Glossary of Terms - Real Estate in Georgia

A

Adjustable Rate Mortgage (ARM)

A home loan whose payments adjust periodically based on the rise and fall of interest rates. These adjustments usually occur within predetermined limits called CAPS. Typically these loans offer a lower interest rate initially.

Amortization

The gradual repayment of a mortgage loan through scheduled monthly payments that include both principal and interest. Early payments are mostly interest, while later payments apply more toward the principal balance.

Appraisal

An estimate of value done by a licensed or certified appraiser. Lenders usually require that the property appraise for the selling price before they will approve a mortgage loan.

Appreciation

An increase in the value of a property over time due to market conditions, improvements, or other factors. Appreciation is one of the primary ways homeowners build wealth through real estate ownership.

B

Buyer's Agent

A real estate agent who represents the buyer's interests in a real estate transaction. The buyer's agent helps find suitable properties, negotiates on behalf of the buyer, and guides them through the purchase process.

C

Cap

In an adjustable rate mortgage, the limit on how much the interest rate or monthly payment can change during an adjustment period and/or over the life of the loan.

Closing

The final step in the home buying process. The buyer and seller meet to execute documents, transfer title, and exchange funds.

Closing Costs

Costs charged by the lender in connection with the issuance of a mortgage loan. They include such items as attorney's fees, surveys, origination fees, recording costs, and others. They do not include prepaid items charged to the purchaser and set aside for future payment of taxes and insurance.

Closing Statement

The statement listing the financial settlement between buyer and seller, as well as the costs each will pay.

Contingency

In a real estate contract, another word for "IF." Such as, "I will purchase your house contingent upon (if) obtaining a specific type of loan."

Conventional Mortgage

A mortgage loan made directly to a borrower without benefit of any government insurance or guarantee.

Comparative Market Analysis (CMA)

A report prepared by a real estate agent that compares a property to similar recently sold homes in the area to determine an appropriate listing or offer price. Also used by buyers to ensure they're making a fair offer.

Credit Score

A numerical rating that represents a borrower's creditworthiness based on their credit history. Lenders use credit scores to determine loan eligibility and interest rates. Higher scores typically qualify for better mortgage terms.

D

Debt-to-Income Ratio (DTI)

A percentage calculated by dividing your total monthly debt payments by your gross monthly income. Lenders use DTI to evaluate your ability to manage monthly payments and repay a mortgage. Most lenders prefer a DTI of 43% or lower.

Deed

A written instrument that, when executed and delivered, conveys title to or an interest in real estate.

Down Payment

A portion of the purchase price that the lender requires the buyer to pay at closing. This is separate from closing costs or prepaid items. On the day of closing it is the buyers' "equity" in the home.

Due Diligence Period

A specified timeframe in a real estate contract during which the buyer can conduct inspections, obtain financing, and investigate the property. In Georgia, this period allows buyers to terminate the contract for any reason and receive their earnest money back.

E

Earnest Money (or Binder)

Money placed on deposit by the buyer to show serious intent to the seller. These funds are applied to the down payment at closing. Typically the money is refunded if one of the contingencies in the contract is not met.

Equity

The difference in the value of the property and the amount of money owed on the property.

Escrow Account

A savings account established for the buyer by the lender. A portion of the buyers' monthly payment is deposited into this account for payment of future taxes and insurance.

F

FHA (Federal Housing Administration)

A subsidiary of the Department of Housing and Urban Development that insures lenders against losses on loans covered by their programs (FHA loans).

Fixed Rate Mortgage

A loan whose interest rate never changes throughout its duration.

Fixture

Any item attached to property which, by its attachment, becomes a part of the real estate. Examples include ceiling fans, light fixtures, towel bars, flowers, trees, fences, built-in appliances, etc. These items become a part of the real estate and are sold with it unless they are specifically excluded in the sales contract.

H

Hazard Insurance (also known as Homeowners Insurance)

This insurance protects you and your lender against damage from hazards such as fire and wind storm.

