Real Estate Glossary
A plain-English guide to real estate terms you will encounter when buying or selling a home in South Bend, Mishawaka, and across Michiana.
Adjustable-Rate Mortgage (ARM)
A mortgage with an interest rate that changes periodically based on market conditions, after an initial fixed period.
Amortization
The process of paying off a loan through regular payments that cover both principal and interest over a set period.
Appraisal
A professional estimate of a property's market value, typically required by lenders before approving a mortgage.
Assessed Value
The value assigned to a property by the local government for tax purposes. In Indiana, assessed value is used to calculate property taxes under the 1% cap system.
Buyer's Agent
A real estate agent who represents the buyer in a transaction, working to get the best price and terms for the buyer.
Closing
The final step in a real estate transaction where documents are signed, funds are transferred, and ownership changes hands.
Closing Costs
Fees and expenses paid at closing by the buyer and/or seller, including loan fees, title insurance, recording fees, and prorations.
Comparative Market Analysis (CMA)
An analysis of recently sold comparable properties used to determine a home's market value. I provide free CMAs for sellers.
Contingency
A condition in a purchase contract that must be met for the sale to proceed, such as a home inspection or financing contingency.
Conventional Loan
A mortgage not backed by a government program (FHA, VA, USDA). Typically requires 5% to 20% down and a credit score of 620+.
Counteroffer
A response from a seller to a buyer's offer that changes one or more terms, such as price or closing date.
Deed
The legal document that transfers ownership of real estate from seller to buyer.
Disclosure
A seller's legal obligation to inform the buyer of known defects or issues with the property. Indiana requires a seller's property disclosure form.
Down Payment
The portion of the purchase price paid upfront by the buyer, typically 3% to 20% depending on the loan type. VA loans require 0% down.
Earnest Money
A deposit made by the buyer to show good faith when making an offer. Typically 1% to 3% of the purchase price, held in escrow until closing.
Escrow
A neutral third party that holds funds and documents during a real estate transaction until all conditions are met.
FHA Loan
A mortgage insured by the Federal Housing Administration, allowing down payments as low as 3.5% with credit scores of 580+.
Fixed-Rate Mortgage
A mortgage with an interest rate that stays the same for the entire loan term, typically 15 or 30 years.
Homestead Deduction
A property tax benefit for owner-occupied homes in Indiana, capping property taxes at 1% of assessed value.
Home Inspection
A professional examination of a property's condition, including structure, roof, plumbing, electrical, and HVAC systems.
Interest Rate
The cost of borrowing money, expressed as a percentage of the loan amount. Lower rates mean lower monthly payments.
Listing Agent
A real estate agent who represents the seller in a transaction, responsible for marketing the property and negotiating on the seller's behalf.
MLS (Multiple Listing Service)
A database of properties for sale shared among real estate agents. Listing on the MLS exposes your home to all agents and their buyers.
PMI (Private Mortgage Insurance)
Insurance required on conventional loans with less than 20% down, protecting the lender if the borrower defaults. VA loans do not require PMI.
Pre-Approval
A lender's commitment to loan a specific amount to a buyer based on credit, income, and asset verification. Stronger than a pre-qualification.
Principal
The amount of money borrowed in a mortgage, not including interest. Each monthly payment reduces the principal.
Property Tax
A tax levied by local governments based on a property's assessed value. Indiana caps owner-occupied property taxes at 1% of assessed value.
Purchase Agreement
The legal contract between buyer and seller outlining the terms of the sale, including price, contingencies, and closing date.
Refinancing
Replacing an existing mortgage with a new one, typically to get a lower interest rate, change the loan term, or access equity.
Survey
A professional measurement of a property's boundaries and structures, often required by lenders before closing.
Title Insurance
Insurance that protects against defects in the property's title, such as liens or ownership disputes. Required by lenders.
Transfer Tax
A tax on the transfer of real estate. Michigan charges $8.60 per $1,000 of sale price. Indiana has no state transfer tax.
Underwriting
The lender's process of evaluating a loan application to determine whether to approve the mortgage.
VA Loan
A mortgage backed by the U.S. Department of Veterans Affairs, available to eligible veterans and service members with zero down payment and no PMI.
Walk-Through
A final inspection of the property by the buyer shortly before closing to verify the home is in the agreed-upon condition.
Zoning
Local government regulations that determine how property can be used, such as residential, commercial, or agricultural.
Related guides
Have a question about a term not listed here?
Call or text Worm at 574-240-WORM. I am happy to explain any real estate term in plain English.