Navigating the real estate world can be overwhelming if you don’t understand the terms being used. We have highlighted the top 21 terms that will help both buyers and sellers be confident and educated in their real estate transactions.
Over the life of a mortgage loan, interest rates can fluctuate. This loan is less predictable than a traditional fixed-rate mortgage.
The process of combining both principal and interest in your mortgage payments. Combining the two allows you to build more equity in the home early on.
Prior to purchasing a home with a bank loan, the home will be appraised. This ensures the bank is lending you the correct amount of money based on the value of the home. The appraiser will look at the property itself as well as the sale price of comparable homes in the area.
How much the home is worth according to a public tax assessor. Needed in order to figure how much the city or state tax the owner owes.
A Real Estate Agent who represents the buyer in the home buying process. This person is free to the buyer. The seller pays the commission to the buyer’s agent upon the sale of a home.
Meeting where the final paperwork is signed and the sale of the property is finalized. The buyer pays closing costs and makes the downpayment. At the end of the meeting, the buyer is handed the keys to their new home.
Closing costs make up about two to five percent of the purchase price, not including the down payment. Closing costs include loan processing costs, title insurance, and other fees. Be sure to budget for closing costs in addition to your down payment.
Comparative Market Analysis (CMA)
A report of comparable homes in the area that is used to deliver an accurate value of a home.
Terms/conditions that are to be met in order to finalize the purchase of a home. For example, the purchase of a new home could be contingent upon you selling your current home.
Earnest Money Deposit
AKA a “good faith deposit”, are initial funds put down by the buyer after an offer is accepted to show the seller they’re serious about buying. The amount can vary between one and five percent of the sale price.
How much home you actually own, aka how much principal on your mortgage you have paid off. It also includes the fair market value of the home. For example, if you have a $250,000 home and you still owe $100,000, you have $150,000 in equity.
An account that a lender sets up to receive funds from the buyer. Can be set up to put money in for taxes and homeowners insurance, which the lender then uses to pay said taxes and homeowners insurance.
A conventional loan where the interest rate stays the same throughout the life of the loan.
The home inspection is paid for by the buyers after an offer is accepted. (They typically cost a few hundred dollars) An inspector will check the house’s plumbing, foundation, appliances and make sure the home is up to code. After an inspection report is delivered, any issues that arise can be negotiated in a final sale price.
A Real Estate Agent who represents the seller in a home transaction.
An individual or company that is responsible for taking care of all aspects of the deal between the borrower and lender.
Prior to purchasing a home, it is recommended a buyer obtains a pre-approval letter from a bank. This helps determine how much the buyer can afford.
Amount of money borrowed to purchase a home. Paying off more of the principal allows the buyer to build more equity in a home.
Private Mortgage Insurance (PMI)
Insurance premium paid by the buyer to a lender in order to protect the lender from default on a mortgage. Most PMI’s end once the buyer reaches 20% equity in a home.
A form filled out to the best of the seller’s knowledge about the property.
Usually part of the closing costs. Research done into public records to ensure the title is free and clear of any liens.