Real Estate Terms

The 1% rule is a quick screening guideline for rental property, suggesting the monthly rent should be at least 1% of the purchase price for the deal to be worth a closer look.

A 15-year mortgage repays the loan in half the standard time, with higher monthly payments but typically a lower rate and far less total interest paid.

The 28/36 rule is an affordability guideline suggesting housing costs stay under 28 percent of gross income and total debt payments under 36 percent.

A 30-year mortgage spreads repayment over three decades, producing lower monthly payments but more total interest than shorter loan terms.

An accessory dwelling unit, or ADU, is a smaller secondary home on the same lot as a main house — such as a converted garage or backyard cottage — that can be used for family or rental income.

Adverse possession is a legal doctrine that can let someone gain ownership of land they have openly occupied and used without the owner's permission for a period set by state law.

Aging in place is the choice to remain in one's own home while growing older, often with home modifications and in-home support instead of moving to a care facility.

Amortization is repaying a loan through scheduled payments that cover both interest and principal, with early payments going mostly to interest and later payments mostly to principal.

Ancillary probate is a second probate process required in another state where the deceased owned property, in addition to probate in their home state.

An appraisal contingency is a clause that lets a buyer back out or renegotiate if a professional appraisal values the home below the agreed purchase price.

An as-is home sale means the seller will not make repairs, so the buyer accepts the property in its current condition — though the seller usually must still disclose known defects.

An assumable mortgage lets a homebuyer take over the seller's existing loan, keeping its interest rate and terms, instead of getting a brand-new mortgage.

A balloon mortgage has smaller payments for a set period followed by one large lump-sum payment of the remaining balance, which the borrower must pay off or refinance.

A bidding war happens when multiple buyers compete for the same property, driving offers above the asking price and sometimes pushing people to pay more than they planned.

Biweekly mortgage payments mean paying half your monthly amount every two weeks, which results in one extra full payment a year and can shorten the loan and reduce total interest.

A bridge loan is a short-term loan that provides temporary financing to buy a new home before your current one has sold.

BRRRR stands for buy, rehab, rent, refinance, repeat — a real estate investing strategy where you improve a distressed property, rent it out, then refinance to pull your cash back out and fund the next purchase.

A buyer's agent is a real estate professional who represents the person purchasing a home, helping them find properties, make offers, and negotiate terms.

A buyer's market is a housing market with more homes for sale than buyers, which tends to soften prices and give buyers more negotiating power.

The cap rate (capitalization rate) is a rental property's annual net operating income divided by its purchase price, a quick yardstick for comparing investment returns.

A capital improvement is a permanent upgrade that adds value to a property or extends its life, and its cost can often be added to your tax basis to reduce taxable gain when you sell.

A cash flow property is a rental whose income exceeds all of its operating costs and debt payments, putting money in the owner's pocket each month.

A cash-out refinance replaces your mortgage with a larger one and pays you the difference in cash, converting home equity into spendable money.

A Closing Disclosure is the final standardized form listing the exact mortgage terms and closing costs, which the lender must provide for review before you sign.

A cloud on title is any claim, lien, or recorded defect that casts doubt on who legally owns a property and can block or delay its sale until it is cleared up.

In a housing cooperative, you buy shares in a corporation that owns the building rather than owning your unit directly, and those shares give you the right to live in a specific apartment.

Combined loan-to-value (CLTV) measures all loans against a property, including the first mortgage plus any home equity loans or credit lines, as a share of its value.

A comparative market analysis is an estimate of a home's value based on the recent sale prices of similar nearby properties, often prepared by a real estate agent.

A condominium is a housing unit you own individually within a larger building or complex, while sharing ownership of common areas with the other unit owners.

A conforming loan is a mortgage that meets the size limits and standards required for purchase by Fannie Mae and Freddie Mac, generally qualifying for better rates.

A construction loan is a short-term loan that funds the building of a home, releasing money in stages as the work is completed and usually converting to or being replaced by a mortgage.

