If you’re a first time home buyer, there are many things you’ll learn during the process, including new terminology. Here are some real estate terms you should know that will help you tremendously in the home-buying process.
Adjustable-Rate Mortgage – A type of loan that may offer a low rate initially, but has the ability to increase over time. Adjustable-rate mortgages may experience rate increases at various intervals, with the most common being 5, 7, and 10 years.
Appraisal – An official report provided by a licensed appraiser who will determine your home’s value based on recent sales of comparable properties and a visual inspection of the one being sold.
Buyer’s Agent – A real estate agent that represents the buyer(s) in their home purchase.
Closing Costs – Closing costs are fees that are due and payable at closing, and are separate from the loan itself. Closing costs can include fees for taxes, title insurance, loan origination and appraisal, among other things.
Contingencies – These are conditions listed in a purchase contract that allow you to walk away from the sale if they are not met. Examples are an appraisal contingency that requires the home be appraised at or above the amount you are paying, and an inspection contingency that guarantees no major problems are uncovered during an inspection.
Earnest Money – Refers to an initial deposit given to show you have a genuine interest in purchasing the property. Earnest money is non-refundable if you renege on your agreement for any other reason than one of the agreed-upon contingencies.
Escrow – A third party who holds onto all funds until both parties have completed their obligations. Only after those obligations have been met will funds be transferred from escrow, usually during closing.
Fixed-Rate Mortgage – A loan in which the rate is fixed and does not fluctuate during its entire term.
Home Inspection – A home inspection is a detailed analysis performed by a licensed home inspector, and provides information about the condition of a home’s plumbing, electrical, heating and air conditioning systems, and structure. This inspection is typically paid for by the borrower, and may cost between $500 and $800, depending on the size of the home and the local market.
Listings – This term refers to an actual home or property listed for sale by a real estate agent or agency.
Offer – An offer is an official agreement to purchase a home at a particular price. An offer may also include one or more contingencies.
Pre-approval Letter – A document obtained from a lending institution stating that you are eligible for a loan up to a certain dollar amount based upon information you have provided. A pre-approval letter does not necessarily guarantee a loan, as you could later be denied based on additional factors.
Seller’s Agent – A real estate agent who represents the seller(s) during the sale of their home. A seller’s agent is sometimes referred to as a listing agent because he or she is also responsible for listing the home for sale.
Title Insurance – A policy that guarantees there are no defects in your home’s title that would prohibit or restrict your use of it. Title insurance is typically required by most lenders, and the fees for this policy are included as part of your closing costs.
These are just a few real estate terms you should know, but there are actually quite a few others you may encounter. Making sure you understand these terms is the key to purchasing the home of your dreams under conditions you are comfortable with. To learn more about the buying process and to start searching for homes contact Park Avenue Properties of Colorado Springs today!