Real Estate 101: The ABCs of Property Purchases

At Waltz, we're dedicated to translating the secret language of home-buying and making it easy to understand. Whether you're navigating open houses, solving mortgage puzzles, or negotiating with sellers, a solid understanding of these terms empowers you to make informed decisions.

Getting started:

  • EIN (Employer Identification Number)An EIN is a unique identification number issued by the IRS to businesses and organizations for tax purposes, similar to a social security number for individuals.
  • LLC (Limited Liability Company)An LLC is a legal business structure that offers limited liability protection to its owners while allowing for flexibility in management and taxation. If you want to learn more about LLCs for real estate investment, check out our video.
  • US Bank AccountA US bank account is a financial account held with a bank or credit union in the United States.
  • ITIN (Individual Taxpayer Identification Number)An ITIN is a tax processing number issued by the Internal Revenue Service. It is issued to individuals who are required to have a taxpayer identification number for tax purposes but are not eligible to obtain a Social Security Number.

Real estate professionals:

  • Real Estate AgentA real estate agent is a licensed professional who assists buyers and sellers in real estate transactions. They can represent one or both parties.
  • CIPS (Certified International Property Specialist)CIPS is a professional designation for real estate agents who specialize in international real estate transactions and have received additional training in this field.
  • RealtorA Realtor is a real estate agent who is a member of the National Association of Realtors and adheres to a specific code of ethics and professional standards.
  • Real Estate BrokerA broker is a licensed professional who can represent buyers or sellers in real estate transactions. Brokers must meet higher licensing standards and can oversee the work of real estate agents.
  • Mortgage BrokerA mortgage broker is a middleman who connects borrowers with lenders and helps them find mortgage loan options that suit their needs. Mortgage brokers can shop financing options from multiple sources, rather than from a single lender (such as a bank).
  • Property ManagerA property manager is responsible for the day-to-day management of rental properties, including finding tenants, collecting rent, maintaining the property, and dealing with tenant issues.

Mortgage process:

  • MortgageA mortgage is a type of loan that is used to purchase a home or other real estate property. The borrower (the buyer) receives funds from a lender (usually a bank or mortgage company) to buy the property and agrees to repay the loan over a specified period with interest.
  • Pre-ApprovalPre-approval is a process where a lender evaluates a borrower's creditworthiness and financial situation to determine how much they can borrow for a mortgage. It provides a homebuyer with a better understanding of their budget. While not an official agreement, it does provide sellers with evidence that the potential buyer is capable getting financing for a purchase. Many real estate agents will not show properties to unapproved buyers.
  • Down PaymentA down payment is an initial upfront payment made by the buyer when purchasing a home. It is typically a percentage of the total purchase price and is paid in cash. A larger down payment reduces the amount of the mortgage loan needed.
  • Interest RateThe interest rate is the cost of borrowing money for the mortgage. In other words, it is the fee you pay when you borrow money for the property. It’s expressed as a percentage and is added on to the amount owed.
  • AmortizationAmortization refers to the gradual reduction of the mortgage principal over time through regular monthly payments, which also cover the interest. The payments are structured to ensure that the loan is fully paid off by the end of the loan term.
  • PrincipalThe principal is the initial amount of money borrowed in a mortgage loan. Over time, as the borrower makes payments, the principal balance decreases. For example: On a $500k purchase with $100k down payment the principal would be $400k.
  • LTV (Loan-to-Value Ratio)LTV is a financial term used by lenders to assess the risk of a mortgage loan. It represents the amount of value of the property that is being financed by the mortgage. A lower LTV indicates a lower risk for the lender, but requires more cash from the buyer. For example a 20% down payment on a property purchased at the appraised value would have an 80% LTV.
  • Closing CostsClosing costs are the fees and expenses associated with finalizing a real estate transaction. These costs can include appraisal fees, title search fees, attorney fees, mortgage brokerage fees, and more. They are paid at the closing of the purchase, and are not included in the sale price of the home.
  • EscrowAn escrow account is a separate account set up by the lender to hold funds for property taxes, homeowners insurance, and other expenses related to the property. A portion of the monthly mortgage payment goes into the escrow account to cover these expenses. These expenses are paid on an annual basis in a one-time payment. Funding an escrow account breaks up that payment across all the regular monthly mortgage payments and ensures taxes and insurance are paid on time.
  • Types of MortgagesVarious types of mortgages are available to borrowers. These can vary in length of term, interest rate fluctuation, payment structure and more. Sounds overwhelming? Check out our blog post where we explain all the different types of mortgages.
  • RefinanceRefinancing involves taking out a new mortgage to replace an existing one. This can be done to get a lower interest rate, change the loan term, or access equity in the property.
  • DefaultIf the borrower fails to fulfill their obligations outlined in the mortgage agreement, they default on the mortgage. Typically this means falling behind on payments. In this situation the lender may begin foreclosure proceedings to take possession of the property.

Closing process:

  • AppraisalAn appraisal is an evaluation of a property's value by an independent, licensed appraiser. It is used to determine the fair market value of the property.
  • Home InspectionIt is a comprehensive examination of a property's condition, structure, and systems conducted by a qualified professional known as a home inspector. The primary purpose of a home inspection is to provide the buyer with a detailed and unbiased assessment of the property's overall condition.
  • TitleThe title of a property is a legal document that proves ownership. It includes information about the property's history, such as past sales and any liabilities or restrictions.
  • DeedA deed is a legal document that transfers ownership of a property from the seller to the buyer. It is recorded in public records to provide evidence of ownership.

Possible costs of ownership:

  • Homeowners Association (HOA)An HOA is an organization established in a residential community to manage and enforce rules, regulations, and common amenities. Homeowners pay dues to support the HOA.
  • Property TaxProperty tax is a tax assessed on the value of real estate properties. It is collected by local governments to fund public services.
  • Property ManagementManages all aspects of your rental property, including securing suitable tenants, lease signing, rent collection, and overseeing maintenance tasks. Fees are typically a percentage of the monthly rent collected.

Types of properties:

  • Condominium (Condo)A condo is a type of housing unit that is part of a larger complex or building. Condo owners own their individual units but share common areas such as grounds, parking, amenities, and the responsibility for their upkeep with other owners. Often this is represented by a shared building or development.
  • TownhouseA townhouse is a multi-story housing unit that is typically attached to other similar units in a row. Townhouse owners own both the interior and exterior of their unit.
  • Single-Family HomeA single-family home is a detached structure intended for one family's occupancy.
  • Multi-Family HomeA multi-family home is a property designed to accommodate multiple households, such as duplexes, triplexes, or apartment buildings.
  • Co-op (Cooperative)A co-op is a type of housing in which owners gain shares in a corporation that owns the entire property. Owners do not own individual units but have the right to occupy (or rent) them.


  • Lien:A lien is a legal claim or encumbrance on a property that serves as collateral for a debt. It must be satisfied before the property can be sold or transferred. Mortgages, property taxes, and contractor liens are all examples of liens that must be paid before sale of a property. Most can be settled from the proceeds of the sale, reducing the profit to the seller.
  • ForeclosureForeclosure is a legal process in which a lender takes possession of a property due to the borrower's default on the mortgage. The property is then typically sold to recover the debt and the buyer loses all rights to it.

Now that you're a real estate lingo pro, are you ready to own your US property?

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