A continuing care retirement community is a housing arrangement that offers independent living, assisted living, and nursing care on one campus so residents can stay as their needs change.

A contract for deed is a seller-financed home purchase where the buyer makes installment payments but the seller keeps legal title until the contract is fully paid, an arrangement carrying notable risks for buyers.

A conventional loan is a mortgage not insured or guaranteed by a government agency, offered by private lenders and typically requiring solid credit.

Cost segregation is a study that breaks a building's purchase price into components that can be depreciated faster than the structure itself, front-loading tax deductions for rental and commercial property owners.

A deed is the legal document that transfers ownership of real estate from one party to another.

A deed in lieu of foreclosure is voluntarily handing a property back to the lender to settle the mortgage debt and avoid the foreclosure process.

A deed of trust is a document used in some states in place of a mortgage, where a neutral third party holds title to the property until the loan is repaid.

Depreciation is the tax mechanism for deducting the cost of a long-lived business or rental asset gradually over its useful life rather than all at once when purchased.

Recoverable depreciation is the part of a property insurance payout initially held back for wear and tear, which you can collect after you finish repairs or replacement.

Discount points are optional upfront payments to the lender, each costing one percent of the loan amount, in exchange for a permanently lower mortgage rate.

Dwelling coverage is the portion of a homeowners policy that pays to repair or rebuild the physical structure of your house after a covered loss.

Earnest money is a deposit a homebuyer submits with an offer to show they are serious, typically applied to the purchase at closing or forfeited if the buyer backs out without a valid contract reason.

Earthquake insurance covers damage caused by earth movement, a peril most standard home policies leave out.

An easement is a legal right allowing someone to use part of another person's property for a specific purpose, such as a shared driveway or a utility line.

Eminent domain is the government's power to take private property for public use, provided it pays the owner fair compensation.

An encumbrance is any claim or restriction on a property — such as a lien, mortgage, or easement — that can affect its use, value, or transfer.

Escrow is an arrangement where a neutral third party holds money or documents until the conditions of a deal are met, a common safeguard in home purchases.

An escrow account is a lender-managed account that collects part of each mortgage payment to pay the property taxes and homeowners insurance when those bills come due.

An escrow analysis is the yearly review a mortgage servicer does to check whether your escrow account holds enough to cover upcoming tax and insurance bills.

An escrow shortage happens when the money set aside with your mortgage servicer for taxes and insurance falls short of what is owed, usually raising your monthly payment.

Eviction is the legal process a landlord uses to remove a tenant from a rental property, usually for unpaid rent or a lease violation.

Extra principal payments are amounts you pay above your required mortgage payment that go straight toward the loan balance, cutting the interest you owe and paying the loan off faster.

Farmland investing is putting money into agricultural land to earn income from farming and potential appreciation of the land itself.

Fee simple is the most complete form of property ownership, giving the owner full rights to the land and building indefinitely, subject only to laws and any existing encumbrances.

An FHA loan is a government-insured mortgage that allows lower down payments and more flexible credit requirements, in exchange for mandatory mortgage insurance premiums.

A financing contingency is a clause that lets a buyer cancel the purchase without penalty if they are unable to secure a mortgage.

First-time homebuyer programs are federal, state, and local offerings, such as down payment assistance and favorable loan terms, that make a first home purchase more affordable.

Flood insurance covers damage from rising water, which standard homeowners policies exclude, and is often bought through the federal flood program or a private insurer.

A flood zone designation is FEMA's rating of how likely a property is to flood, which affects whether flood insurance is required and how much it costs.

For sale by owner, or FSBO, means selling a home yourself without hiring a listing agent, in order to avoid paying that agent's commission.

Foreclosure is the legal process a lender uses to take and sell a property when the borrower stops making mortgage payments.

A forever home is a house bought with the intent to stay long term, chosen to fit a household's needs for decades rather than as a stepping stone.

Fractional ownership is an arrangement in which several people each own a share of a property and split its use and expenses in proportion to their stake.

The gross rent multiplier is a property's price divided by its gross annual rent, a rough screening tool for comparing rental investments.

