Buying a home involves its own language. Don’t let the jargon intimidate you. Here’s a guide to the terms you may encounter when you begin the home-buying process.
1 BD/1 BA — One bedroom, one bathroom
DR — Dining room
FP — Fireplace
FB — Full bathroom. A bathroom with a toilet, sink and shower and/or bathtub.
HB — Half bathroom. A bathroom with only a toilet and sink. Also known as a powder room.
LR — Living room
W/D — Washer dryer
For example, a “2 Bd, 1 Ba w/Kitchen, DR, LR w/ FP” translates to a two-bedroom home with one bathroom, a dining room, and living room with fireplace.
Real Estate Terms
ARM — Adjustable-Rate Mortgage. A mortgage loan where at first the initial interest rate is fixed for a time period but then can vary until the end of the loan (See Fixed-rate mortgage below to contrast).
APR — Annual Percentage Rate. APR is a measure of the cost of borrowing money. APR includes the interest rate, points, fees and other charges paid to obtain a loan.
Arms-length transaction — Both parties to a transaction are acting independently to get the best deal they can (buyers want a low price; sellers want a high price).
DTI — Debt-to-Income. The total percent of a borrower’s income that is paid toward debt each month. A borrower’s DTI affects his credit rating. Generally, 43% is the highest DTI ratio a borrower can have and still get qualified for a mortgage, but lenders prefer a ratio lower than 36%.
Fixed-rate mortgage — A mortgage loan with an interest rate that won’t change during the length of the loan.
FSBO — For Sale By Owner. The owner of the property is selling without a real estate agent.
LTV — Loan-to-Value. LTV is the size of your mortgage in relation to the value of the property you want to buy. For example, if you have a mortgage of $270,000 and you’re buying a property that costs $350,000, your LTV would be 77%.
This means that 77% of the property’s value is paid for by your mortgage and 23% is paid for out of your own money (your deposit). The higher your LTV, the riskier it is for the lender offering you a mortgage.
MLS — Multiple Listing Service. A local or regional real estate service that compiles available properties for sale submitted by real estate brokers and agents. An MLS can only be accessed by real estate brokers and agents who pay a fee to access it. The U.S. has more than 900 MLS systems, each with its own rules and a database accessible only to its members.
Preapproved – A preapproval means that a lender has examined your credit and other expenses.
Prequalifed – An informal estimate of how much a buyer can afford to borrow for a mortgage.
PITI — Principal, Interest, Taxes and Insurance. The major homeownership costs included in many monthly mortgage payments.
PMI — Private Mortgage Insurance. Insurance that protects a lender against loss if a borrower defaults on a loan. PMI is required for conventional loans that have less than a 20% down payment.
Rate lock — An agreement between a borrower and a lender that allows the borrower to lock in an interest rate on a mortgage for a specified period.
Title insurance — Compensates the buyer or lender if title defects, liens or competing claims of ownership on a property arise after closing.
Under contract — A seller has accepted the buyer’s offer, but any contingencies have yet to be met.
Wading through the jargon of real estate can be tricky. Our team is here to translate the complexities and help you navigate the bureaucracy. When you’re looking for a local real estate agent who will give you advice you can trust, give our team a call.