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Common Real Estate Terms

Like many industries, the world of real estate sometimes operates in its own language and lingo. Having a working knowledge of what some of the terms are referencing will help you navigate this world and get you better acquainted with the discussion. Understanding the flow of these terms will help aid you down your path of achieving your real estate needs and goals. Let’s share a few common terms..

Financial Terms

Adjustable-Rate-Mortgage – Mortgages with rates that can change periodically

Commission – A percent of the home’s sale price paid to real estate brokers upon successful close of escrow. It is customarily paid by the seller and split between the buyer and seller brokers, but it can vary

Debt-to-Income-Ratio – Your monthly minimum debt payments divided by your monthly pre-tax income

Down Payment – The amount paid by the homebuyer to the lender during closing

Earnest Money Deposit – A “good faith” deposit by the buyer at the time of the purchase and sale to show they are serious about the purchase. It is typically put toward closing costs or returned to the buyer when the transaction is finalized

Escrow Account – An account overseen by a trusted third party to hold all monies related to a real estate transaction, such as down payments and closing costs, until the transaction is completed

Equity – The difference between what you owe on your mortgage and what your home is currently worth

Fixed-Rate Mortgages – Mortgages that have the same interest rate throughout the entire span of the loan

PITI (Principle, Interest, Taxes and Insurance) – The four basic elements of a monthly mortgage payment

Principal – IN the context of borrowing, that is the amount of money owed on a loan

Procedural Terms

Appraisal – The estimated value of a piece of real estate, as judged by a qualified third party

Close of Escrow – When the transaction is finalized and the buyer legally takes possession of the home from the seller

Contingencies – Clauses in a purchase and sale agreement specifying actions or requirements that must be met for the contract to become legally binding

Mortgage Commitment Letter – A formal document from your lender stating you’re approved for the loan

Pre-Approval – An estimate given by a lender to determine if you are able to afford a particular house you have bid on

Pre-Qualified – An estimate given by a lender to determine how much of a mortgage you may qualify for when you are seeking a home

Purchase and Sale Agreement – The agreement between the buyer and seller noting the final sale price and terms of the transaction

Title Search – A review by a third-party professional of all public records associated with a home’s history, including previous purchases, sales, taxes and liens. The title is a document that states the property is clear of all past-due taxes, liens, and property disputes

We know the market can be confusing, but we are here to offer clear, concise information you can trust. Feel free to contact us and we will answer any questions you may have

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