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NYC Real Estate Glossary of Terms

You’re prepared to buy a home in New York City, but what the heck is a DTI and LTV and why do they matter?

Real estate lingo is a world of its own. Add in NYC’s uniqueness and it can be a confusing language to navigate. Review these common words and phrases in the home-buying process.

Adjustable-rate mortgage

Mortgage with an interest rate that changes at pre-set intervals based on an index. Payments can go up or down.

Closing costs

Fees paid at the real estate closing when the property is officially transferred from the seller to the buyer. Both buyer and seller can incur closing costs.

Common charges

Monthly fees paid by condo owners to cover the common services and amenities shared by other condo residents, including management fees and operating expenses.

Condo

A residential building in which the apartments are individually owned, but the common parts of the property, including its grounds, are jointly owned. Condos are considered real property because buyers receive deeds for their homes.

Contract of sale

A legally binding agreement between a buyer and seller that outlines the terms of purchase or transfer for a given property.

Co-op

Buyers purchase shares in a cooperative that collectively owns the apartment building. Shareholders have exclusive use of an apartment within the co-op. It is not considered real property.

Co-op board

A group of residents elected to represent all shareholders within a co-op building. The board determines the rules of the building, addresses building issues and reviews applications for new buyers.

Credit score

This number indicates a person’s ability to repay a loan. Scores range from 350 to 850 with higher numbers reflecting stronger credit worthiness. It’s based on a variety of factors but most importantly a person’s credit history.

Debt-to-income (DTI) ratio

The amount of debt you have compared to your overall income. Lenders use this formula to assess your credit-worthiness and whether to extend you a loan. It is expressed as a percentage (i.e., 33%)

Down payment

A typical down payment is 5 to 20 percent of the sale price in cash in order to qualify for a loan. For co-ops, the down payment is usually at least 20 percent and can go much higher.

Earnest money deposit

Small deposit a prospective buyer makes to a seller to prove their offer is made in good faith. It is held in escrow and is usually non-refundable if the buyer backs out of the contract.

Escrow

Deposit or down payment a buyer puts into the custody of a neutral third party like a title company, broker, or attorney to hold until the deal is closed. Once the deal is closed and the terms of the contract are met, the sum can be paid out to the seller.

Final walk-through

A few days before closing, the buyer “walks through the property” to make sure it’s in the condition the contract specifies.

Fixed-rate mortgage

A mortgage whose interest rate does not change for the entire term of the loan.

In contract

An offer has been made and accepted on a property. The buyer has paid a deposit and both seller and buyer have signed the offer. The listing is no longer available unless the deal falls through.

Landmark designation

A building recognized for having special historical, cultural or aesthetic value. The Landmarks Preservation Committee must approve any alterations within the building.

Loan estimate (previously known as Good Faith Estimate)

Three-page form a buyer receives after applying for a mortgage. It lists details and terms of the loan.

Loan-to-value (LTV) ratio

Comparison between the mortgage amount and the appraised value of property. Buyers with an LTV ratio under 75% are more likely to be approved for a loan since there is more equity in the home.

Mortgage

Loan that a bank or lender gives you to buy a house. A mortgage payment is made up of principal, interest, taxes and insurance.

Maintenance fees

Monthly fee co-op owners pay to cover operating expenses of the building, including taxes, insurance, etc. Amount is based on number of shares owned in the co-op.

Preapproval

Written statement from lender stating a buyer can qualify for a particular loan amount based on that lender’s guidelines.

Private mortgage insurance (PMI)

This is a type of insurance used with conventional home loans. Borrowers who don’t have a down payment of at least 20 percent are typically required to purchase PMI.

Rate lock

A lender guarantees a borrower a certain interest rate at a certain price over a set period of time – perhaps 30, 45, 60 or 90 days.

Right of first refusal

Essentially, it means the condo board has the right to become the purchaser of an apartment being sold in the building.

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