Real Estate Glossary

A mortgage with an interest rate that changes periodically based on a market index. Typically offers a lower initial rate than a fixed-rate mortgage, but carries the risk of rate increases over time.

The process of paying off a loan through regular scheduled payments over time. Early payments are mostly interest; later payments are mostly principal.

A professional assessment of a property's market value conducted by a licensed appraiser. Lenders require an appraisal before approving a mortgage to ensure the loan amount does not exceed the property's value.

A property sold in its current condition, with the seller making no repairs or improvements. Buyers accept the property with all known and unknown defects.

A mortgage with low monthly payments for a set period, followed by a large lump-sum 'balloon' payment of the remaining balance. Common in commercial real estate.

A short-term loan used to bridge the gap between buying a new home and selling an existing one. Typically carries higher interest rates due to its temporary nature.

A real estate agent who represents the buyer's interests in a transaction. In Connecticut, buyer's agents have a fiduciary duty to act in the buyer's best interest.

A real estate market condition where supply exceeds demand, giving buyers more negotiating power. Characterized by longer days on market, lower prices, and more seller concessions.

A metric used to evaluate investment properties. Calculated as Net Operating Income (NOI) divided by the property's purchase price or current value. A higher cap rate generally indicates higher potential return and higher risk.

An investment metric that measures the annual cash income earned on the cash invested in a property. Calculated as annual pre-tax cash flow divided by total cash invested.

A property title free of liens, encumbrances, or legal questions about ownership. Lenders require clear title before approving a mortgage.

The final step in a real estate transaction where ownership is transferred from seller to buyer. All documents are signed, funds are disbursed, and keys are exchanged.

Fees and expenses paid at the closing of a real estate transaction, beyond the purchase price. Typically range from 2–5% of the loan amount for buyers and 6–10% of the sale price for sellers.

A standardized form provided to borrowers at least 3 business days before closing that outlines all final loan terms, costs, and fees.

An evaluation of a property's value based on recent sales of similar properties in the same area. Used by agents to help sellers price their homes and buyers make competitive offers.

A condition that must be met for a real estate contract to become binding. Common contingencies include financing, home inspection, and appraisal.

A mortgage not insured or guaranteed by a government agency. Typically requires a higher credit score and down payment than FHA loans but offers more flexibility.

A Connecticut state tax paid by the seller when transferring real property. The base rate is 0.75% of the sale price; higher rates apply to properties over $800,000.

The number of days a property has been listed for sale. A key indicator of market conditions and property desirability.

A lender's measure of a borrower's ability to manage monthly debt payments. Calculated as total monthly debt payments divided by gross monthly income. Most lenders prefer a DTI below 43%.

A legal document that transfers ownership of real property from one party to another. Must be signed, notarized, and recorded with the local town clerk in Connecticut.

Failure to meet the legal obligations of a mortgage, typically by missing payments. Can lead to foreclosure if not resolved.

The portion of the purchase price paid upfront by the buyer, not financed by a mortgage. Conventional loans typically require 3–20%; FHA loans require as little as 3.5%.

The process of thoroughly investigating a property before purchase, including inspections, title searches, zoning reviews, and financial analysis.

A good-faith deposit made by the buyer when submitting an offer. Typically 1–3% of the purchase price. Applied toward closing costs or down payment at closing.

A legal right for one party to use another's property for a specific purpose, such as a utility company's right to access power lines on private land.

The difference between a property's current market value and the outstanding balance of any mortgages or liens. Equity builds through appreciation and mortgage paydown.

A neutral third party that holds funds and documents during a real estate transaction until all conditions are met. Also refers to the account where property taxes and insurance are held by the lender.

Federal law that prohibits discrimination in the sale, rental, or financing of housing based on race, color, national origin, religion, sex, familial status, or disability.

A mortgage insured by the Federal Housing Administration. Allows lower down payments (3.5%) and more flexible credit requirements, making it popular with first-time buyers.

A mortgage with an interest rate that remains constant for the entire loan term. Provides predictable monthly payments and protection against rising rates.

The legal process by which a lender takes possession of a property after the borrower defaults on the mortgage. Connecticut is a judicial foreclosure state, requiring court involvement.

A document (now replaced by the Loan Estimate) that outlines estimated closing costs and loan terms. Lenders must provide a Loan Estimate within 3 business days of a loan application.

A quick valuation metric for rental properties. Calculated as purchase price divided by annual gross rent. Lower GRM generally indicates a better investment.

A revolving line of credit secured by the equity in your home. Functions like a credit card with a variable interest rate, typically used for home improvements or large expenses.

A professional examination of a property's condition, including structure, systems, and components. Strongly recommended for all buyers; typically costs $400–$600 in Connecticut.

