Basic real estate terminology may seem like common knowledge to some, but to the inexperienced, first-time home buyer, some of these terms can seem like a foreign language. It is important to have a good knowledge of the basics before entering into the process of buying a home. Buying a home is one of the biggest investments of a person’s life, so it’s important to have basic knowledge of the real estate world before diving in. These basic real estate terms should help you start off on the right foot.
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 that many people don’t realize is that when buying a home you don’t have to pay your real estate agent. They get their commission from the home seller.
Before you apply for a mortgage or even start looking for a home, you should get a pre-approval letter from the bank, which states an estimate of how much money they 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 it’s needed.
A mortgage is a pledge of real estate collateral to secure a debt. Also, it is a legal document describing and defining the pledge, and may also include the terms of repayment of the debt.
When you put in an offer on a home, “contingencies” are certain conditions that must be met before the deal will go through. Examples of some of these “contingencies” could be –
- Getting the loan (financing contingency)
- Inspection doesn’t show any serious issues (inspection contingency)
- Appraisal value and your offer are a close match (appraisal contingency)
Fixed Rate vs. Adjustable Rate
Conventional loans include “fixed rate” and “adjustable rate” mortgages. A fixed rate mortgage has a predetermined interest rate throughout the life of the loan, which is usually for around 30 years. An adjustable rate mortgage has a variable interest rate usually for 5, 7, or 10 years.
- If you are planning to own your home longer than five years, a fixed rate mortgage is usually the safer option.
- Make sure to shop around so that you can get the best mortgage possible, which will save you a lot of money in the long run.
Be prepared to pay a lot of fees when you purchase a home. Typically, closing costs will amount to 2-5% of the purchase price of the home, not including the down payment. Common fees that you will have to pay include excise tax, loan-processing costs and title insurance, which brings us to our next term.
After all is said and done and the seller has accepted your offer, you should receive a home title report within a week or so. Most mortgage lenders require you to pay title insurance as a part of your closing costs. Research has to be done to make sure that the seller of the home actually had rights to the title and there are no loose ends such as unpaid taxes.
Comparative Market Analysis (CMA)
This is a report of similar homes in the area that were recently sold or are currently on the market. This is used to help determine an accurate value of your home.
Are you ready to buy a home but not sure where to start? Melissa Clements is an experienced real estate agent here on the Emerald Coast and she can get you on the right track to finding the perfect home. Contact her today – she will answer all of your questions and set your plan into motion.