Breaking down the key concepts and terms you may come across when purchasing a home.
Buying a home is a long and complicated process. With so much new information and terminology to take in from all sorts of directions, it’s hard to keep track and stay informed. Between real estate verbiage and financial/legal, it’s hard to stay on top of things, especially for first-time home buyers. It’s so important to familiarize yourself with the process. That is why we have put together the Home Buyer’s Dictionary - a one-stop shop of terminology you may come across during the home buying process.
A mortgage loan whose interest rate adjusts according to a market index. This means that as the interest rate goes up or down, so does your mortgage payment.
The amount a professional appraiser determines your home and its property to be worth.
A short-term loan collateralized by the buyer’s present home (which is usually for sale) that allows the proceeds to be used for closing on a new house before the present home is sold. Also known as “swing loan”.
One unit in a complex of many. When you purchase a condominium, you solely own what is inside your walls and you jointly own the hallways, exterior, and common areas. You also pay a monthly fee for the management of these areas.
The cost required to officially charge the ownership of the property. Buyers and sellers have different costs they are responsible for at closing.
Also called settlement, the signing of documents and payment of funds to legally transfer house and its property from the buyer to the seller.
The score that tells a borrower how much of a credit risk you will be.
A report detailing a borrower’s credit history. A few items shown are the amount of the borrower’s debt, their timeliness of making payments, and their credit rating.
Violation of a mortgage contract.
The number of homes that a local jurisdiction allows to be built on a certain acre of land.
A “good faith” deposit submitted with a purchase offer to show that the potential home buyer is serious about buying the house.
The exterior of a specific model. A floor plan may have multiple elevations for you to choose from, each with varying architectural styles, building materials and exterior treatments.
When a third party handles funds or documents for the buyer, seller or both.
What your home is valued at after the balance of what you owe is subtracted.
A mortgage that has an interest rate that stays the same for the life of the loan. This means your monthly payment will remain constant.
An estimate, given to the borrower by their lender, to show what settlement costs they will be responsible for and how much they will be.
Insurance against damage to your home from vandalism, fire and other hazards. You are required to carry insurance equal to the value of your home.
An association that manages the care of common areas of a community. The home owner pays a monthly or quarterly fee to this association for maintenance costs.
Insurance that covers personal liability and hazards for a home and the contents inside of it.
The amount you pay to the lender for borrowing money. A portion of this becomes part of your monthly mortgage payment.
The claim against the property that has to be paid off when you sell a property.
The highest or lowest a payment on an Adjustable Rate Mortgage can reach for the life of the loan.
The amount of time the lender agrees to lock in an interest rate for the purchaser prior to settlement.
A document that states a debt exists and the repayment terms.
Items you can choose to add on to your home. Options add to the price of the house, but allow you to personalize your home (e.g. tile floors, fireplace, etc).
Principal, Interest, Taxes, and Insurance. The four main parts of your monthly mortgage payment.
A community where several builders offer a variety of home styles in many price ranges. There are usually amenities in the community such as recreational facilities and shopping.
A charge by the lender to increase the amount of interest yield on a loan. Each point is 1% of the loan amount.
When you pay part or all of your loan before it’s matured.
The amount you borrow for your loan. This amount does not include interest.
A builder’s list of changes or corrections to be made on a buyer’s home.
A Realtor who has earned a broker’s license can employ real estate agents, as well as represent buyers and sellers.
Insurance that protects the lender or the buyer against any loss that comes out of disputes over who owns a property.
When title records are searched to make sure the seller is the legal owner of the property. It also checks whether there are any outstanding claims or liens.
A buyer’s final inspection of the home before settlement to look for any problems that need to be fixed by the seller.