Real Estate Terms for Homebuyers

Trying to wade through all of the real estate lingo before buying a home? You’re not alone. The world of real estate is full of jargon and abbreviations, and it can be tough to keep up. To help you out, we’ve compiled a list of real estate terms for homebuyers along with their definitions. Ready? Let’s jump in.

Real Estate Terms for First-time Homebuyers

MLS

MLS stands for multiple listing service. This is a database of properties that are currently available for sale that real estate experts maintain.

Realtor

Real estate is a notoriously tricky business. Dealing with properties that are often worth hundreds of thousands of pesos is not for the faint of heart. Realtors are the professional who navigates this world. They help people buy and sell homes, sometimes acting as mediators between buyers and sellers.

HOA

Homeowners Association. An organization that manages and maintains common areas in a community, such as pools or tennis courts.

Contingency

A condition must be met for a contract to be finalized. For example, a typical contingency in a home purchase contract is the buyer obtaining financing within a specific timeframe.

Down payment

A down payment is the initial amount of money you’ll pay to secure a mortgage. The size of your down payment will depend on several factors, including the price of the home, your credit score, and the type of loan you’re using.

Deposit

A deposit is a sum of money paid upfront to the seller at the time the buyer accepts the offer. The deposit size can significantly impact the property’s cost, so it’s important to be aware before making an offer. Sometimes, a higher deposit may be negotiable, so it’s always worth asking.

Pre-approval

Pre-approval is when a lender estimates how much money they are willing to lend you based on your financial situation (income, debts, etc.). Unlike pre-qualification, pre-approval involves submitting documents such as tax returns and pay stubs so the lender can verify your information.

Pre-qualification

Pre-qualification determines how much money you’ll be eligible to borrow from a lender based on your income, debts, and credit score. This is different from pre-approval, which means you’ve been approved for the loan.

Easement

An agreement that gives someone the right to use your property for a specific purpose (such as running power lines across your land).

Earnest money deposit

A check that the prospective buyer writes up and submits with their offer on the house shows that they are serious about acquiring the property and have the financial means to do so.

Balanced Market

A balanced market is like Goldilocks’ porridge- not too hot and not too cold. It’s just right. And that’s what you want in a market- not too many buyers driving up prices beyond reason or too few sellers leading to frustrated buyers and drastic price reductions. In a balanced market, there are enough buyers, so sellers are more likely to accept reasonable offers close to their asking prices.

Title insurance

Defends the lender (and, in some instances, the buyer) against any claims or problems that may arise with the property’s title.

Land Survey

A land survey is a map of a property’s boundaries and improvements (buildings, fences, etc.). Zoning laws and ordinances put in place by local governments dictate how the land can be used (for example, residential vs. commercial).

Home inspection

A home inspection is a thorough examination of the condition of a home conducted by a professional inspector.

Amortization

The periodic debt repayment over time is known as amortization. Each mortgage payment returns a portion of the principal (the amount borrowed) and a part of the interest. As you pay down the principal, the interest on your loan diminishes over time.

Appraisal

An appraisal is an estimate of a property’s market value, typically performed by a professional appraiser. Lenders require appraisals to determine how much they are willing to lend you.

Closing costs

All fees and expenditures connected with purchasing a property and securing a mortgage are closing costs. Typical closing expenses include appraisal fees, loan origination fees, and title insurance.

Escrow

Escrow is when a third party holds something of value (usually money) on behalf of two other parties (in this case, the buyer and seller) involved in a transaction. In real estate transactions, escrow typically refers to the account held by the title company where funds are deposited during the escrow period.

Mortgage Insurance (MI)

Mortgage insurance protects lenders against borrowers who may default on their loans.

Contract to sell

A contract to sell is a legally binding agreement between a buyer and seller that outlines the terms and conditions of a real estate transaction.

Spot cash payment

Spot cash payment is often associated with big-ticket items like automobiles and real estate. The advantage of spot cash is that you get the item immediately and don’t have to pay any interest or fees. However, the downside is that you need total money, which can challenge many people.

Virtual Deals

In today’s age of technology, it’s no surprise that even buying a home can be done virtually. Virtual deals refer to the home-buying process completed using technology in place of face-to-face contact. Some common technology tools in virtual deals include 360 home tours and video showings, video conference calls, e-documents, e-signatures, and e-transfers. While some may argue that there’s nothing like seeing a property in person, virtual deals have become increasingly popular due to their convenience and efficiency.

Bonus Tips for First-time Homebuyers

Work with a buyers agent: A buyer’s agent is a real estate agent who looks out for your best interests during the home-buying process. They can assist you in locating properties that meet your budget and requirements and bargain on your behalf to get the best possible price.

Get pre-approved for a mortgage: As a first-time purchaser, you should be pre-approved for a mortgage before you begin house hunting. This will indicate how much you can borrow and demonstrate to sellers that you’re serious about purchasing a home.

Save up for a down payment: A down payment is the upfront percentage of the purchase price, usually between 3 and 20 percent of the overall cost. The larger your down payment, the less your monthly payments will be.

Consider a shorter loan term: Loan terms can range from 10 to 30 years, but most first-time homebuyers choose a 15- or 20-year loan. A shorter loan term will mean higher monthly payments, but you’ll pay off your debt faster and save on interest over the loan.

Make sure you’re prepared for closing costs: The expenditures connected with concluding your home loan are known as closing costs. These charges may mount up to several thousand pesos, so it is essential to be aware of them before house hunting.

Look for government assistance programs: Several government programs can help first-time homebuyers with the cost of purchasing a home. These programs typically have income and credit requirements, so make sure you research them before you apply.

Conclusion

There you have it! A quick overview of some of the most commonly used real estate terms. With this list in hand, you’ll be well on your way to becoming a knowledgeable home buyer who is prepared for anything that comes your way during the purchase process.

Jane

Jane

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