If you've been intimidated by real estate industry lingo in the past, you aren't alone.
There are many acronyms and industry-specific words that will come up during the home-buying process, and it's helpful to know what these terms mean so you can understand what is happening and avoid unnecessary confusion!
Here are 7 terms you should know before buying a home:
1. Closing costs
These are all the fees associated with buying or selling a home. They include things like title insurance, taxes, deed transfer fees, and other expenses that are required by law and customarily paid by the buyer at closing. The total amount varies depending on where you live and whether you're buying or selling a home.
2. Appraisal
An appraisal, or home value estimate, is an evaluation of the worth of your home. It's often used by lenders to determine whether or not you qualify for a mortgage. You can also get an appraisal if you're considering selling and want to know what your home is worth.
3. Inspection
A home inspection is an evaluation of the condition of the house by someone who isn't involved in selling or buying the property. Inspectors look for major structural problems and assess whether any systems are outdated or need repairs to meet health and safety standards. They also check appliances and fixtures to ensure they're in working order.
4. Earnest money
Earnest money is a deposit you make to show the seller that you are serious about buying their home. It is often a percentage of the total purchase price, or it may be a flat fee. The seller holds this money until the transaction closes and you receive your deed. The amount varies based on the price of the home.
5. Contingencies
A contingency is a condition that must be met before a contract can be considered final. For example, an inspection contingency gives the buyer the right to have the home inspected within a specific time frame, such as 5-7 days. This contingency allows the buyer to cancel the contract or negotiate repairs based on the findings of the home inspection.
6. Closing Day
Closing day is when all parties involved in the sale of a home sign off on all remaining details and complete the transaction. This is typically 30 – 45 days after an offer has been accepted by the seller.
7. Pre-approval
Getting pre-approved for a mortgage is an important first step in the process of buying a home. Your mortgage lender will decide how much money you can borrow based on your financial information, including your credit score, income history, and assets. Once pre-approved, you can start looking at houses without worrying about financing. You will still need to go through an underwriting process, but pre-approval acts as an assurance from the lender that they will approve the loan based on their initial evaluation.
Interested in homeownership? Send us a message, and we'd love to chat more with you about the home-buying process!
