The home buying process comes with its own language, specific to the real estate space.
Here are some essential realty terms defined.
Conventional loans come in two forms: fixed-rate and adjustable-rate mortgages. In this case, the interest rate can change at five, seven, or ten-year intervals.
An appraisal is lender-required after going under contract; it determines the value of the home.
A buyer’s agent works specifically on the buyer’s behalf. Their main goal is to promote the interests of the buyer with total loyalty, fidelity, and good faith, with their best interests at heart. They negotiate on behalf of, and advocate for, the buyer.
Additionally, the buyer’s agent has to disclose to the potential seller if there’s adverse material related to the transaction—if the buyer is unable financially able to go through with the purchase, or if they intend to occupy the home.
Closing is the final step: 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 (loan processing fees, title insurance, tax).
Comparative Market Analysis
A CMA is a report that you can ask your agent for when looking at a home that compares similar properties in an area.
Contingencies are conditions that must be met for a home purchase to go through.
Equity is how much of the home you actually own, such as how much of the principal you’ve paid. The more equity you have, the better.
Set up by the lender as a third party, an escrow is an account that receives monthly payments from the buyer.
This type of conventional loan is where the interest rate stays the same throughout the entire life of the loan.
Homeowner’s Association (HOA)
HOAs are private organizations that manage a community. HOAs come with a range of rules and dues (either paid monthly or annually), that often depends on how active they are.
Home Sale Contingency
When a home is contingent, it means that the sale will only go through if the buyer can finalize a close on their current property.
A home inspection is paid for by the buyer, with a licensed professional, to assess the condition of the home.
Following the inspection, this is a clause that can allows the buyers a predetermined amount of time to perform any necessary inspections.
A loan or mortgage contingency is when a buyer can back out of the deal and keep their deposit if they are unable to secure a mortgage during a fixed amount of time. This is included as a clause in the offer contract.
When mortgage shopping, a lending company will offer pre-approval, based on debt-to-income ratios, cash on hand, and credit history. The lender will write a pre-approval letter listing the type of loan (how much) the buyer qualifies for.
Multiple Listing Service (MLS)
An MLS is a database that your real estate agent has access to, that has extensive property information about homes on the local market.
When buyers want to buy a house, they submit a formal contract through their agent, called an offer. They offer to purchase the home for a specific price based on market value and their agent’s expertise.
The seller can do one of three things: accept the offer, reject the offer, or submit a counter offer.
The counter offer can include slight changes to negotiate the offer to their benefit. It can have adjustments to price, time frames, contingencies, etc. The buyer then has the option to accept, reject, or again counter.
A pre-qualification letter from a mortgage lender states that you’re pre-qualified to buy a home, but doesn’t commit the lender to a specific amount.
A principal is the amount of money borrowed to purchases your home or the amount of the loan that hasn’t been repaid yet.
Private Mortgage Insurance (PMI)
For lower down payments (typically less than 20%), buyers are required to get PMI, an additional monthly fee. This protects the lending company.
This is the seller’s real estate agent, who works solely on the behalf of the seller. Their main goal is to promote the interests of the seller with total loyalty, fidelity, and good faith, negotiating and advocating on behalf of the seller.
Additionally, the seller’s agent has to disclose to potential buyers what they know about the property, including all known issues.
A title represents ownership of a property, also known as a deed.
Title Insurance protects the lenders and homeowners against any legal issues with the title.
A transaction broker assists either the buyer or seller, or sometimes both, throughout the real estate transaction. They perform terms of any written or spoken agreement, inform the parties of all information, present the offers, help with contracts, and help with the closing without representing or advocating for one side or the other.
They are held to the same standards as buyer and seller’s agents, with disclosing any adverse material facts, either concerning the property or a buyer’s financial ability to buy the home.
Underwriting is the process a lender uses to approve or reject a loan, evaluating both the property and the borrower’s credit and ability to pay their mortgage.
These are the costs and fees a buyer has to pay before closing on a home—such as an appraisal, insurance, and an inspection.
READY TO BUY?
If you’re interested in taking the next steps, connect with the team at Sopris Realty today. Contact us online or give us a call at 970-945-7677.