On all sides of the real estate market, there are hundreds of terms that are important to the process, whether having to do with finance, listing, or purchasing a property.
Here are ten essential terms to know within the real estate industry, as a buyer, seller, or curious window-shopper.
Be sure to check in next month with another ten-term list.
Conventional loans come in two forms: fixed-rate and adjustable-rate mortgages. In this case, the interest rate can change later on, at five, seven, or ten-year intervals. This is widely considered the riskier option for buyers who want to stay in their homes long-term, because the loan rates can always increase based on the housing market.
After going under contract with a home, one of the first steps is getting an appraisal to determine the value of the home. They will examine the property and compare other homes in the area. This service is required by your mortgage lender to make sure they are lending an appropriate amount of money. For example, appraisals that come in less than the offer you put in will receive a smaller loan.
As a homebuyer, this is your real estate agent, who represents you throughout the buying process. For example, a member of the Scott Dillard team.
A big day in the homebuying process (and the final step) is closing, which is a meeting where all of the final paperwork is signed and the sale of the property is finalized. This is where the buyer makes the down payment and pays all closing costs.
In addition to the down payment, the buyer will also need to pay closing costs, which include loan processing fees, title insurance, and tax, though they vary based on state, loan type, and mortgage lender. On average, closing costs typically add up to about two to five percent of the purchase price. These are paid at closing.
A Comparative Market Analysis (CMA) is a report that you can ask your agent for when looking at a home; it compares similar properties in an area to get a better idea of the value for the home in question.
Contingencies are conditions that must be met in order for a home purchase to go through. For example, sometimes a loan has to be approved or the seller’s home has to be sold first.
Equity is how much of the home you actually own; this is often how much of the principal you’ve paid. The more equity you have, the better. For example, if you have a $300,000 home and you owe $200,000 on it, you have $100,000 in equity.
Set up by the lender as a third-party, an escrow is an account that receives monthly payments from the buyer.
Conventional loans come in two forms: fixed-rate and adjustable-rate mortgages. In this case, the interest rate stays the same throughout the entire life of the loan.