utility deposit is money an electric, gas, water or telephone company requires before it will start or continue service for a customer whose payment record or credit file it treats as a risk. It is refundable, it usually earns interest, and how much it can be and when it comes back are set by the state commission that regulates the utility rather than by federal law.

A VA loan is a mortgage made by an ordinary lender and partly guaranteed by the Department of Veterans Affairs for an eligible veteran, service member or surviving spouse. It requires no down payment and carries no monthly mortgage insurance, and the price of that is a one-time funding fee that a large group of borrowers does not pay at all.

A vacancy rate is the share of a housing inventory that is empty and available. The phrase names three different quantities: the Census Bureau's rental vacancy rate, its homeowner vacancy rate, and the vacancy allowance an investor subtracts in a property's projections. They are not interchangeable.

A warranty deed is a deed in which the grantor guarantees the title and agrees to defend it against claims. The guarantee, not the size of the interest conveyed, is what separates it from other deeds.

Wholesaling real estate is contracting to buy a property and then selling the contract rather than the property. The wholesaler never takes title; what changes hands is the right to complete the purchase, and the wholesaler's profit is the difference between the contract price and what the end buyer pays for that right.

Zoning is the division of a community into districts by local ordinance, with different rules in each about what may be built and how land may be used. It is the mechanism that decides whether a particular thing you want to do with your property is permitted, conditional, or prohibited.