Common Real Estate Terms You Should Know
1. Adjustable-rate mortgage
In an adjustable-rate mortgage, the interest rate can change over the course of the loan at five, seven, or ten year intervals.
This is the process of combining both interest and principal in payments, rather than simply paying off interest at the start.
In order to get a loan from a bank to buy a home, you first need to get the home appraised so the bank can be sure they are lending the correct amount of money. The appraiser will determine the value of the home based on an examination of the property itself, as well as the sale price of comparable homes in the area.
4. Assessed value
This is how much a home is worth according to a public tax assessor who makes that determination in order to figure out how much city or state tax the owner owes.
5. Buyer’s/Listing agent
Buyer’s agent is who represents the buyer in the home-buying process. The listing agent is who represents the seller.
6. Cash reserves
The cash reserves is the money left over for the buyer after the down payment and the closing costs.
The closing refers to the meeting that takes place where the sale of the property is finalized. At the closing, buyers and sellers sign the final documents, and the buyer makes the down payment and pays closing costs.
8. Closing costs
In addition to the final price of a home, there are also closing costs, which will typically make up about two to five percent of the purchase price, not including the down payment. Examples of closings costs include loan processing costs, title insurance, and excise tax.
9. Comparative market analysis
Comparative market analysis (CMA) is a report on comparable homes in the area that is used to derive an accurate value for the home in question.
This term refers to conditions that have to be met in order for the purchase of a home to be finalized.
Equity is ownership. In homeownership, equity refers to how much of your home you actually own—meaning how much of the principal you’ve paid off.
Escrow is an account that the lender sets up that receives monthly payments from the buyer.
13. Fixed-rate mortgage
In a fixed-rate mortgage, the interest rate stays the same throughout the life of the loan.
14. Home warranty
This warranty protects from future problems to things such as plumbing and heating, which can be extremely expensive to fix.
Home inspections are required once a potential buyer makes an offer. The purpose is to check that the house’s plumbing, foundation, appliances, and other features are up to code.
This is the cost of borrowing money for a home. Interest is combined with principal to determine monthly mortgage payments.
A listing is essentially a home that is for sale.
18. Mortgage broker
The broker is an individual or company that is responsible for taking care of all aspects of the deal between borrowers and lenders, whether that be originating the loan or placing it with a funding source such as a bank.
This is the initial price offered by a prospective buyer to the seller. A seller may accept the offer, reject it, or counter with a different offer.
20. Pre-approval letter
Before buying a home, a buyer can obtain a pre-approval letter from a bank, which provides an estimate on how much the bank will lend that person.
The principal is the amount of money borrowed to purchase a home. Principal is combined with interest to determine the monthly mortgage payment.
22. Private mortgage insurance
Private mortgage insurance (PMI) is an insurance premium that the buyer pays to the lender in order to protect the lender from default on a mortgage. These insurance payments typically end once the buyer builds up 20% equity in a home.
Refinancing is when you restructure your home loan, replacing your old loan with an entirely new loan that has different rates and payment structures.
24. Title insurance
Title insurance is often required as part of the closing costs. It covers research into public records to ensure that the title is free and clear, and ready for sale.
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