10 Terms All First-Time Homebuyers Need to Know
If you are a first-time homebuyer, real estate jargon can be overwhelming. New terms are constantly being thrown around by agents, banks and other parties involved in the process. It is important to have an understanding of real estate terminology to ensure that you are remaining informed and making the best decisions possible. You should always feel comfortable enough with your real estate agent to ask them to clarify any terms for you. Here are 10 terms that will be helpful to know before entering the home-buying process.
Appraisal – The valuation of property based on the estimate of an authorized person (Appraiser). Banks typically require an appraisal of a property before issuing a loan.
Closing Costs – A variety of fees and expenses associated with the closing of a real estate transaction. These could potentially include attorney fees, appraisal fees, credit report fees, etc. Closing costs can be negotiated between the buyer and seller.
Contingencies – Specific requirements that must be met before closing on a property. A contingency could be that a buyer has to sell their current home first, or that the seller must provide a complete home inspection.
Deed – A legal document signed by the buyer and seller of a property, transferring the ownership rights to the buyer.
Down Payment – A percentage of the sales price paid directly to the seller. It is advised to put a 20 percent down payment on a home to avoid private mortgage insurance (PMI). However, according to the National Association of REALTORS® (NAR), the average down payment for first-time homebuyers was only 6 percent in 2019.
Earnest Money – A specific form of security deposit made to the seller. It is often known as the “good faith” deposit and proves to the seller that the buyer is serious about purchasing the home.
Loan Estimate – A three-page document provided by the lender that explains all of the information in regards to the loan applied for. The form includes the estimated interest rate, monthly payment, estimated costs of taxes and insurance, etc. Its purpose is to help a buyer have a better understanding of the loan, and allows them to compare it to other loans they have applied for.
Mortgage – A loan provided by a bank or mortgage lender to help buyers finance the purchase of a home. When a buyer takes out a mortgage, they are agreeing to repay the borrowed money plus interest. The home will be used a collateral.
REALTOR® – A licensed real estate salesperson who belongs to the National Association of REALTORS® (NAR). REALTORS® are held at a higher ethical standard than regular real estate agents are and must adhere to a Code of Ethics.
Title Company – Title companies generally review titles to make sure there are no problems, issue title insurance policies and facilitate closings.
Now that you have a better understanding of these terms, you can have more confidence during your home search! Visit www.crye-leike.com/blogs for more real estate tips and tricks.