Terms Every First-Time Homebuyer Should Know
Buying a home can be an overwhelming process, especially for first-time buyers. There’s a lot of real estate jargon thrown around during the process, which can make things confusing. To help you navigate the home-buying journey with confidence, here are some essential terms you should know.
Contingent
An offer on a home has been accepted, but the finalized sale is contingent upon certain criteria. These conditions typically include appraisal, inspection, or mortgage approval.
Closing Cost
These are fees paid at the end of the transaction, either by the seller, the buyer, or both. They include taxes and other lender expenses.
Earnest Money
A deposit made to the seller showing the buyer’s good faith in the transaction. It is typically held in a trust or escrow account.
Home Inspection
This is an examination of the property’s condition, usually performed by a qualified home inspector of your choice. It’s an essential part of the home-buying process to avoid any unpleasant surprises later.
Title
The title refers to the bundle of rights and the piece of property being transferred. The title company provides a preliminary title report for you to review before accepting the property.
Appraisal
A property or land valuation completed by an appraiser who determines the market value. This process can take anywhere from 2 to 4+ weeks.
Insurance
Homeowner’s insurance is essential when purchasing a home. Choose your insurance provider and provide the information to your lender. Be sure to gather multiple quotes before choosing the best option.
Signing
Once everything is in order, schedule the closing. This is when you’ll sign all the necessary documents for your new home. The process takes about one hour.
Recording
The day after signing, the ownership of the property is transferred to the buyer. This is when you receive the keys to your new home!
Amortization
The repayment of a mortgage over the loan term through monthly installments of principal and interest.
Comparables
Homes in the area that have sold within the past several months are known as comparables. Real estate agents use these to help determine a home’s value.
Contingencies
These are conditions written into a home purchase contract that protect the buyer if any issues arise during the purchase process.
Debt to Income Ratio (DTI)
This is a ratio that compares a home buyer’s expenses to their gross income. It’s an important figure that lenders use to assess how much you can afford to borrow.
Equity
This refers to the percentage of the home that is owned by the homeowner, or the difference between the home’s market value and the outstanding mortgage amount.
Pre-Approval
A thorough assessment of a borrower’s income, assets, and other financial information to determine how much loan they would qualify for. Getting pre-approved gives you a clear picture of what you can afford.
Private Mortgage Insurance (PMI)
PMI is a monthly cost for buyers who put down less than 20% of the home’s purchase price. It protects the lender in case the borrower defaults on the loan.
Offer
An offer is an agreement between a buyer and a seller to purchase real estate. It is also known as a sales contract, and outlines the terms and conditions of the sale.
Understanding these key terms will help you feel more prepared and confident when purchasing your first home. If you’re thinking about buying, selling, or upgrading your home, feel free to connect with me for expert guidance every step of the way!
