A few tools for clearer decisions.

Homebuying glossary

Common terms in plain English.

Amortization

The gradual repayment of a loan through scheduled principal and interest payments. On a fully amortizing loan, the balance reaches zero at the end of the term if payments are made as agreed. Related lesson →

Annual percentage rate (APR)

A yearly measure of borrowing cost that includes the interest rate and certain loan charges. It is broader than the interest rate, but does not include every cost of owning a home.

Appraisal

A professional opinion of property value for a stated purpose, commonly used by a lender when evaluating the home as collateral. Related lesson →

Appraisal gap

A difference between the agreed purchase price and the appraised value. Its effect on required cash depends on the loan and contract. Related lesson →

Assessed value

The property value used by the local assessor for property-tax purposes. It can differ from current market value. Related lesson →

Basis

A tax measure generally starting with acquisition cost and adjusted for qualifying improvements and other items. It helps determine gain when property is sold. Related lesson →

Cash to close

The amount still needed to complete closing after accounting for the down payment, costs, deposit already paid, credits, and other adjustments. Related lesson →

Closing costs

Transaction and financing expenses paid in connection with completing a purchase or refinance. They are separate from the down payment. Related lesson →

Closing Disclosure

A standardized document showing final mortgage terms, payments, costs, and transaction details for most covered home loans. Related lesson →

Contingency

A condition written into a contract that can provide options if its requirements are not met. Its protection depends on the wording, deadlines, and required notices. Related lesson →

Debt-to-income ratio (DTI)

Counted monthly debt payments divided by qualifying gross monthly income. Lenders use it as part of their review; it is not a complete household budget.

Deed

A legal document used to transfer an ownership interest in real property. It is different from the loan’s promissory note. Related lesson →

Discount points

Upfront charges generally paid in exchange for a lower mortgage interest rate. One point is 1% of the loan amount; the rate reduction varies.

Down payment

The portion of the purchase price the buyer contributes without the first mortgage, subject to any additional financing. It does not include all closing costs. Related lesson →

Earnest money

A purchase deposit delivered under the contract. It is generally credited at closing, while its release or return depends on the agreement and circumstances.

Easement

A right allowing someone to use another owner’s land for a particular purpose, such as access or utilities. Related lesson →

Equity

The estimated value of a property minus debt secured by it, before selling expenses. It can increase or decrease. Related lesson →

Escrow

A neutral arrangement for holding transaction funds and documents while written instructions are completed. Mortgage tax-and-insurance escrow is a different use of the same word. Related lesson →

Fixed-rate mortgage

A mortgage with an interest rate that does not change during its term. Taxes, insurance, and other ownership expenses can still change. Related lesson →

Home equity line of credit (HELOC)

A credit line secured by the home that allows borrowing within a limit during a draw period. Rates and payments may change. Related lesson →

Homeowners association (HOA)

An organization that manages a common-interest community according to its governing documents, often collecting dues for shared responsibilities.

Impound account

An account the mortgage servicer uses to collect money for specified expenses, such as property taxes and insurance, and pay those bills when due. Related lesson →

Lien

A legal claim against property, often securing payment of a debt. Liens can affect the transfer of clear ownership. Related lesson →

Loan Estimate

A standardized estimate of mortgage terms, projected payments, and closing costs that helps borrowers compare loan offers.

Mello-Roos

A special tax associated with a California community facilities district. Property-specific charges can be added to the ordinary property tax bill. Related lesson →

Net proceeds

The cash remaining from a sale after payoffs, selling costs, credits, and other applicable adjustments. It is not the same as taxable gain. Related lesson →

PITI

Principal, interest, taxes, and insurance: four common parts of housing costs. Mortgage insurance, association dues, and maintenance can add more. Related lesson →

Preapproval

A lender’s preliminary assessment of potential borrowing based on its review and assumptions. The process varies and does not guarantee final financing. Related lesson →

Principal

The outstanding amount borrowed on a loan, excluding interest. Paying principal reduces the debt balance. Related lesson →

Private mortgage insurance (PMI)

Insurance commonly required on conventional loans with smaller down payments. It protects the lender and has loan-specific cancellation conditions.

Refinance

A new loan that pays off and replaces an existing mortgage. The new loan can have different costs, rates, terms, and qualification requirements.

Reserves

Money set aside for future needs. A household repair reserve and an HOA’s reserve funds have different owners and purposes. Related lesson →

Special assessment

An additional charge for a particular purpose. An HOA assessment and a government property assessment are different obligations that should be reviewed separately.

Supplemental property tax

A separate California property-tax adjustment that can follow a reassessable change of ownership or completed new construction.

Title insurance

Coverage for specified ownership-related risks, subject to policy terms and exclusions. Lender and owner policies protect different insured interests. Related lesson →

Buyer checklist

Use this as a conversation guide, not a transaction-specific instruction list.

• Set a comfortable monthly budget and reserve.
• Compare loan options and total cash to close.
• Separate home needs from preferences.
• Review disclosures, inspections, and contract deadlines.
• Verify wiring instructions by a known phone number.
• Confirm the final walkthrough, recording, and keys.

Seller checklist

Use this as a conversation guide, not a transaction-specific instruction list.

• Clarify your reason and timing.
• Collect property records and identify needed work.
• Discuss pricing and marketing with a professional.
• Compare offer terms as well as price.
• Review disclosures, escrow tasks, and moving arrangements.
• Estimate net proceeds and keep tax records.