Appraisal: A determination of the value of the house you plan to buy. A professional appraiser makes an estimate by examining the property, looking at the initial purchase price, and comparing it with recent sales of similar property. Your lender will require the appraisal in order to ascertain the worth of the house for lending purposes. If the appraisal comes in lower than the loan amount there are several options - you can come up with additional down payment money, order a second appraisal, terminate the contract and get your earnest money back or negotiate some kind of compromise. Typically the seller will lower the purchase price of the home to the appraised amount, although you will often lose the seller paid closing costs (although lenders can creatively find a way to roll those into the loan).

Closing Costs: All settlement or transaction charges (above and beyond the actual cost of the property) that home buyers (or sellers, depending on tradition in your area and what you negotiate with the seller) need to pay at closing. These typically include lender's fees and points or prepaid interest, a prorated share of the property taxes, transfer taxes, credit check fees, homeowners' and title insurance premiums, deed filing fees, appraisal fees, and attorneys' fees.

Due Diligence: The time period stated in the contract (and a point of negotiation) where the buyer can terminate the contract for any reason and get their earnest money back. This is the time to get a home inspection and negotiate any necessary repairs. If you have any other concerns about the property or area, this would be the time to research.

Earnest Money (EM): A partial payment (deposit) demonstrating commitment in a contractual relationship, and commonly made in real estate transactions within two days of the agreement becoming binding. Typically this is about 1% of the purchase price and is cashed and held in escrow. The seller keeps the earnest money if the buyer terminates the contract after due diligence is up unless the buyer terminates because of the appraisal or financing contingency or a breach of contract on the seller’s part. If you close on the home, the EM goes towards your downpayment or closing costs (and if you get a USDA loan with all seller paid closing costs, you can get this money back at closing!).

Closing: The final transfer of the ownership of a house from the seller to the buyer, which occurs after both have met all the terms of their contract and the deed has been recorded. Both parties meet at the closing attorney’s office to sign documents.

Private Mortgage Insurance: Insurance that reimburses a mortgage lender if the buyer defaults on the loan and the foreclosure sale price is less than the amount owed the lender (the mortgage plus the costs of the sale). A home buyer who makes less than a 20% down payment will most likely have to purchase private mortgage insurance, commonly referred to as PMI.