When you have a loan that feels comfortable, it enables you to buy the home of your dreams and enjoy it. To make sure you get great financing terms, it’s important to understand real estate lingo. 

Here are some common expressions you’ll hear and what they mean:


The loan-to-value ratio of real estate financing is the total loan amount you’re approved for compared to the property’s value. A higher LTV percentage can make it easier to purchase a home if you don’t have a lot set aside for a down payment, but it also increases your interest rate.

Closing Costs

Closing costs are additional fees outside the price of a home. Buying real estate isn’t just about paying the seller, you also have to pay for essentials such as transferring the deed, appraising the property value and preparing loan documentation. All of these additional fees are called closing costs. Sometimes you can negotiate to have the seller pay these costs as part of your purchase price.

Pre-Approved Loans

There’s a difference between being prequalified and pre-approved. Prequalified gives you a rough idea of how much financing you can apply for, but it doesn’t mean you’re already approved. You still have to go through the application process and submit financial documents. When you’re pre-approved, however, it means that the lender is extending your financing. If you accept the offer, you’re ready to go.

Private Mortgage Insurance

Private mortgage insurance acts as a type of guarantee to your financial institution in the case of failing to pay off your real estate loan. PMI helps mitigate the risk in case you default on your loan and the property forecloses for less than the loan amount. You may have to buy PMI if your down payment is below a certain percentage.


Contingencies are exceptions to the rules in a real estate contract. For example, you can have a contingency tied to the outcome of a home inspection. If the inspection reveals a serious problem with the home, the contingency could allow you to void the deal.


An escrow account is a third-party account where the money is held until both parties fulfill their end of the agreement. It’s a way to make sure everything is correct before finalizing the purchase. Closing means that both parties agree to complete the transaction, and money is finally transferred. Attorneys often act as escrow agents.

Whether you’re looking for a new home or want to purchase a piece of real estate for your business, choosing the right financing makes a big difference. Experienced real estate lenders take the time to answer all of your questions.