Ground rent is a recurring payment a property owner makes to the owner of the land the building sits on, in arrangements where the land and the structure are owned separately.

A rent guarantor is a person, often a parent, who legally agrees to pay a tenant's rent if the tenant cannot, giving the landlord added assurance.

The implied warranty of habitability is a legal rule requiring landlords to keep rental housing safe and livable, with working essentials like heat, water, and plumbing, whether or not the lease says so.

HOA fees are the regular dues homeowners pay to a homeowners association to cover the upkeep of common areas, shared amenities, and certain services.

A home appraisal is a licensed appraiser's professional estimate of a property's market value, which lenders require before approving a mortgage on it.

Home equity is the portion of your home you actually own, meaning its market value minus what you still owe on it.

A home equity conversion mortgage (HECM) is the federally insured type of reverse mortgage, available to older homeowners with substantial equity and subject to federal consumer protections.

A home equity line of credit (HELOC) is a revolving credit line secured by your home that you can draw on as needed, usually at a variable rate.

A home equity loan lets you borrow a lump sum against the equity in your home, usually repaid at a fixed rate, with the home serving as collateral.

A home inspection is a professional examination of a property's condition, covering structure, systems, and safety issues, done before purchase to uncover problems.

A home maintenance budget is money set aside each year for the upkeep and inevitable repairs a house needs, so that costs like a new roof or water heater do not become a financial shock.

A home sale contingency is a clause in a purchase offer that makes the deal dependent on the buyer first selling their current home.

Home selling costs are the total expenses a seller pays to complete a sale, including agent commissions, transfer taxes, title fees, and any concessions or repairs.

A home warranty is a service contract that helps pay to repair or replace major home systems and appliances when they break down from normal wear, separate from homeowners insurance.

A homeowners association, or HOA, is an organization that governs a housing community, sets rules for the properties, and collects dues to maintain shared areas.

Homeowners insurance covers damage to your house and belongings and protects you if someone is injured on your property.

A homestead exemption reduces the taxable value of a primary residence, lowering the owner's property tax bill and, in some states, offering protection from certain creditors.

House flipping is buying a property, renovating it, and reselling it fairly quickly with the goal of earning a profit on the improvements and resale.

House hacking is buying a home you live in while renting out part of it — a spare room, a basement unit, or other units in a small multifamily building — so the rental income helps cover your mortgage.

House poor describes a homeowner whose housing costs consume so much income that little is left for savings, emergencies, or other financial goals.

Housing affordability measures whether typical households can reasonably afford homes in an area, comparing home prices and mortgage costs against local incomes.

A housing bubble is a period when home prices rise far above what incomes and rents can justify, driven by speculation, and eventually risk a sharp fall.

Section 8 housing is a federal rental assistance program that pays part of the rent for eligible low-income families, letting them rent from private landlords.

The housing ratio is the share of gross monthly income going to housing costs, including the mortgage payment, property taxes, and insurance, which lenders use to judge affordability.

An iBuyer is a company that uses technology to make quick cash offers on homes and buy them directly from owners, offering speed and convenience in exchange for a typically lower price.

An impound account, also called an escrow account, is money your mortgage servicer collects with each payment to pay property taxes and insurance on your behalf.

An inspection contingency is a clause giving the buyer the right to have the home professionally inspected and to renegotiate or walk away if serious problems turn up.

An interest-only mortgage lets the borrower pay only interest for an initial period, keeping payments low but building no equity until principal payments begin.

Joint tenancy is a way for two or more people to own property together with equal shares and a right of survivorship, meaning a deceased owner's share passes automatically to the survivors.

A jumbo loan is a mortgage larger than the conforming loan limits, typically requiring stronger credit, more documentation, and a bigger down payment.

A lady bird deed lets you keep control of your home during your life, including the right to sell it, while naming who inherits it automatically at death without probate.

A land loan is financing used to buy a vacant lot or parcel of land, typically with stricter terms than a mortgage because undeveloped land is riskier for lenders.

