Purchasing a home can be an exciting, yet daunting experience. It’s important to familiarize yourself with the terminology associated with the real estate industry. Understanding even the most basic terms can not only help you navigate the buying process but ensure you make informed decisions. In this article, we cover 10 essential terms that every home buyer should know.
- Mortgage
A mortgage is a loan provided by a financial institution that enables individuals to purchase a home. It is typically repaid over an extended period. The home/property serves as collateral. - Down Payment
The down payment refers to the upfront payment made by a buyer when purchasing a home. It is a percentage of the home's total value and is typically due at closing. - Closing Costs
Closing costs include various fees and expenses that home buyers need to pay when finalizing their purchase. These costs may include appraisal fees, legal fees, title insurance, and more. - Home Appraisal
A home appraisal is an unbiased assessment of a home’s value conducted by a licensed appraiser. Lenders require appraisals to ensure properties are worth their purchase prices. - Pre-approval
Getting pre-approved for a mortgage involves a lender reviewing financial information and creditworthiness to determine the loan amount a buyer qualifies for. This step helps buyers understand their budget before they start house hunting. - Escrow
Escrow is a financial arrangement where a trusted third party holds funds and important documents until the transaction is completed. It provides security for both the buyer and seller during the buying process. An escrow also includes annual costs such as property taxes and homeowner insurance premiums. - Title
A title is a legal document showing ownership rights to a property. Before closing the deal, a title search is conducted to ensure there are no liens or disputes associated with the property. - Homeowners Association (HOA)
HOAs are groups created by a real estate developer to manage and maintain shared amenities in residential communities. Membership is usually mandatory and there are typically fees involved. - Home Inspection
A home inspection is a thorough examination of a home’s condition by a professional inspector. They can help uncover any existing or potential issues, enabling buyers to make counter offers, ask for certain repairs, or decide on different homes to pursue. - Private Mortgage Insurance
Private Mortgage Insurance, commonly known as PMI, is insurance coverage that enables home buyers to make smaller down payments than lenders require. Home buyers who have less than 20% to put down can use PMI to buy a home.
Final Thoughts
Understanding real estate terminology can be overwhelming, especially for first-time home buyers. By familiarizing yourself with these 10 terms, you can feel more confident and informed throughout the buying process. The more knowledge you have the better informed you’ll be when it comes to finding and buying your next home.
Get a Home Loan through TwinStar
Embark on your home ownership journey with us. Our friendly team of local experts can help guide you through the mortgage loan process and make sure you are prepared and confident when it comes to pursuing your dream home. For information about TwinStar home loans, visit our Home Loans page.