Real Estate & Financial Terms, Simplified
Understanding financial terminology should feel approachable, not overwhelming. Browse terms by letter below for quick, easy reference throughout your real estate journey.
A
Accounts Payable
Money owed by a business or individual for goods or services received but not yet paid.
Accounts Receivable Financing
A financing method where outstanding invoices are used as collateral for funding.
ACH Loan
A loan repaid through automatic withdrawals from a checking account.
B
Balance Sheet
A financial statement showing assets, liabilities and equity at a specific point in time.
Bridge Loan
A short-term loan used until permanent financing or the sale of a property is secured.
C
Cash Flow
The movement of money coming into and going out of a household or business.
Closing Costs
Expenses paid at the completion of a real estate transaction beyond the property price.
D
Debt-to-Income Ratio
A comparison of monthly debt payments to gross monthly income used by lenders to evaluate borrowing ability.
Down Payment
The upfront portion of a home purchase paid in cash by the buyer.
E
Earnest Money
A deposit showing a buyer’s serious intent to purchase a property.
Equity
The difference between a property’s value and the amount still owed on it.
F
Fair Market Value
The price a property would likely sell for under current market conditions.
Fixed Rate Mortgage
A mortgage with an interest rate that remains unchanged throughout the loan term.
G
Gross Income
Income earned before taxes and deductions are taken out.
H
Home Equity
The portion of a home’s value owned outright by the homeowner.
Home Inspection
A professional evaluation of a property’s condition before purchase.
I
Interest Rate
The percentage charged by a lender for borrowing money.
Investment Property
Real estate purchased primarily to generate income or appreciation.
J
Joint Tenancy
A form of shared property ownership where rights automatically transfer to surviving owners.
K
Key Rate
An important benchmark interest rate influencing borrowing costs.
L
Liability
A financial obligation or debt owed to another party.
Loan Estimate
A document outlining estimated mortgage terms and closing costs.
M
Market Value
The current value a property would likely sell for in the open market.
Mortgage Insurance
Insurance protecting lenders if a borrower defaults on a mortgage.
N
Net Worth
The total value of assets minus liabilities.
O
Origination Fee
A lender fee charged for processing a new loan.
P
Pre-Approval
A lender’s conditional commitment stating how much a buyer may borrow.
Principal
The original amount borrowed before interest.
Q
Qualified Mortgage
A mortgage meeting standards established to help ensure borrower affordability.
R
Refinancing
Replacing an existing loan with a new loan, often to secure better terms.
Return on Investment
A measure of profitability compared to the original investment amount.
S
Seller Concessions
Costs the seller agrees to pay to help reduce a buyer’s expenses.
Short Sale
The sale of a property for less than the amount owed on the mortgage.
T
Title Insurance
Insurance protecting against ownership disputes or title issues.
Truth in Lending Act
A federal law requiring lenders to disclose borrowing terms and costs.
U
Underwriting
The process lenders use to evaluate loan risk and approve financing.
V
Variable Interest Rate
An interest rate that can change over time based on market conditions.
W
Wire Transfer
An electronic transfer of funds between financial institutions.
X
Xenocurrency
A currency traded outside its domestic borders.
Y
Yield
The income earned from an investment, typically expressed as a percentage.
Z
Zero-Based Budgeting
A budgeting method where every dollar is assigned a specific purpose.