A landlord is a person or company that owns property and rents it out to tenants in exchange for rent payments.

Landlord insurance covers a property you rent to others, adding the dwelling coverage, liability, and lost-rent protection that a standard homeowners policy withholds once a home is no longer owner-occupied.

A lease agreement is the legal contract between a landlord and tenant setting the rent, term, and rules for occupying a property.

A lease break fee is a charge a tenant pays to end a lease early, often set as a flat amount or a few months' rent in the lease agreement.

A lien is a legal claim against property that secures a debt, and it generally must be paid off before the property can be sold with clear title.

A life estate gives someone the right to use a property for the rest of their life, after which it passes automatically to another named person.

A like-kind exchange — named for Section 1031 of the tax code — lets a real estate investor sell an investment property and defer capital gains tax by reinvesting the proceeds in another investment property under strict deadlines.

A listing agent is a real estate professional who represents the seller, marketing the property and negotiating offers on the seller's behalf.

A Loan Estimate is the standardized form lenders must send shortly after you apply for a mortgage, laying out the projected rate, payment, and closing costs so offers can be compared side by side.

A loan modification is a permanent change to a mortgage's terms, such as the rate or repayment timeline, made to help a struggling borrower keep the home.

The loan-to-value (LTV) ratio compares a loan's balance to the property's value, a key measure lenders use to gauge risk and set loan terms.

A manufactured home is a house built entirely in a factory to federal construction standards and then transported to its site, distinct from a traditional home built on location.

The median home price is the middle price in a set of home sales, where half sold for more and half for less, often used to track housing market trends.

A multiple listing service, or MLS, is a shared database real estate agents use to list properties for sale and see each other's listings.

Mortgage forbearance is a temporary pause or reduction in mortgage payments a servicer grants during financial hardship, with the missed amounts still owed later.

The mortgage interest deduction lets homeowners who itemize deduct interest paid on a home loan, up to loan-size limits set by federal law.

A mortgage note is the legal document in which a borrower promises to repay a home loan, spelling out the amount, interest rate, and repayment terms.

Mortgage points are upfront fees paid at closing, each equal to one percent of the loan amount, most often used to buy down the interest rate.

A mortgage rate lock is a lender's guarantee that your quoted interest rate will hold for a set period while your loan closes, protecting you if rates rise in the meantime.

A mortgage recast is when you make a large lump-sum payment toward your loan's balance and the lender recalculates your monthly payment over the remaining term, lowering it without refinancing.

A mortgage servicer is the company that collects your mortgage payments, manages your escrow account, and handles day-to-day loan administration, and it is often not the lender that originally made the loan.

A mortgage statement is the periodic summary from your loan servicer showing your balance, payment, interest, and escrow activity.

Mortgage underwriting is the lender's detailed review of your credit, income, assets, and the property itself before giving final approval on a home loan.

Moving costs are the expenses of relocating a household, such as movers, truck rental, packing supplies, and deposits, which are easy to underestimate when budgeting for a move.

A multigenerational household is a home where three or more generations, such as grandparents, parents, and children, live together and often share expenses.

Negative equity means owing more on an asset — most commonly a car or a home — than the asset is currently worth.

The passive activity loss rules generally block losses from rental properties and other passive investments from offsetting wages or business income — the losses are suspended until passive income or a sale frees them.

A payoff statement is a document from your lender stating the exact amount needed to fully pay off a loan by a specific date, including any accrued interest.

A piggyback loan is a second mortgage taken out alongside the primary mortgage at purchase, often used to avoid private mortgage insurance or stay under loan-size limits.

A mortgage pre-qualification is an informal estimate of how much you might be able to borrow based on self-reported finances, without the verification behind a pre-approval.

A prepayment penalty is a fee some lenders charge for paying off a loan earlier than scheduled, compensating them for interest they would otherwise have earned.

The price-to-rent ratio divides a home's purchase price by a year's rent for a comparable home, helping gauge whether buying or renting is the better value in a market.

