Federal Trade Commission

ftc.gov

The Real Estate Marketplace Glossary:

How to Talk the Talk

Buying

a home can be

exciting. It also can

be somewhat daunting, even

if you've done it before. You will deal

with mortgage options, credit reports, loan

applications, contracts, points, appraisals, change

orders, inspections, warranties, walk-throughs, settlement

sheets, escrow accounts, recording fees, insurance, taxes...the list

goes on. No doubt you will hear and see words and terms you've

never heard before. Just what do they all mean?

The Federal Trade Commission, the agency that promotes competition

and protects consumers, has prepared this glossary to help you

better understand the terms commonly used in the real estate

and mortgage marketplace.

A

Appraisal: A professional analysis used

Annual Percentage Rate (APR): The cost of

to estimate the value of the property. This

a loan or other financing as an annual rate.

includes examples of sales of similar prop-

The APR includes the interest rate, points,

erties.

broker fees and certain other credit charges

a borrower is required to pay.

Appraiser: A professional who conducts an

analysis of the property, including examples

Annuity: An amount paid yearly or at other

of sales of similar properties in order to de-

regular intervals, often at a guaranteed

velop an estimate of the value of the prop-

minimum amount. Also, a type of insurance

erty. The analysis is called an "appraisal."

policy in which the policy holder makes

payments for a fixed period or until a stated

Appreciation: An increase in the market

age, and then receives annuity payments

value of a home due to changing market

from the insurance company.

conditions and/or home improvements.

Application Fee: The fee that a mortgage

Arbitration: A process where disputes are

lender or broker charges to apply for a

settled by referring them to a fair and neu-

mortgage to cover processing costs.

tral third party (arbitrator). The disputing