A
Adjustable-Rate Mortgage (ARM) — A loan whose interest rate stays fixed for an initial period, then resets at set intervals based on a market index. Payments can rise or fall after each reset.
Amortization — Paying off a loan gradually through scheduled payments. Early payments go mostly toward interest, and later ones go mostly toward principal.
Annual Percentage Rate (APR) — A yearly measure of what a loan costs, combining the interest rate with certain fees. It helps compare loans, but it is not the same as your interest rate.
Appraisal — An independent estimate of a home's market value, ordered by the lender. It is separate from a home inspection, which looks at condition rather than value.
Appraisal Gap — The difference between a home's appraised value and the agreed purchase price. If the appraisal comes in lower, the buyer and seller must renegotiate or the buyer must cover the difference in cash.
Appreciation — An increase in a property's value over time.
Assumable Mortgage — A loan a buyer can take over from the seller, keeping the original terms. Most conventional loans are not assumable; some government-backed loans are.
B
Backup Offer — A second offer accepted by a seller in case the first contract falls through.
Balloon Mortgage — A loan with lower payments for a period, followed by one large payment of the remaining balance. These are less common today.
Basis Point — One one-hundredth of a percentage point. A rate moving from 6.50 to 6.75 percent has risen by 25 basis points.
Broker — A person licensed to represent buyers or sellers in a real estate transaction and, in Colorado, the level of license required to run a brokerage. A Realtor® is a broker or agent who belongs to the National Association of Realtors and follows its code of ethics.
Buyer's Agent — An agent who represents the buyer in a purchase. The scope of the services and the agent's compensation are set out in a written agreement.
Buydown — A payment made, often by the seller or builder, to lower the buyer's interest rate or monthly payment for a set period or the life of the loan.
C
Capital Improvement — A change that adds lasting value to a home, such as a new roof or an addition, as opposed to routine repair.
Cash-Out Refinance — Replacing your current mortgage with a larger one and taking the difference in cash.
Certificate of Occupancy — A local government document confirming that a building meets code and can be lived in.
Closing — The final step of a sale, when documents are signed, funds are transferred and ownership passes to the buyer. Also called settlement.
Closing Costs — Fees paid at closing beyond the down payment, including lender charges, title and escrow services, prepaid taxes and insurance, and recording fees.
Closing Disclosure — A form lenders must give buyers at least three business days before closing that lists the final loan terms and costs. It replaced the older settlement statement and the Good Faith Estimate.
Collateral — Property pledged to secure a loan. With a mortgage, the home itself is the collateral.
Commission — The fee paid to real estate professionals for their services, negotiated and agreed in writing.
Comparable Sales (Comps) — Recently sold homes similar in size, condition and location, used to estimate what a property is worth.
Condominium — A home in which you own your unit and share ownership of common areas, such as hallways, grounds and amenities, with the other owners.
Conforming Loan — A conventional loan that meets the size limits and guidelines set by Fannie Mae and Freddie Mac. The limit changes annually and varies by county.
Contingency — A condition in the contract that must be met for the sale to move forward, such as an inspection, financing or the sale of the buyer's current home.
Contract to Buy and Sell — The written agreement between buyer and seller that sets out price, deadlines, contingencies and other terms. In Colorado, standard forms are approved by the state's real estate commission.
Conventional Loan — A mortgage that is not insured or guaranteed by a government agency.
Credit Score — A number summarizing your credit history that lenders use to help decide whether to approve a loan and at what rate.
D
Days on Market (DOM) — How long a home has been listed for sale.
Debt-to-Income Ratio (DTI) — Your monthly debt payments divided by your gross monthly income. Lenders use it to judge how much you can comfortably borrow.
Deed — The legal document that transfers ownership of real property. In Colorado, a special warranty deed is commonly used.
Deed of Trust — The document that secures a mortgage loan in Colorado. The borrower holds the property while the loan is repaid, and a public trustee can release it once the debt is paid or oversee foreclosure if the borrower defaults.
Default — Failing to meet the terms of a loan, most commonly by missing payments.
Discount Points — Fees paid upfront to lower the loan's interest rate. One point equals one percent of the loan amount.
Down Payment — The portion of the purchase price paid in cash at closing rather than financed.
Due Diligence — The period after a contract is signed when the buyer investigates the property, including inspections, title, HOA documents and financing.
E
Earnest Money — A deposit made when an offer is accepted, held in escrow and credited to the buyer at closing. It shows the buyer is serious.
Easement — A legal right for someone else to use part of your land for a specific purpose, such as utility lines or shared access.
Encumbrance — Any claim or restriction on a property, such as a lien, easement or unpaid tax.
Equity — The part of a home you own outright: its value minus what you owe on it.
Escrow — A neutral arrangement in which a third party holds money and documents until the conditions of a transaction are met. The term also describes an account a lender uses to collect and pay your property taxes and insurance.
Expansive Soil — Clay soil that swells when wet and shrinks when dry. It is common along the Front Range and can affect foundations.
