Real Estate Terms to Know

Thinking of buying or selling your Memphis home? Get a leg up on the process by learning some of the real estate lingo you are likely to face in the coming weeks. Our guide will have you speaking like a real estate professional in no time.

APR - Stands for “annual percentage rate,” and is the most accurate indicator of the cost of a mortgage loan. The APR reflects all of the closing costs, which can total as much as 3 to 5 percent of the loan. The best way to price-compare between various mortgages is by looking at the APR rather than the interest rate. The APR can be found on your loan disclosure documents.

Appraisal - Refers to a qualified appraiser providing a written estimate of a property's value. This is considered the most definitive expression of a property's value (short of an actual arms-length transaction) and is often required by lenders.

ARM - Stands for “adjustable-rate mortgage,” a type of mortgage in which the interest rate fluctuates based on the prevailing rates in the overall economy. Many ARMs will lock a fixed interest rate for a limited period of time, such as 5 years, 7 years or 10 years. Many will also say that a rate increase will be “capped” at a certain maximum, such as 2 percent.

Closing Costs - A blanket term for all of the ancillary costs associated with borrowing a mortgage and buying a home. This includes title insurance, a loan origination fee, title search fees, recording fees, underwriting fees, and more.

Contingency - When a buyer submits an offer to purchase a property, they commonly make the offer “contingent upon” some condition, such as financing or a favorable home inspection. This means the offer “hinges upon” that condition playing out favorably, and can be withdrawn if the condition isn't met.

Depreciation - Many people believe that their home value rises. In fact, the value of the underlying land may rise, but the actual structure depreciates each year. The roof, carpet, paint, HVAC and other components of the home experience aging and decay. (In markets with rapid appreciation, though, the retail value of the structure might outpace depreciation.) Depreciation is reported on IRS Form 4562.

FHA - Refers to the U.S. Federal Housing Administration. Many first-time homebuyers opt for loans that are insured by the FHA. Known as “FHA loans,” these require a smaller downpayment (as low as 3.5 percent).

LTV - “Loan-to-value.” This refers to the ratio of the loan amount, relative to the overall value of a property. For example: a $70,000 loan on a $100,000 property will have a 70 percent LTV ratio.

RE - This is an easy term: “RE” simply stands for “real estate.” Many professionals use this shorthand.

REALTOR - Fun fact: Not all real estate agents are REALTORS. A real estate agent is an individual who is licensed to buy and sell real estate. A REALTOR is an agent or broker who belongs to the National Association of REALTORS.

Good look as you move to Memphis and buy/sell your home!