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Are you looking for a home and feeling overwhelmed by the jargon in the real estate world? Don’t worry; I’ve got you covered! Understanding these 10 key terms will empower you to make more informed decisions and navigate the home-buying process with greater confidence
- Pre-approval: Obtaining a lender’s confirmation of the amount you can borrow. Pre-approval strengthens your offer and makes you more attractive to sellers.
- Escrow: A neutral third-party account where funds are held during the home-buying process. It ensures a smooth transaction, protecting both the buyer and seller.
- Earnest Money: (AKA: Good Faith Deposit) Earnest money is a deposit made by the buyer to demonstrate their commitment to purchasing the property. It is usually paid shortly after the acceptance of an offer. It’s held in escrow until the closing. If the transaction successfully closes, the earnest money is credited toward the buyer’s down payment or closing costs. However, if the deal falls through due to reasons specified in the contract’s contingencies (e.g., failed inspections, financing issues), the buyer will be able to get their earnest money back. (CLICK HERE FOR A MORE IN DEPTH DESCRIPTION OF EARNEST MONEY)
- Down Payment: The initial amount you pay for a home at closing. It’s often expressed as a percentage of the total property value and influences the size of your mortgage and monthly payments.
- Contingency: A condition in the purchase agreement that must be met for the sale to proceed. Common contingencies include home inspection, financing, and appraisal.
- Closing Costs: The additional fees and expenses, such as taxes, insurance, lender fees, legal fees, or inspection fees paid at the transaction’s closing. Knowing these costs upfront helps you budget effectively. (CLICK HERE FOR TIPS ON BUDGETING FOR CLOSING COSTS)
- Appraisal: An evaluation of a property’s value by a licensed professional. The appraisal determines the fair market value, affecting your loan approval because lenders typically will not lend you more than a home appraises for.
- Title: Legal ownership of a property. A title search ensures there are no ownership disputes or liens that could impact the property’s transfer.
- Title Insurance: Title insurance protects you and the lender from potential ownership disputes or claims on the property’s title after the sale. (CLICK HERE FOR A MORE IN DEPTH DESCRIPTION OF TITLE INSURANCE)
- Equity: The difference between the property’s market value and the outstanding mortgage balance. As you pay off your mortgage, your equity increases. What you owe to the mortgage company – what you can sell your home for = Equity.
As a first-time home buyer, being familiar with these terms will empower you throughout your home-buying journey. Remember, your real estate agent is here to guide you every step of the way. If you are still in search of a Real Estate Agent to guide you feel free to give me a ring at 201-218-9666. Happy house hunting!
