ESCROW (EARNEST MONEY DEPOSIT)
The escrow deposit—also called earnest money—is a good-faith deposit a buyer makes when entering into a contract. It shows the seller that the buyer is serious about purchasing the home. The deposit is held by a third party (usually the title company) until closing. If the buyer completes the transaction, the money is credited toward closing costs or the down payment. If the buyer cancels for a reason allowed in the contract, the deposit is refunded.

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INSPECTION PERIOD
The inspection period is the timeframe written in the contract during which the buyer can complete inspections on the property. This may include a general home inspection, roof, plumbing, electrical, termite, pool, and more. During this period, the buyer can negotiate repairs, request credits, or cancel the contract without penalty (depending on the contract terms).

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PROPERTY INSPECTION REPORT
A property inspection report is the written document provided by a licensed inspector after evaluating the home. It outlines the condition of each major system and identifies any defects, safety concerns, or recommended repairs. Buyers use this report to make informed decisions about moving forward, renegotiating, or requesting repairs.

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TITLE INSURANCE
Title insurance protects buyers and lenders from financial loss due to issues with the property’s title, such as unknown liens, ownership disputes, or errors in public records. Two types of policies exist: one for the lender and one for the buyer. It is a one-time fee paid at closing and provides protection for as long as the buyer owns the home.

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HOMEOWNERS INSURANCE
Homeowners insurance protects the property against damages caused by events like fire, theft, storms, and liability claims. Lenders require proof of insurance before closing. Buyers typically pay the first year’s premium at or before closing.

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HOA (HOMEOWNERS ASSOCIATION)
An HOA is an organization in certain communities that sets rules and manages shared amenities. Buyers purchasing in an HOA community will pay monthly, quarterly, or annual dues. These funds support community maintenance, landscaping, and amenities. The HOA also enforces rules that homeowners must follow.

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CONTINGENCY
A contingency is a condition in the purchase contract that must be met for the sale to move forward. Common contingencies include financing, appraisal, and inspections. Contingencies protect the buyer by allowing them to cancel the contract without penalty if the conditions are not met.

 

INTEREST RATE
The interest rate is the cost of borrowing money for your mortgage. It directly affects your monthly payment and total loan cost. Rates vary depending on credit score, loan type, market conditions, and lender.

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ESCROW ACCOUNT (MONTHLY MORTGAGE)
An escrow account is a separate account your lender sets up to collect and hold funds for property taxes and homeowners insurance. A portion of your monthly mortgage payment goes into this account, ensuring these bills are paid on time.

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PITI (PRINCIPAL, INTEREST, TAXES & INSURANCE)
PITI represents the four parts of a typical monthly mortgage payment:

• Principal: amount that goes toward paying down the loan

• Interest: cost of borrowing money

• Taxes: property taxes

• Insurance: homeowners insurance
  Lenders use PITI when determining how much a buyer can afford.

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PMI (PRIVATE MORTGAGE INSURANCE)
PMI is insurance that protects the lender if the buyer defaults on the loan. It is usually required when the buyer puts less than 20% down. PMI can often be removed once the homeowner reaches about 20% equity, depending on the loan program.

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APPRAISAL GAP
An appraisal gap occurs when the appraised value comes in lower than the contract price. Buyers may negotiate, cancel (if protected by a contingency), or pay the difference out of pocket. An appraisal gap clause in the offer outlines how much a buyer is willing to cover if this happens.

 

CLOSING DISCLOSURE (CD)
The Closing Disclosure is a final document that outlines your loan terms, closing costs, and cash needed to close. Lenders must provide it at least three days before closing so buyers can review and confirm everything is accurate.

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UNDERWRITING
Underwriting is the process your lender uses to verify your income, assets, debts, and overall financial profile. The underwriter confirms that you meet all loan guidelines before granting final loan approval. This step happens before you are clear to close.

 

CLEAR TO CLOSE (CTC)
Clear to Close means the lender has completed the underwriting process and approved the loan. All documentation has been verified, and you are officially ready to schedule your closing. This is the final step before signing the closing paperwork and receiving the keys.

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