Buying a Home? Industry Terms You Need to Know

During the home buying process, you need to be prepared for all the ins and outs that come with searching for your dream home, especially as a first-time homebuyer. There are several key concepts that you should be familiar with so that you’re not surprised down the line.

Here’s a primer on some of the terms that will help make your life easier when you’re in the market to buy a home.

Real Estate Terms You Need to Know

Acceptance

Acceptance means agreeing to the terms of an offer, which is then signed off on in a contract. If either the seller or the buyer backs out without allowable cause, they will face consequences, like losing earnest money or confronted with a possible lawsuit.

Appraisal

When you have a sense of the type of home you’re interested in, your real estate agent should put together a market analysis of comparable homes in the area. This will help when you apply for a mortgage because your lender will request an appraisal of the home you would like to buy. By knowing what other houses are selling for, you won’t have to worry about your loan not being approved by your lender because your offer was more than the appraised value of the home.

Buyer’s and Listing Agents

When you set out to buy a home, it’s a good idea to hire a real estate agent to represent you. Known as the buyer’s agent, they not only have insight about inventory on the market, but they will be able to help answer any questions that arise along the way. On the other hand, the listing agent represents the seller, but can also represent the buyer; though that’s not in the buyer’s best interest.

Closing Costs

Speaking of which, when you close on a house, you not only have to pay the down payment to the lender but additional closing costs. These can include the appraisal, closing fee, title insurance, homeowners insurance, and inspection. Average closing costs range between $2,500-$5,000.

Counter Offer

When you make an offer on a house, the seller can agree to it, outright deny it, or do what is most common–make a counter offer. A counter offer is where the seller looks to make a compromise, most commonly on price.

Earnest Money

Earnest money is money paid by the buyer to the seller in order to show their intention to purchase the house. The money will be held and applied at closing when the remainder of the purchase money is due. The seller may keep the money if the buyer backs out of the contract.

Fixed and Adjustable Rate Mortgages

Fixed rate mortgages are exactly as they sound; the rate you pay on your loan remains the same during the life of the mortgage (typically 30 years). Conversely, adjustable rate mortgages have rates that vary through the life of the mortgage (typically 5, 7, or 10 years). It can be financially advantageous to choose the latter if you plan to sell your home before the introductory rate ends. Regardless of which one you choose, you should shop around and do your due diligence.

Inspection

After you’ve made an offer, you will need to have the home inspected to ensure there aren’t any major issues. A home inspection typically costs between 2-5% of purchase price.

Offers and Contracts

Once you’ve found your perfect home, you can make an offer with the help of your agent or an attorney. If the seller accepts your offer, the house will go under contract, and it typically takes 30-45 days for the contract to close.

Title Insurance

As part of the closing costs, most mortgage lenders require you to pay title insurance. Title insurers will then search public records to make sure the seller has the rights to the title and doesn’t have any liens, such as unpaid property taxes, on the home.

If you are a first-time homebuyer, Bay National Title Company can not only help you with all of your closing needs but also help make the buying process easier to understand.