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Buying a home comes with a lot of new terms, and it’s easy to feel overwhelmed if you don’t know what they mean. Our Buyer’s Glossary is designed to give you simple, plain-language definitions for the words and phrases you’ll hear throughout your real estate journey in Kentucky—so you can move forward with confidence at every step. |
| Use the search bar below to type any term, and the page will scroll you directly to its definition. |
Buyer’s Glossary of Real Estate Terms
Abstract of Title – A summary of all the legal transactions and claims affecting a property's ownership.
It helps verify clear ownership before closing.
Addendum – A separate document that modifies or adds to the original purchase agreement.
It’s used to change terms like closing dates or include repair requests.
Agreement of Sale – The contract between buyer and seller outlining property purchase terms.
Often referred to as the purchase agreement.
Appraisal – An evaluation of a property’s value, usually required by the lender.
A licensed appraiser compares the home to similar sales to ensure the price matches market value.
Assessment – The value a local government places on a property for tax purposes.
It’s used to calculate your property taxes each year.
As Is – A property sale without warranties or repairs—the buyer accepts the condition as found.
Sometimes called “As Is, Where Is.”
Binder – A preliminary, non-binding document outlining the terms of a buyer’s offer.
Serves as a blueprint for drafting the formal purchase agreement.
Buyer Agent – A licensed real estate professional who represents the buyer’s interests.
Different from a listing agent and must act in the buyer’s favor.
Caveat Emptor – Latin for “Let the buyer beware,” meaning buyers must do due diligence.
It reminds buyers that sellers may not disclose all defects.
Cash to Close – The total amount a buyer needs to bring to closing.
It includes the down payment, closing costs, and any prepaid items minus credits.
Chain of Title – The chronological history of ownership transfers and claims on a property.
Used to ensure clean title before closing.
Closing – The final step in the home buying process when ownership officially transfers.
It’s also called “settlement” and involves signing documents and paying closing costs.
Closing Costs – Fees paid at closing beyond the purchase price, usually 2–5% of the home’s value.
These include lender, title, attorney, appraisal, and prepaid taxes/insurance.
Cloud on the Title – A potential legal claim or defect that may impair ownership.
These issues must be resolved before completing a sale.
Commission – The fee paid to agents for facilitating a real estate transaction.
Typically paid by the seller and split between listing and buyer agents.
Contingency – A condition that must be met for the purchase contract to move forward.
Examples include inspection, appraisal, or financing contingencies.
Contingent (Under Contract) – A property sale where specific conditions must be met before closing.
Common contingencies include financing, inspection, or sale of another home.
Counteroffer – A response to an offer with modified terms (like price or repairs).
It restarts the negotiation process between buyer and seller.
Credit Score – A number reflecting your creditworthiness based on past borrowing.
Lenders use it to decide loan approval and interest rate.
Debt-to-Income Ratio (DTI) – The percentage of your income that goes toward monthly debt.
Lenders use the 28/36 rule to decide what housing payment you can afford.
Deed – The legal document that transfers ownership of a property from seller to buyer.
Types include general warranty, special warranty, and quitclaim deeds.
Deposit (Earnest Money) – A good faith deposit showing you’re serious about buying.
It’s usually 1–2% of the purchase price and applied to your down payment or closing costs.
Down Payment – The portion of the home price you pay upfront out-of-pocket.
Loan programs vary (FHA 3.5%, VA/USDA 0%, Conventional 3–20%).
Due Diligence Period – A time after contract when the buyer can investigate the property.
Often overlaps with the inspection period and allows you to cancel if issues arise.
Dual Agent – A single agent representing both buyer and seller in the same transaction.
Only allowed with written consent from both parties.
Easement – A legal right for someone else to access or use part of a property.
Common for driveways, utilities, or shared pathways.
Effective Age – An appraiser's estimate of how old a building appears, based on condition.
Can differ from the actual construction age.
Equity – The difference between your home’s market value and what you owe on the loan.
As you pay down the mortgage, your equity grows.
FHA Loan – A government-backed loan requiring as little as 3.5% down.
It’s popular for first-time buyers with moderate credit.
Fixed-Rate Mortgage – A loan with the same interest rate for the entire term.
