Like many major life experiences, home-buying can be an intimidating process if you’ve never done it before. Or, if you have, and the process didn’t go well. If you’re not familiar with industry jargon, hearing real-estate terms can be akin to learning a foreign language, especially if those terms aren’t defined clearly or simply. Read on for a handy dissection of the most important real-estate nomenclature.
Listings
A listing is the public advertisement that a home is for sale. The most visible aspect is the physical For Sale sign in a yard. In today’s digital world, real-estate companies round up all “listed” homes into handy online databases. Happy searching!
Confident businessman sitting at the table in office and reading documents
Two Kinds of Real-Estate Agents
One is a buyer’s agent, who represents someone purchasing a home that’s for sale. The other kind of agent is a listing agent, who represents someone selling a home.
Appraisal
You’re likely familiar with this term thanks to its applications in other areas of life, such as jewelry or antiques appraisal. The same concept applies in real estate. You must have your dream home appraised by a licensed professional before you apply for a mortgage. The appraiser will consider the property you want to buy, plus the value of surrounding properties. Financial institutions need all this info in order to vet mortgage applications.
Pre-Approval Letter
A pre-approval letter comes from a financial institution and states that you’ve been approved — tentatively — for a mortgage. It takes into account your financial health and the amount of money you want to spend on your new home. The best time to seek loan pre-approval is before you begin searching for a new home. But, definitely do it before you shop for mortgages. Which brings us to…
Two Kinds of Mortgages
A Fixed Rate Mortgage (FRM) means the interest rate you receive from your lending institution won’t change during your mortgage. Neither will the amount of your monthly payment. An Adjustable Rate Mortgage (ARM) begins with a fixed interest rate for a certain number of years. Afterward, the interest rate on your mortgage rises or falls with the financial markets, which means your monthly payments will do the same, and could affect your budget.
Home Inspection
This is one of the final steps before you begin the actual home-buying transaction. You must have a professional home inspector comb the property for obvious or hidden issues. He or she will note problems or possible repairs to be completed prior to buying the home.
Offers Lead to Contracts
An offer is the amount of money a home buyer is willing to pay a home seller. This is negotiable, of course, and may require several counter-offers. A contract legally details the accepted offer and its terms of completion. Responsibilities for both buyer and seller will be included here.
Contingencies
What if your home inspection reveals that all electrical outlets must be replaced? Or, perhaps the builder hasn’t finished exterior landscaping? Contingencies are items that must be changed or completed to your satisfaction before you agree to purchase the home. They can be simple or not so much, depending on the agreement between you and the seller.
Closing Costs
In a nutshell: fees you must pay to get your mortgage done. These can come from lawyers, fact-checking, paperwork, etc. Closing costs also can come from…
Title Insurance
Most lending institutions require home buyers to pay for this. It validates the seller’s right to hold a title to the home being sold, and that no hidden things like liens or unpaid taxes are lurking.
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