Your Real Estate Lingo Cheat Sheet
Diving into the real estate game can be daunting, especially if you’re a first-time home buyer. Then, you throw in all of the unfamiliar jargon and confusing contract terms, and it can be downright overwhelming. Fortunately, we’re here to ease you into the most common terms that you’ll need to know to better understand the process, and ultimately, your investment. After all, you don’t want to miss out on an amazing opportunity just because you don’t speak the language.
Armed with the basic knowledge of the following terms, you’ll be able to enter into the real estate market with confidence and a “get-it-done” attitude. Let’s break the real estate lingo down:
- Appraisal – An appraisal is the estimated value of a given property. Appraisals are conducted to see how much money a lender might lend so that you can buy a particular property.
- Prequalification – This is the process to determine if a borrower, you the buyer, is qualified for a home loan (the amount is approximate).
- FICO Score – When you approach a lender, they will look at your FICO score, the numerical value that’s assigned to lenders based on your credit history.
- Debt to Income Ratio – In order to qualify for a loan in the first place, your monthly debt cannot exceed 43% of your monthly income.
- Loan to Value Ratio – This ratio is how the lender will determine if a loan is worth the risk associated with it.
- Comparative Market Analysis (CMA) – This is a study you’ll want in your hands before you make an offer on a home. It shows how comparable other homes in the area have sold to help better determine and ensure a reasonable and fair price.
- Mortgage – Your mortgage is basically the home loan.
- Payment Terms – As the buyer, you’ll need to know the monthly and cumulative totals of such payment terms as principal, interest, taxes, PMI, etc.
- HOA – The Homeowner’s Association is the organization that determines community rules and standards. You’ll want to check these before you invest to make sure you’re willing to comply.
- Certificate of Title – This is the document that ensures the property is legally owned by the person who claims it (i.e. the seller).
- Earnest Money Deposit – This is a payment made to the seller along with the offer to show serious intention to purchase a property of interest.
- Good Faith Deposit – This is a payment made to the lender with the offer to show serious intention.
- Contingencies – These are conditions that must be met in order for an offer on a home to proceed.
- Closing Costs – These are all of the fees and expenses associated with closing on a home.
- Escrow – This is a third-party account where all closing costs are collected while the lender approves the deal.
- Due Diligence – These are actions that a responsible buyer must address in order to protect the real estate investment.
- Fiduciary Duties – These are the responsibilities of the broker that the real estate agent works for.
While these are only some of the terms you can expect to encounter during your home buying process, remember that your real estate agent is there to answer any and all other questions that you may have concerning your investment.