Your debt-to-income ratio is all your monthly debt payments divided by your gross monthly income. This number is one way in which lenders measure your ability to manage the monthly payments to repay the money you plan to borrow.

To calculate home equity, you need to subtract the amount of money you owe on your home through mortgages or other liabilities from the value of the home.

The loan-to-value (LTV) ratio is a financial term used by lenders to express the ratio of a loan to the value of an asset. The term is commonly used by banks to represent the ratio of the first mortgage line as a percentage of the total appraised value of real property.

An adjustable-rate mortgage (ARM) is a type of mortgage in which the interest rate applied on the outstanding balance varies throughout the life of the loan. With an adjustable-rate mortgage, the initial interest rate may be  fixed for a period of time, after which it resets periodically, often every year or even monthly.

A fixed-rate mortgage (FRM) is a fully amortizing mortgage loan where the interest rate on the note remains the same through the term of the loan, as opposed to loans where the interest rate may adjust or “float”. Unlike many other loan types, FRM interest payments and loan duration is fixed from beginning to end.

An Offer to Purchase Real Estate can be used to make a firm or conditional offer. A firm offer means the buyer is willing to purchase the property without any specified conditions. If the seller accepts a firm offer, the transaction can be completed without further negotiation.

A counteroffer means the original offer was rejected and replaced with another one. The counteroffer gives the original offeror three options: accept the counteroffer, reject it, or make another offer. There is typically no binding contract between the parties involved until one accepts the other’s offer.

A basic contractual form is a contract of purchase and sale. This contract is an enforceable agreement between two parties to buy and sell. It is used for complex transactions such as those involving business assets and real estate.

The Due Diligence process consists of the buyer’s review of the seller’s disclosures and any home inspections the buyer wants to make.The purpose of the home inspection  is for the buyer to understand the condition of the property he or she is purchasing and to determine whether or not to go through with the purchase .If the inspection reveals a major defect that buyer and seller could not have factored into the original negotiation, then it may be reasonable for the seller to repair the defective item so that it is functional.

Earnest money is money you put down as a good-faith gesture that you’re serious about buying a house. Typically, it’s 1-5% of the purchase price. The money is deposited into an escrow account with the title company or escrow company and credited towards the purchase at closing.

A home appraisal is an unbiased estimate of the true (or fair market) value of what a home is worth. The appraisal can include recent sales information for similar properties, the current condition of the property, and the location of the property,

A title search is an examination of public records to determine and confirm a property’s legal ownership, and find out what claims or liens are on the property. A clean title is required for any real estate transaction to go through properly.

Closing (also referred to as settlement) is the final step in executing a real estate transaction. The closing date is set during the negotiation phase, and is usually several weeks after the offer is formally accepted. On the closing date, the ownership of the property is transferred to the buyer.

The closing or escrow agent, who is usually an attorney or officer of a title insurance company, accepts money into the escrow account from the buyer and the buyer’s lender, then disburses the funds according to the purchase contract.

The title company reviews title, issues insurance policies, facilitates closings and files, and records paperwork. Title companies play several key roles in common real estate transactions. Title companies generally act as the combined agent of the insurance company, the buyer, the seller, and any other parties related to a real estate transaction.

Closing costs are the expenses, over and above the price of the property, that buyers and sellers normally incur to complete a real estate transaction. Costs incurred may include:  mortgage loan origination fees, discount points, appraisal fees, title searches, title insurance, surveys, taxes, deed-recording fees, and credit report charges. Prepaid costs are those that recur over time, such as property taxes and homeowners’ insurance. The lender is required by law to state these costs in a good faith estimate within three days of a home loan application.