There are likely to be some terms you don’t understand when you buy a house for the first time. That can be a lot to handle, especially when you’re making one of the biggest purchases of your life.
You don’t have to know a lot of real estate jargon, which is good news. That’s the job of your agent. There are, however, some basic terms that will help you feel a lot more at ease during the process.
Terms Every Homebuyer Should Know
Once you know this language, you’ll be able to understand important details better, like contracts and negotiations. When those important talks come up, you’ll feel ready, in charge, and able to make the best choice for your situation. This is what Redfin says:
“Having a basic understanding of important real estate concepts before you start the homebuying process will give you peace of mind now and could save you a fortune in the future.”
To help you understand some important real estate terms, the Federal Trade Commission (FTC) and First American have put together this list.
Appraisal: An appraisal is a report that tells you how much the home is thought to be worth. Appraisals tell lenders how much a house is worth, so they don’t lend more than it’s worth.
Contingencies: Conditions in a contract that must be met, usually within a certain amount of time or by a certain date. As an example, a common contingency is a home inspection. You can skip these to try to make your offer more appealing, but it’s not usually a good idea.
Closing Costs: Closing costs are all the fees and payments you have to make to the different people who helped you buy a house. You can get a list of closing costs from your lender. This list should include things like attorney’s fees, taxes, title insurance, and more.
Down Payment: The down payment is different for each buyer, but it’s usually between 3.5 and 20% of the home’s price. Some programs even let you borrow money with no money down. To find out more, ask your lender. Most likely, you don’t have to put 20% down unless your loan type says otherwise.
Escalation Clause: Escalation Clause: This is often used in markets with a lot of competition. It’s an optional add-on to a real estate contract that lets the seller know that a potential buyer is ready to raise their offer on a home if another offer comes in higher. The clause also says how much more the buyer is willing to pay than the highest offer.
Mortgage Rate: The number of points you have to pay on a loan to buy a house. Talk to a lender about it so you know how it will affect your monthly mortgage payment.
Pre-Approval Letter: It’s a letter from a lender telling you how much they’re willing to lend you for a home loan. This, along with knowing how much you’ve saved, can help you choose a price range. Getting this from a lender should be one of the first things you do when you want to buy a house, even before you look at homes online.
Bottom Line
You don’t have to remember all of these words, but it helps to know a few of them. When you buy a home, you’ll have more information and fewer surprises if you review the basics now.