Navigating the world of real estate, you are going to end up coming across all sorts of real estate terminology that are not very familiar. Whether it is your first time buying, or just don’t quite understand something, there is a lot of confusing terms used among real estate professionals.

Understanding what your real estate agent is talking about when they use common real estate terms will make the process flowing, and will also ensure communication is much easier. Read more about Real Estate.

Here are 5+ basic real estate terms that will allow you to be better informed and involved in any real estate transaction.

Comparative Market Analysis

The best system available to home sellers to acquire their home’s current value so they can choose the best sale price is a CMA or Comparative Market Analysis. It is the term real estate agents use when they lead an in-depth analysis of a home’s worth in today’s market.


A contingency is a precondition that must be met before the transaction can be finalized between the buyer and the seller converts legally binding. If the home inspection reveals significant problems, then the contingency allows the buyer to walk away from the contract without penalization. A common contingency is the home inspection. Others include an appraisal or financing contingencies.

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Debt-To-Income (DTI) Ratio

The ratio of monthly payments to monthly gross income. Lenders use a housing DTI ratio (house installment split by monthly income) and a total DTI ratio (total debt payments comprising the house payment divided by monthly income) to determine whether a buyer qualifies or not for a mortgage.

Down Payment

The down payment is the out of pocket money you pay towards a house before your lender grants you with a loan to meet the rest of the purchase amount. Your down payment can differ depending on the type of mortgage you take out. It can be from 3 percent to 20 percent of the total.

Earnest Money Deposit

It is the amount you give along with your offer on the house to show good faith. This amount regularly accounts for one to two percent of the home’s purchase value. If the sale goes through, the earnest money deposit goes to the down payment. If the seller rejects the proposal, the money goes back to the buyer.


The escrow is a deposit of funds or documents, such as the earnest money deposit, that is held by an escrow agent, or other third party till the sale is completed. The third party operates the property, cash, and the property title till all requirements of the property negotiation have been met.


Your home’s equity is the variation between the home’s fair market value and the outstanding balance of the mortgage. Equity rises over the life of the loan. For instance, if your home is worth $100,000, and you owe $50,000 still, the other $50,000 is your equity.