Real Estate Terms to Know Part 1
Terms to Know on The Buyer Side
Real Estate Language Explained
When making you start searching for houses, you will encounter tons of terms that you might not be familiar with. Even to those who are hip to real estate lingo, or have been through the process before, it can be somewhat confusing. When you work with the Ask Cathy Marketing Group, we want you to feel as comfortable as possible when you are signing the contract. After all, making an offer on a home is an important process.
In order to help out with the real estate process, we decided to start this series of blogs that covers some terms you need to know when buying or selling a home. The best help you can receive, however, during the real estate process is by working with an experienced local Realtor. Our Realtors at Ask Cathy have years of experience, and in every type of market. We know how to win for our clients, so contact us today if you are interested in buying or selling a home.
The buying process may seem scary, especially when you are face to face with the actual contract, and faced with all sorts of legal jargon. We want to help ease your potential fears, by making some potentially confusing terms a bit more familiar. This way, when you are actually in the buyer's chair, signing the contract - you will feel more at ease with the entire process.
In Part 1 of this Blog Series, let’s get you familiar with the following terms and what they mean to a buyer.
Adjustable Rate Mortgages (ARMs): An ARM loan is a type of mortgage where there is an initial fixed-rate period that is typically lower than a conventional mortgage, that then changes depending on the current market after the fixed-rate period expires.
Fixed-Rate Mortgage: A fixed-rate mortgage is a mortgage where you lock in with a lender at a rate, and your mortgage stays at the same rate throughout the entirety of the loan. These are offered typically at 10, 15 20, or 30-year loans, with the 15 and 30-year fixed-rate loans being the most popular mortgages in the country.
FHA Loan: An FHA loan is a type of loan where the federal government insures lenders and banks that they take care of any losses those lenders might incur if the buyer is not able to make their payments. These loans typically offer buyers lower down payment and lower interest rates, but loans always vary, so make sure to talk with a trusted lender.
VA Loan: A VA loan is a type of home loan that is available from the Department of Veteran Affairs for any active or retired members of the military. These loans allow homeowners to receive a loan on a home with very small to no down payments and with competitive interest rates.
Pre-Approval: Pre-Approval is the process of getting approved by a lender for a certain sales price, and exact loan amount. This letter gives you as a buyer a very detailed idea of what you will need to pay in order to purchase a home, and what kind of properties you should be looking at. The lender determines this by doing a thorough investigation of your financials, including your credit, your debt-to-income ratio, and other financial information.
Principal: When you take out a mortgage loan, the principal amount of the loan is what you owe to the lender, not including the interest. If you took out a loan at $250,000, that would be the principal that you owe on the loan. Every month, you pay the monthly interest of the loan, and a smaller portion of the principal. The lender will typically structure your loan so that you pay the interest of the loan first.
Appraisal: An appraisal is conducted by a professional appraiser, who is typically sent out by the lender in order to verify that the property is worth as much as the homeowner is willing to pay for it. There will also typically be an appraisal contingency in the contract that allows the buyer to walk if the appraiser finds the property is not worth what it is being listed for.
Home Sale Contingency: A home sale contingency is a way for the buyer to tell the seller that they will only be able to go ahead with closing on a property as long as they also are able to sell their current home. This is included in the contract as a home sale contingency. This will typically occur when the buyer needs money for closing costs, down payment, etc.
Title Search: A title search is the part of the closing process in which a title examiner will search through public records to find out who is the legally recorded owner of the property, and if there are any liens or encumbrances on the property. This process can protect you from legal issues down the road, including encountering any unexpected debts from previous owners.
Realtor: This one might be slightly confusing, but it’s important to know. Not every real estate agent is a Realtor, as Realtors are actually real estate agents that are members of the National Association of Realtors, also known as NAR. NAR holds its members to high standards, and requires that all of its members follow an ethical code when representing clients in buying or selling properties.
Debt-To-Income Ratio: Debt-to-Income ratio is calculated by adding your total amount of debt to your monthly house payment, and then dividing that number by your gross monthly income, and finally multiplying it all by 100. Your debt-to-income ratio is an important indicator for your lender of what you can actually afford monthly and for your loan.