Glossary of Mortgage Terms

A rent-to-own home is a property you lease with an agreement that gives you the right, and sometimes the obligation, to buy that home at a set price once the lease period ends.

Rental property depreciation is a tax deduction that allows real estate investors to recover the cost of an income-producing property by deducting a portion of its value each year over a set recovery period.

A real estate owned (REO) property is a home that a bank, lender, or government agency has taken back after it failed to sell at a foreclosure auction. Because the lender now holds the property on its books, it typically prices and lists it for sale quickly — often below market value — in order to recover its losses.

A resale house is a home that has already been owned and is now up for sale again, as opposed to a brand-new home.

A restrictive covenant is a legal rule written into a property deed or community agreement that limits how homeowners can use, change, or build on their land.

The secondary mortgage market is where lenders sell home loans they have already made to investors and government-sponsored businesses. This gives those lenders more money to lend to more home buyers.

The Section 504 Home Repair Program is a USDA program that gives very-low-income rural homeowners access to low-interest loans and grants so they can fix, improve, or make their homes safer.

Section 8 is a federal housing assistance program, officially called the Housing Choice Voucher Program, that helps low-income families, seniors, and people with disabilities afford safe rental housing in the private market.

The Secured Overnight Financing Rate (SOFR) is a standard interest rate that is set based on overnight rates. Lenders use U.S. Treasury repurchase agreements to set rates on adjustable-rate mortgages and other loans.

Seller concessions are contributions a home seller agrees to pay toward the buyer’s closing costs, reducing the amount of cash the buyer needs to bring to the closing table.