Becoming familiar with a few key terms can help first-time home buyers reduce their stress and help prepare them for one of the most important decisions of their life. In alphabetical order, here are a few real estate terms and phrases that I think are good to know:
Adjustable Rate Mortgage (ARM)
A mortgage with an interest rate dependent upon a market indicator such as the weekly average of one-year U.S. Treasury Bills throughout the life of the loan. In order to avoid wild fluctuations, ARMs typically limit how often and how much the interest can vary.
Annual Percentage Rate (APR)
Your APR is your yearly interest rate calculated by taking the average compound interest rate over the lifetime of the loan.
An appraisal is a document put together by someone who has done a full, in-depth assessment of the home and comparable homes in the area. An appraisal should give you a good idea of the condition of the house and if it’s worth the price tag.
This is the agent who represents the buyer in the home-buying process. On the other side is the listing agent, who represents the seller.
This is a good one to know! When someone says that it’s a “buyer’s market” it means there are more homes for sale than there are people to purchase them. If there’s no one to buy, the houses sit on the market for a while and prices drop. That’s the time to pounce.
There are extra fees attached to buying a home you might not have considered. These additional fees may include the appraisal fees, inspection fees, a title search, a pest inspection and more. It’s a good rule to budget for 1-3% of the purchase price of the home.
At the end of the selling process a neutral third party will take possession of all funds and documents until the deal has been sealed.
Equity is ownership. In homeownership, equity refers to how much of your home you actually own—meaning how much of the principal you’ve paid off. The more equity you have, the more financial flexibility you have, as you can refinance against whatever equity you’ve built. Put another way, equity is the difference between the fair market value of the home and the unpaid balance of the mortgage. If you have a $300,000 home, and you still owe $200,000 on it, you have $100,000 in equity.
Fixed Rate Mortgage
There are two types of conventional loans: the fixed-rate and the adjustable-rate mortgage. In a fixed-rate mortgage, the interest rate stays the same throughout the life of the loan.
A fixture in a home is anything of value that is permanently attached to the structure of the home. This can include carpeting, light fixtures, window coverings, and landscaping. Fixtures are a common cause for dispute between buyers and sellers.
This is the final transfer of ownership between the buyer and seller, the exchanging of the keys. This happens once both sides have fulfilled all terms of the contract.
Home inspections are required once a potential buyer makes an offer. Typically, they cost a few hundred dollars. The purpose is to check that the house’s plumbing, foundation, appliances, and other features are up to code. Issues that may turn up during an inspection may factor into the negotiation on a final price. Failing to do an inspection may result in surprise costly repairs down the road for the home buyer.
When a buyer is pre-approved, it means they have already secured funding from a bank to purchase a home.
Once you have the title, you own the home. A title is proven by a deed which is recorded in the county records office.
Want to know more? Give us a call today! In additional to helping you buy or sell your home, my team will be able to guide you through any potentially confusing and real estate terms or processes.