Anyone interested in real estate should be able to talk the talk. Here is a list of common phrases and words with a short explanation. Use it as a reference:

Adjustable Rate Mortgage (ARM). A type of mortgage loan whose interest rate changes periodically up or down, usually once or twice a year. They are tied to an interest rate index like 11th District Cost of Funds.

Annual Percentage Rate (APR). Everything financed in your mortgage loan package (interest, loan fees, points or other charges) expressed as a percentage of the loan amount (usually slightly above the actual interest rate alone). Assumable Loan. A loan in which the lender is willing to “transfer” from the previous owner of the home to the new owner, sometimes at the same interest rate, sometimes at a new rate. An assumable loan can make your home more attractive to buyers when you want to sell. Often the new buyer has to qualify for the assumption just as he/she would for a new loan.

Closing Costs. Costs the buyer must pay at the time of closing in addition to the down payment: including points, mortgage insurance premium, homeowners insurance, prepayments for property taxes, etc. Closing costs average 3% to 4% of the loan amount. Contingency. A condition put on an offer to buy a home; such as the prospective buyer making an offer contingent on his or her successful sale of a present home.

Conventional Mortgage. A type of mortgage not insured by either the Federal Housing Administration (FHA) or the Department of Veterans Affairs (VA), and thus usually requiring a 10% to 20% down payment.
Earnest Money. Funds submitted with an offer to show “good faith” to follow through with the purchase. Earnest money is placed by the buyer into an escrow/trust account until closing, when it becomes part of the down payment or closing costs.

Escrow. A procedure in which documents or transfers of cash and property are put in the care of a qualified third party, other than the buyer or seller.

FHA Financing. Financing for a loan which will be insured against loss by the Federal Housing Administration. Such financing allows for a lower down payment than required by most lenders.
Homeowners Insurance. Insurance that protects the homeowner from casualty (losses or damage to the home or personal property) and from liability (damages to other people or property). Required by the lender and usually included in the monthly mortgage payment.