So, you thought you’d left vocabulary lessons behind you when you left school, right? Well, I promise that I won’t give you a pop quiz. Nevertheless, I will share these eleven essential vocabulary words you should learn if you are buying a home!
If you’re a first-time buyer, these terms might be new to you. If you’ve purchased a house in the past, consider this a refresher course.
11 Vocabulary Words for Home Buyers
Read on for today’s “vocabulary lesson.”
1 - Buyer’s Agent
The buyer’s agent is, as the name implies, the agent who represents the buyer or buyers in a real estate transaction. The buyer can be an individual, couple, or even a corporate entity. This person will conduct negotiations between buyer and seller.
This agent’s goal is to help the buyer get the greatest number of advantages for their client.
Furthermore, this agent acts as the mediator who will write and extend an offer and come to terms with the selling party’s agent. If you are on the hunt for an expert negotiator that will help you get the home you want, at the best price and most desirable terms, consider working with Glass House (we also provide up to 1.5% cash back to our home buyers)!
2 - Listing Agent or Selling Agent
You might hear the terms listing agent and selling agent used interchangeably as you begin house hunting. And that’s correct; they are the same thing.
The listing agent is the real estate professional who represents the seller in a real estate transaction. The seller could be an individual, a couple, or a corporation or business.
This agent’s goal is to sell the listed property for the highest yield and allow the seller to walk away with the best possible outcome.
In addition, the agent will receive offers from agents, present the bids to their clients, and help them decide which offers the best advantages. Finally, they will negotiate with the buyer’s agent to seal the deal.
3 - Fixed rate mortgage
A fixed rate mortgage is a banknote for a borrower’s purchase of real estate. These notes offer a stable and predictable interest rate that doesn’t rise or fall over the course of the loan.
Thus, your mortgage payment plus interest will remain constant. However, other factors included in the mortgage may fluctuate—such as the costs of homeowner’s insurance or property taxes.
Most borrowers take a period of 15 to 30 years to repay this mortgage.
4 - Adjustable Rate Mortgage (ARM)
An adjustable rate mortgage (ARM), is a banknote to cover the cost of a borrower’s investment in real property. These notes typically offer lower interest during the initial years of the loan and fluctuate (higher or lower) during the remainder of the term.
This mortgage type is preferred by borrowers who foresee paying off their property in a shorter amount of time before the interest rate adjustment.
5 - Closing Costs
The fees incurred when you’re buying a home or commercial property are considered closing costs. These are finalized at the closing when the title for the real property transfers from the seller to the buyer. The transaction will not conclude until you pay this.
Some of the incurred costs include:
- Appraisal fees
- Mortgage fees
- Legal fees
- Escrow fee
- Home inspections
- HOA fees
- Title insurance
- Property tax
- Homeowner’s insurance
Buyers should expect to pay between 2% to 5% of their total mortgage amount on these fees at closing. Here's what to expect on Closing Day!
6 - Contingencies
Contingencies in real estate refer to actions the seller must take to make the home acceptable to the buyer.
Here are a couple of examples. The buyers might offer a particular amount of money, contingent on the fact that the home appraises for a specific value. Or, they could offer to purchase the home with a contingency for a repair to a leaky roof.
If the seller fails to remedy the stated requirement, the deal falls through.
These conditions are often implemented based on the findings of the home inspector.
7 - Earnest Money
The term Earnest Money refers to funds sent from the buyer to the seller along with an offer letter. The money indicates that the seller is “earnest” and sincere in their bid for the property. Your realtor may also call this “good faith money,” but it means the same thing.
The money goes into the escrow account and is treated as a deposit that becomes part of the entire transaction.
8 - Escrow
Escrow is a fund that is guarded by a third party during a real estate transaction. In most cases, this is a title company or an attorney. Any deposits or funds during the process are held in this account until closing. The funds then disburse to the correct party (usually the seller).
9 - Home Inspection
The term home inspection means a qualified third party will assess the condition of the home.
This process gives a buyer the peace of mind that comes from knowing that the property has a clean bill of health—or a heads up on repairs that must be made.
The inspector looks at the home from the grade of the land, foundation, and all exterior components. And, they check overall mechanical, electrical, plumbing, and craftsmanship inside the home. They will also spot any signs of previous damage from fire, water, insects, or neglect.
10 - Pre-approval Letter
When a buyer begins house hunting, he or she must first obtain a pre-approval document from a lender. This letter indicates the amount of money that the bank is willing to extend to that borrower. While it’s not a formal mortgage approval, it serves an essential purpose.
This letter proves to sellers and both agents that the buyer is credit-worthy in the eyes of the bank and serious about buying the property. Additionally, it helps the buyer’s agent steer their client to a home that’s within their means.
Need to get pre-approved? Contact our preferred local lender for a quick and easy pre-approval!
11 - Pre-qualified Buyer
A pre-qualified buyer is a person who is seeking a real estate investment and also has the pre-qualification letter in hand. This proves the intent of investment in a property.
Don’t let the legal jargon or real estate confuse you. Questions? Ask! That’s what your agent is for!
"Thanks for reading! I’m passionate about empowering home buyers and sellers with professional advice and unbiased information, throughout the real estate transaction. Unlike most agents, I always put clients first. When it comes to negotiating, marketing homes, and sealing the deal, I’ve got the experience and knowledge you’re looking for. If you have any questions about moving to VA, D.C., or MD, don’t hesitate to reach out."