F
Fair Market Value — The price a willing buyer and a willing seller would agree on, both being well informed and neither under pressure.
Fannie Mae and Freddie Mac — Government-sponsored companies that buy mortgages from lenders, which keeps money available for home loans.
FHA Loan — A mortgage insured by the Federal Housing Administration, with lower down payment and credit requirements than many conventional loans. It requires mortgage insurance.
Fixed-Rate Mortgage — A loan whose interest rate stays the same for the entire term.
Foreclosure — The legal process a lender uses to take and sell a property when the borrower stops making payments. In Colorado it is usually handled through the public trustee.
H
Home Inspection — A professional review of a home's condition, including its structure, roof, systems and appliances.
Home Equity Line of Credit (HELOC) — A revolving line of credit secured by your home's equity, which you can draw on as needed.
Homeowners Association (HOA) — An organization that manages a community's shared spaces and enforces its rules. Owners pay regular dues.
Homeowner's Insurance — A policy that covers damage to your home and belongings, plus liability. Lenders require it.
Home Warranty — A service contract covering repair or replacement of certain systems and appliances. It is different from homeowner's insurance.
I
Improvement Location Certificate (ILC) — A Colorado document, prepared by a surveyor, that shows the location of a home and its improvements relative to the property lines. It is less detailed than a full survey.
Interest Rate — The percentage a lender charges for borrowing money, before other fees.
J
Jumbo Loan — A mortgage larger than the conforming loan limit. It usually has stricter requirements.
L
Lien — A legal claim on property as security for a debt.
Listing Agent — The agent who represents the seller and markets the home.
Loan Estimate — A form lenders must provide within three business days of an application, summarizing the loan terms, projected payments and costs.
Loan-to-Value Ratio (LTV) — The loan amount divided by the property's value. A lower LTV means a bigger down payment or more equity.
Lock (Rate Lock) — A lender's commitment to hold a specific interest rate for a set period while the loan is processed.
M
Metropolitan District (Metro District) — A special taxing district that finances infrastructure such as roads, water and parks in a community, often in newer developments. It appears as additional property taxes.
Mill Levy — The tax rate applied to a property's assessed value, used to calculate property taxes.
Mortgage — A loan used to buy real estate, secured by the property. In Colorado the security instrument is a deed of trust.
Mortgage Insurance — Coverage that protects the lender if a borrower defaults. Conventional loans use private mortgage insurance (PMI), and FHA loans have their own mortgage insurance premium (MIP).
O
Offer — A buyer's written proposal to purchase a property, including price and terms.
Origination Fee — A charge from the lender for processing and underwriting a loan.
P
Pre-Approval — A lender's review of your finances resulting in a letter stating the amount they are prepared to lend. It is stronger than a pre-qualification.
Pre-Qualification — An initial estimate of what you might borrow, based on information you provide without full verification.
Prepayment Penalty — A fee some loans charge if you pay them off early. Many loans today do not have one.
Principal — The amount you borrow, and the part of each payment that reduces what you owe.
PITI — Principal, interest, taxes and insurance, the four parts of a typical monthly mortgage payment.
Public Trustee — A county official in Colorado who handles releases of deeds of trust and foreclosure sales.
R
Radon — A naturally occurring radioactive gas that can build up in buildings. Testing is common in Colorado, and a mitigation system can reduce levels.
Real Estate Transaction Broker — In Colorado, a broker who assists a buyer, seller or both without acting as an advocate for either side.
Refinance — Replacing an existing mortgage with a new one, usually to change the rate, term or loan amount.
REO (Real Estate Owned) — A property owned by a lender after an unsuccessful foreclosure sale.
S
Seller Concession — An agreement by the seller to pay some of the buyer's closing costs or other expenses.
Seller's Property Disclosure — A form in which the seller states what they know about the property's condition and any known defects.
Sewer Scope — A camera inspection of a home's sewer line, often recommended for older homes.
Short Sale — A sale for less than the amount owed on the mortgage, approved by the lender.
Special Warranty Deed — A deed in which the seller guarantees the title only against problems that arose during their own ownership.
T
Title — Legal ownership of a property, and the record of that ownership.
Title Commitment — A document from a title company showing the current ownership, liens and other matters affecting a property, and stating the terms on which the title insurance policy will be issued.
Title Insurance — A policy that protects the owner or lender against covered problems with the property's title, such as errors in public records or undisclosed liens.
U
Underwriting — The lender's process of verifying your income, credit, assets and the property to decide whether to approve a loan.
V
VA Loan — A mortgage guaranteed by the U.S. Department of Veterans Affairs for eligible veterans, service members and some surviving spouses. It often needs no down payment or monthly mortgage insurance.
W
Walk-Through — A final visit to the property, usually shortly before closing, to confirm its condition and that agreed repairs are complete.
Z
Zoning — Local rules that control how land can be used, such as residential, commercial or mixed-use.
This glossary is for general information only. Loan terms, forms and requirements change, so confirm current details with a licensed professional.