Private mortgage insurance (PMI) protects the lender if a borrower defaults, and is typically required on conventional loans when the down payment is under 20 percent.

Deed fraud, also called home title theft, is a scam in which a criminal forges paperwork to transfer a property's ownership without the real owner's knowledge, often to borrow against or sell the home.

A property manager is a professional hired by a rental owner to handle tenants, maintenance, rent collection, and day-to-day operations in exchange for a fee.

A property survey is a professional measurement of a parcel's exact boundaries, dimensions, and features, used to confirm what land you actually own or are buying.

Property tax is the recurring local tax on real estate, based on the property's assessed value, that typically funds schools, roads, and other local services.

A property tax appeal is the formal process of challenging your home's assessed value with the local taxing authority in an effort to lower your property tax bill.

A property tax assessment is the value a local government assigns to your property to calculate how much property tax you owe.

Public housing is government-owned rental housing offered at reduced rents to eligible low-income households, the elderly, and people with disabilities.

A quitclaim deed transfers whatever ownership interest one person has in a property to another without guaranteeing that the title is clear.

Home environmental hazards such as radon, asbestos, lead paint, and mold can affect a property's safety and value, and sellers are often required to disclose known problems to buyers.

A rate-and-term refinance replaces your existing mortgage with a new one to get a better interest rate or a different payoff timeline, without taking cash out.

A real estate agent commission is the fee, usually a percentage of the sale price, paid to the agents involved in a property transaction.

Real estate crowdfunding is an arrangement where many investors pool small amounts of money online to fund a property or development, sharing in the income or profits.

A real estate investment trust, or REIT, is a company that owns or finances income-producing property and lets people invest in real estate by buying shares, much like buying stock.

A real estate syndication is a group investment in which a sponsor manages a larger property and passive investors contribute capital in exchange for a share of the returns.

Real estate wire fraud is a scam where criminals impersonate a title company, agent, or lender and send fake wiring instructions to a homebuyer, redirecting the down payment or closing funds to the thief's account.

A deed of reconveyance is the document a lender issues to transfer a property's title back to the owner once the mortgage is fully paid off.

Refinancing is replacing an existing loan with a new one — typically to get a lower interest rate, a different repayment term, or a lower monthly payment.

Rent is the payment a tenant makes to occupy property they do not own, normally under a lease that fixes the amount and the term. It buys use of the property and none of its equity, and it excludes the ownership costs a landlord carries.

Rent control refers to state or local laws limiting how much landlords can raise rents, intended to keep housing affordable for existing tenants.

Rent increase rules are the laws and lease terms that govern how much and how often a landlord can raise rent, which vary widely by state and local rent-control ordinances.

Rent reporting is a service that adds your on-time rent payments to your credit reports, helping renters build credit history from a bill they already pay.

Rent-to-own is an agreement where a tenant rents a home with the option or obligation to buy it later, sometimes with part of the rent credited toward the purchase.

A rental application fee is a charge landlords collect to cover the cost of screening a prospective tenant, such as running a credit and background check.

Rental income is the money collected from tenants, which is taxable but can be offset by deductions such as mortgage interest, repairs, and depreciation.

A rental property is real estate owned to generate income from tenants, combining rental cash flow with potential appreciation and distinct tax treatment.

Renters insurance covers a tenant's personal belongings and personal liability, since the landlord's policy covers only the building itself.

Renting with bad credit refers to the difficulty of qualifying for a lease when your credit history is weak, which landlords may offset by requiring a larger deposit, a cosigner, or proof of income.

Replacement cost coverage pays to repair or replace damaged property with new items of similar kind, without subtracting for wear and tear.

Residential energy credits were federal tax credits for home efficiency upgrades and clean-energy systems like solar panels — the One Big Beautiful Bill Act ended them for expenses after 2025.

A 55-plus community, sometimes called a retirement village, is age-restricted housing built for older adults, often with shared amenities and lower-maintenance living.

A reverse mortgage lets older homeowners convert home equity into cash or income without selling, with the loan repaid when they move out, sell, or die.