HOA (Homeowners Association)

An organization in a subdivision or planned community that makes and enforces rules for the properties and residents. Homeowners pay monthly or annual dues that cover maintenance of common areas, amenities, and sometimes exterior maintenance.

Home Inspection

A professional examination of a property's condition, typically conducted during the due diligence period. The inspector evaluates the home's structure, systems, and components, providing a detailed report that helps buyers make informed decisions.

L

Listing Agreement

A written employment agreement in which the property owner authorizes a real estate broker to act as agent in the sale and marketing of their property.

Loan-To-Value Ratio

The ratio (%) obtained by dividing the loan amount by the selling price. Example: A $90,000 loan on a $100,000 house would result in a 90% loan-to-value ratio.

M

MLS (Multiple Listing Service)

A database used by real estate agents to share information about properties for sale. The MLS allows agents to access comprehensive listing data and helps ensure properties reach the widest possible audience of potential buyers.

Mortgage

A written instrument used to pledge real estate as collateral for a loan. See Security Deed.

Mortgage Insurance

Insurance required by lenders to help pay off a loan in the event of foreclosure.

N

Note

A written promise to repay a loan. In real estate transactions the note is secured by a mortgage or, in Georgia, by a security deed.

O

Origination Fee

One of the fees charged by the lender for arranging the loan. Part of the closing costs.

P

Pending

A listing status indicating that a property is under contract with a buyer, but the sale has not yet closed. Pending properties are typically no longer accepting new offers, though backup offers may sometimes be considered.

Personal Property

Property which by nature is not attached to the land and therefore moveable. It is not a part of the real property. Examples: automobiles, non-built-in appliances, draperies, etc.

PITI

An acronym for Principal, Interest, Taxes, and Insurance–the four components that typically make up a monthly mortgage payment. Understanding PITI helps buyers accurately budget for homeownership costs.

Points

Fees paid to a lender at closing to reduce the interest rate on a mortgage. One point equals 1% of the loan amount. Paying points upfront can lower your monthly payment over the life of the loan.

Prepaid Items

Items paid to the lender at closing to establish the buyer's escrow account for payment of taxes and insurance.

Preapproval

A formal commitment from a lender stating the maximum loan amount a buyer qualifies for, based on verified income, assets, credit history, and employment. Preapproval carries more weight than prequalification and shows sellers that a buyer is serious and financially capable of completing the purchase.

Prequalification

An informal assessment by a lender of how much mortgage financing a potential buyer may be able to obtain, based on preliminary information about income, assets, and debts. Unlike preapproval, prequalification does not involve verification of financial documents or a credit check, making it a less reliable indicator of actual borrowing power.

Private Mortgage Insurance (PMI)

Insurance required by lenders when the down payment is less than 20% of the home's purchase price. PMI protects the lender if the borrower defaults. It can typically be removed once the homeowner reaches 20% equity.

Prorate

To divide monies, or obligations into fair shares between buyers and sellers. Example: Taxes are usually prorated between buyers and sellers based on the number of days during the tax year that each owns the property.

R

Real Property

Land or any improvements or attachments to the land such as buildings, trees, fences, fixtures, etc.

S

Security Deed

The instrument used in Georgia instead of a mortgage. It pledges real estate as collateral for a loan.

Survey

A professional measurement of a property's boundaries, dimensions, and features. Surveys identify property lines, easements, encroachments, and other important details. Lenders typically require a survey before closing on a home purchase in Georgia.

T

Title

The legal right of ownership of property.

Title Defect

A problem or flaw in the chain of ownership that must be corrected before good title can be transferred.

Title Insurance

Insurance required by lenders to protect against an undiscovered defect in the title to real estate.

U

Under Contract

A listing status indicating that a seller has accepted a buyer's offer and both parties have signed a purchase agreement. The property remains under contract until closing or until the contract is terminated. Similar to "pending" but may still be in the due diligence period.

V

VA Loan

A mortgage loan guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. VA loans often require no down payment and have competitive interest rates with no private mortgage insurance requirement.