Your monthly payment of principal and interest stays predictable.
Fixtures – Items permanently attached to the property (like lighting or carpeting).
They’re included in the sale unless explicitly excluded.
Gazumping – When a seller accepts a verbal offer but later accepts a higher one.
Avoid by waiting for written, signed agreements before proceeding.
HOA (Homeowners Association) – A governing body in some neighborhoods or condos.
They collect monthly/annual fees to maintain shared areas and enforce rules.
HOA Documents – Documents that explain HOA rules, fees, and financial status.
Important to review before buying in communities with shared governance.
Home Inspection – A professional review of a home’s condition before closing.
It checks for defects in structure, systems, and safety.
Homeowners Insurance – A policy that protects your property from damage or liability.
Most lenders require it before closing.
Inspection Period – The timeframe buyers have to complete inspections.
It’s often called the due diligence period, and both terms may be used interchangeably.
Interest Rate – The cost of borrowing money for your mortgage, expressed as a percentage.
It directly impacts your monthly payment.
Legal Description – A precise, legally recognized description of a property’s boundaries.
Used in deeds and surveys to identify the exact parcel.
Lien – A legal claim on a property until a debt is paid off.
For example, unpaid taxes or contractor bills can place a lien on the home.
Loan-to-Value (LTV) – The ratio of your mortgage amount divided by the property’s appraised value.
Lower LTV often means better interest rates and less PMI.
MLS (Multiple Listing Service) – A database where real estate agents list and find properties.
It ensures accurate and up-to-date property information.
Mortgage – A loan used to purchase a home, paid back with monthly installments.
It includes principal, interest, taxes, and insurance (PITI).
Mortgage Assumption – Taking over the seller’s mortgage and its terms instead of getting a new loan.
Common with FHA, VA, and USDA loans if lender allows.
Mortgage Insurance (PMI/MIP) – Insurance that protects the lender if the buyer defaults.
PMI applies to conventional loans under 20% down, while MIP applies to FHA loans.
Offer – A formal proposal to purchase a home with terms and price.
The seller can accept, reject, or counter it.
Option Fee – A payment that gives the buyer the right to terminate the contract within a set period.
More common in some states, but conceptually tied to due diligence.
Origination Fee – A lender’s fee for processing your mortgage application.
It’s often 0.5–1% of the loan amount.
PITI – Acronym for Principal, Interest, Taxes, and Insurance that make up your monthly mortgage payment.
Pre-Approval – A lender’s written commitment stating what you can afford.
It strengthens your offer compared to just being pre-qualified.
Pre-Qualified – An estimate of what you can afford based on self-reported information.
It’s less reliable than a pre-approval since no documents are verified.
Principal – The original loan balance you borrow to buy a home.
Each monthly payment reduces the principal you owe.
Property Taxes – Local taxes paid annually based on your home’s assessed value.
In Kentucky, the average is around 0.80% of home value.
Rate Lock – An agreement with your lender to guarantee an interest rate.
It usually lasts 30–60 days while your loan is processed.
REALTOR® – A licensed real estate professional who is a member of the National Association of REALTORS®.
Not all real estate agents are REALTORS®.
Real Property – Land plus anything permanently attached to it (structures, fixtures).
Re-trade – When a buyer renegotiates the price downward during due diligence after contract.
Sellers may reject this for being unprofessional or unfair.
Settlement Statement (Closing Disclosure) – A detailed breakdown of all closing costs.
Buyers must receive this at least 3 days before closing.
Survey – A map showing property boundaries and improvements.
It ensures no encroachments or boundary disputes.
Title – Legal ownership of a property.
A title search ensures no liens or claims exist before transfer.
Title Insurance – Protection against claims or errors in property ownership history.
It’s usually required by lenders and optional for buyers.
Underwriting – The process where lenders verify your financials before final approval.
It ensures you meet all requirements for the loan.
USDA Loan – A government-backed loan for rural areas.
It allows 0% down for eligible buyers.
VA Loan – A government-backed loan for veterans and service members.
It allows 0% down with no PMI.
Walkthrough (Final Walkthrough) – A last visit before closing to check the home’s condition.
It ensures any repairs were made and no damage occurred before move-in.
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