The SALT deduction is the itemized federal deduction for state and local taxes — income or sales taxes plus property taxes — which is subject to an annual cap set by federal law.

Schedule E is the Form 1040 attachment for reporting income from rental real estate, royalties, and pass-through entities like partnerships and S corporations.

A second home is a property you own in addition to your primary residence, such as a vacation place, and it carries different tax and mortgage rules than a main home.

The Section 121 exclusion lets homeowners exclude up to $250,000 of gain ($500,000 for joint filers) when selling a primary residence they owned and lived in for at least two of the previous five years.

A security deposit is money a tenant pays a landlord upfront to cover potential damage or unpaid rent, refundable when the lease ends if its terms are met.

A seller disclosure is a document in which a home seller reports known defects and problems with the property so buyers can make an informed decision.

Seller financing is an arrangement where the home seller acts as the lender, letting the buyer make payments directly to them instead of borrowing from a bank.

A seller's market is a housing market with more buyers than available homes, which tends to push prices up and give sellers the upper hand.

A short sale is selling a home for less than the remaining mortgage balance with the lender's approval, an alternative to foreclosure for underwater homeowners.

Snowbird finances covers the money issues of splitting the year between two homes in different climates, such as maintaining two residences and navigating state residency rules.

A special assessment is an extra one-time charge an HOA or local government levies on property owners to pay for a large repair or improvement not covered by regular dues.

Home staging is arranging furniture and décor to make a property more appealing to buyers, which sellers often pay for to help a home sell faster or for a higher price.

A starter home is a smaller, more affordable first house bought with the expectation of moving up later as income and family needs grow.

Subletting is when a tenant rents out all or part of their leased space to another person while remaining responsible to the landlord under the original lease.

Tenancy by the entirety is a form of joint property ownership available only to married couples in some states, treating them as a single owner and offering protection from one spouse's individual creditors.

Tenancy in common is shared property ownership where each owner holds a distinct share that can be unequal, and each share can be sold or passed to heirs independently.

Tenant rights are the legal protections renters have, such as a habitable home, proper notice before entry or eviction, and the return of a security deposit, which vary by state and locality.

A timeshare is a shared-ownership or right-to-use arrangement that gives you the ability to use a vacation property for a set period each year, along with ongoing fees.

A timeshare exit scam is a fraud that targets owners desperate to get out of a timeshare, charging large upfront fees for exit services that are never delivered.

A title defect is a problem in a property's ownership record, such as a lien, error, or competing claim, that can cloud the right to sell or transfer it.

Title insurance protects a homebuyer or lender against ownership disputes and hidden claims on a property, in exchange for a one-time premium paid at closing.

A title search is a review of public records to confirm a property's legal ownership and uncover any liens or claims before a sale closes.

A townhouse is a multi-floor home that shares one or more walls with neighboring units, where you typically own both the structure and the land beneath it.

A transfer on death deed lets you name who will inherit your real estate when you die, passing the property outside of probate.

An underwater mortgage means you owe more on your home loan than the property is currently worth, leaving you with negative equity.

A USDA loan is a government-backed mortgage for homes in eligible rural and some suburban areas, offering low or no down payment to income-qualified buyers.

A utility deposit is an upfront payment a utility company may require before starting service, typically refunded after you build a record of on-time payments.

A VA loan is a mortgage guaranteed by the Department of Veterans Affairs for eligible service members, veterans, and surviving spouses, often requiring no down payment.

The vacancy rate is the percentage of rental units that sit empty over a given period, a key gauge of how much income a rental property is actually producing.

A vacation home is a property owned mainly for personal getaways, which may also be rented out part of the year to help offset its costs.

A warranty deed transfers property ownership along with the seller's legal promise that the title is clear and they have the right to sell it.

Wholesaling real estate is a strategy where you put a property under contract and then assign that contract to another buyer for a fee, without actually purchasing the property yourself.

Zoning is the set of local government rules that dictate how land in a given area can be used, such as for housing, business, or industry, and what can be built there.