A property tax reduction available to homeowners who use the property as their primary residence. Connecticut municipalities offer varying exemption amounts.

A document (largely replaced by the Closing Disclosure) that itemizes all charges and credits to the buyer and seller in a real estate transaction.

A clause in a purchase contract that allows the buyer to have the property professionally inspected and to negotiate repairs, credits, or cancellation based on the findings.

The percentage of the loan principal charged by the lender for borrowing money. Distinct from APR, which includes fees and other costs.

A foreclosure process that requires court involvement. Connecticut is a judicial foreclosure state, which typically makes the process longer than non-judicial states.

A mortgage that exceeds the conforming loan limits set by Fannie Mae and Freddie Mac. In most of Connecticut, the 2024 conforming limit is $766,550 for a single-family home.

A legal claim against a property as security for a debt. Common liens include mortgages, property tax liens, and mechanic's liens. Must be resolved before a clear title can be transferred.

A contract between a property owner and a real estate agent authorizing the agent to market and sell the property. Specifies commission, listing price, and duration.

A standardized form provided within 3 business days of a mortgage application that outlines estimated loan terms, monthly payments, and closing costs.

The ratio of the mortgage amount to the appraised value of the property. A lower LTV indicates more equity and typically results in better loan terms.

The price a willing buyer would pay and a willing seller would accept for a property in an arm's-length transaction, with both parties having reasonable knowledge of the facts.

A database used by real estate agents to share property listings. In Connecticut, the primary MLS is SmartMLS. Listings on the MLS receive maximum market exposure.

A loan secured by real property. The borrower (mortgagor) pledges the property as collateral to the lender (mortgagee). Failure to repay can result in foreclosure.

For investment properties: gross rental income minus operating expenses (taxes, insurance, maintenance, management), before debt service. A key metric for evaluating investment properties.

A formal written notice from a landlord to a tenant to vacate the premises. In Connecticut, the required notice period varies by reason (3 days for non-payment, 15 days for lease violations).

A formal proposal to purchase a property at a specified price and terms. Becomes a binding contract when accepted by the seller.

Insurance that protects the buyer against losses from title defects, liens, or ownership disputes that existed before the purchase. A one-time premium paid at closing.

Insurance required by lenders when the down payment is less than 20% of the purchase price. Protects the lender (not the buyer) against default. Can be removed once equity reaches 20%.

A lender's conditional commitment to provide a mortgage up to a specified amount, based on a review of the borrower's credit, income, and assets. Stronger than pre-qualification.

An informal estimate of how much a borrower may be able to borrow, based on self-reported financial information. Not a commitment to lend.

The original amount borrowed in a mortgage, excluding interest. Monthly payments reduce the principal balance over time through amortization.

The binding contract between buyer and seller that outlines all terms of the real estate transaction, including price, contingencies, and closing date.

A deed that transfers whatever interest the grantor has in a property, without any warranties of title. Commonly used between family members or to clear title issues.

In Connecticut, it is customary (and often required by lenders) for both buyers and sellers to be represented by a real estate attorney at closing.

A real estate agent who is a member of the National Association of REALTORS® (NAR) and adheres to its Code of Ethics. Not all licensed agents are REALTORS®.

Replacing an existing mortgage with a new one, typically to obtain a lower interest rate, reduce monthly payments, or access equity.

A document in which the seller discloses known material defects and conditions of the property. Required in Connecticut for residential sales.

A real estate market where demand exceeds supply, giving sellers more negotiating power. Characterized by multiple offers, above-asking prices, and short days on market.

A sale in which the lender agrees to accept less than the full mortgage balance owed. Requires lender approval and typically takes longer than a conventional sale.

Legal ownership of a property. A clear title means the property is free of liens, encumbrances, or disputes.

An examination of public records to verify the seller's right to transfer ownership and to identify any liens, easements, or other encumbrances on the property.

A local official in Connecticut who determines the assessed value of properties for property tax purposes. Assessed value is typically 70% of fair market value.

A property for which an offer has been accepted but the sale has not yet closed. Also called 'pending' in some markets.

The process by which a lender evaluates the risk of a mortgage application by verifying the borrower's income, assets, credit, and the property's value.

A mortgage guaranteed by the U.S. Department of Veterans Affairs, available to eligible veterans, active-duty service members, and surviving spouses. Requires no down payment or PMI.

A final inspection of the property by the buyer, typically 24–48 hours before closing, to verify that the condition is as agreed and any required repairs have been completed.

A deed in which the seller guarantees clear title to the property and will defend against any future claims. The most protective type of deed for buyers.

Local government regulations that dictate how land and buildings can be used in specific areas (residential, commercial, industrial, etc.). Zoning affects what you can build or operate on a property.