The home buying process can be filled with unfamiliar real estate jargon. Educating yourself on the lingo
will not only make you more confident throughout the process, it can ensure that you don’t miss any important steps. Here are five real estate terms you should know and understand before you start looking for a home.
5 Real Estate Terms Everyone Should Know
1.)Buyer’s Agent vs. Listing Agent:
There are usually two agents involved when you buy a home. The“buyer’s agent,” who represents you, and the “listing agent,” who represents the home seller. One thing many people don’t realize is that when buying a home, you don’t have to pay your real estate agent; they’ll get a commission from the home seller.
2.) Fixed Rate vs. Adjustable Rate Mortgages: Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan, the most common being for 30 years. An adjustable rate mortgage has a variable interest rate, the most common being for 5, 7, or 10 years.
3.) Pre-approval Letter: Before you apply for a mortgage , you should get a pre-approval letter from the bank. A pre-approval letter is an estimate of how much the bank will lend you. This letter will help you determine what you can afford, and ensures home sellers that you will be able to get a loan when needed.
4.) Appraisal: When you apply for a mortgage, your lender will require an appraisal of the home you want to buy. A licensed appraiser will estimate the home’s current value based on comparable homes that have sold in the area and a thorough investigation of the property.
5.) Closing Costs: Be prepared to pay a lot of fees when you purchase a home…just make sure you know exactly what you’re paying for. Typically, closing costs will amount to 2-5% of the purchase price of the home, not including the down payment. Common fees include excise tax, loan-processing costs and title insurance. For a more exact list of what you’ll be charged, ask for a Good Faith Estimate or GFE from your lender. A GFE includes the estimated costs you’ll have to pay for the home loan which will help you compare offers, understand the real cost of the loan, and make an informed decision about your loan choice.
When in doubt of certain terms, always ask your trusted real estate agent. We’re always there to help you through the home buying process, and having a well informed client is just one of the many ways we strive to make it easier on you!
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