The process of buying a house can be overwhelming. Here are 43 real estate terms you must know if you’re buying a house.
The real estate terminology sheet is a tool that gives a list of 43 terms, along with their definitions and examples.
The real estate and mortgage sectors employ a lot of jargon and terminology that may be difficult to understand. Here’s a glossary of real estate terminology to familiarize yourself with before (and throughout) the homebuying and financing procedures.
The majority of the real estate terminology to be familiar with while looking for a house have to do with making an offer on a property. Here are some important real estate terms to know when you make bids and look for a financing.
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1. As-is
A property that is being offered with no guarantees as to its condition, which means that you will receive exactly what you see. For your own safety, you are responsible for checking the house.
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2. Buyer’s representative
In a real estate transaction, a buyer’s agent is a real estate specialist who represents the buyer.
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3. Establish a commission
A commission paid to real estate agents in order to sell your property. The typical real estate commission is between 5% and 6%, which is paid by the seller to their listing agent, who then divides the fee with the buyer’s agent for bringing the buyer to the table.
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4. Affordability
A discount or advantage given by a buyer or seller to assist in the closing of a real estate transaction. Concessions are usually negotiated as part of the purchase contract and may be used to offset closing expenses. For instance, a seller may be prepared to pay for new appliances or house repairs.
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5. Plan for the unexpected
A clause in a contract that allows the buyer to back out if they can’t get a loan (financing contingency), repairs can’t be negotiated (home inspection contingency), the home’s value is less than the asking price (appraisal contingency), or the buyer can’t sell their current home (selling contingency) (home sale contingency).
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6. Counter-proposal
A retort to a prior proposal. As a seller, you may submit a lower-than-acceptable counteroffer in response to a buyer’s offer price. A buyer may also add extra conditions to a seller’s counteroffer.
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7. A deposit of the earnest money
An initial deposit, typically 1% to 3% of the sales price, to demonstrate a buyer’s desire to purchase a property.
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8. Inspecting the house
A written report that provides a comprehensive assessment of the condition of a house. After the seller accepts a purchase offer, buyers usually request a house inspection.
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9. a real estate agent
In a real estate transaction, a real estate expert who represents the seller.
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Multiple Listing Service (MLS)
This database, abbreviated as “MLS,” is a tool used by real estate agents to promote their properties. Local real estate organizations run MLSs, and customers may usually access MLS listings online.
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Preapproval is number eleven.
Based on a preliminary examination of your credit, debt, income, and money available for a down payment, an estimate of how much a mortgage firm would give you. A preapproval letter is usually required for a seller to accept an offer.
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Prequalification is number twelve.
A less formal discussion about how much you may be able to afford based on a buyer’s projected credit scores, wages, and down payment amount.
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13. Purchase contract
This legal document, often known as a purchase or sales contract, details the price and terms of the property you’ve agreed to acquire. A typical contract contains information regarding the property, the down payment, earnest money, closing date, and contingencies.
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During the lending procedure, mortgage conditions are discussed.
Once your offer is accepted and the final loan approval process begins, you’ll be bombarded with lender jargon in addition to important real estate terminology. If you don’t understand a word listed here, ask your loan officer to explain it so you’re completely aware throughout the process.
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14. Evaluation
A trained appraiser compares comparable neighboring house sales to determine the worth of a property. An appraisal contingency is included in most purchase contracts, enabling a buyer to pull out if the market value does not at least equal the sales price.
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APRIL 15 (annual percentage rate)
A measure of closing expenses in mortgage finance stated as an annual percentage rate, which includes points, origination fees, and other credit charges.
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Automated underwriting is number 16 on the list.
An automated procedure that analyzes a borrower’s credit profile and recommends whether a loan should be approved or denied. Lenders may refer to this as AUS.
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Costs of closing
Fees paid up front to get a mortgage, which range from 2% to 6% of the loan amount depending on its size. The closing expenses are disclosed on the first loan estimate sent to applicants three business days after they apply for a mortgage, as well as on a closing disclosure document sent three business days before the property transaction closes.
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18. A conventional loan
A kind of mortgage loan that is not backed by any government body. Allows for down payments as little as 3% with a credit score of 620 or above.
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19. Your credit score/report
A credit score is a three-digit figure that indicates your risk of defaulting on a loan. A credit report assesses your credit history, and the data is used to generate a credit score. Depending on the loan program you choose, lenders have minimum credit score criteria.
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DTI (debt-to-income) ratio (20)
A ratio of your monthly debt (including your new mortgage payment) to your monthly pre-tax earnings. A DTI of 43 percent or less is recommended by the Consumer Financial Protection Bureau (CFPB).
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21. Make a deposit
To buy a house, a part of the selling price is paid in cash up advance. A down payment is not required for certain home financing options.
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Escrow account (number 22)
Property taxes, homeowners insurance, and mortgage insurance are all collected and paid into this account by your lender when they become due.
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FHA loan number 23
A mortgage that is insured by the Federal Housing Administration (FHA) and has less lending restrictions. For example, if your credit score is 500 to 579, you may put down 10%, or if your score is 580 or above, you can put down as low as 3.5 percent. There are two kinds of mortgage insurance required for FHA loans: an upfront mortgage insurance payment (UFMIP) and an annual mortgage insurance premium (AMIP) (MIP).
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Mortgage with a fixed rate of interest (mortgage with a fixed rate of
A mortgage having a fixed interest rate for the duration of the loan.
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25. Monthly gross income
Earnings before deductions for taxes, insurance, and other expenses. For a mortgage preapproval, most lending programs utilize gross monthly income.
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Lender’s title insurance is number 26.
Lenders need title insurance to protect themselves from financial loss if the property is subject to any ownership claims (such as ownership disputes, or past judgments or liens).
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27. Estimated loan amount
A written document that details all of the expenses involved in obtaining a mortgage. Within three days of receiving a mortgage application, lenders must give a loan estimate to the applicant.
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28. LTV (Loan-to-Value) Ratio
A ratio of the amount borrowed to the value of a property. Some loans have LTV limitations imposed by lenders. For example, conventional loans typically have a maximum LTV of 97 percent, which means you must make a minimum down payment of 3% to be accepted for the loan.
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Mortgage broker (number 29)
A licensed mortgage expert who works as a go-between for many different lenders in order to offer mortgage financing alternatives. Mortgage brokers do not finance or establish lending criteria for house loans.
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30. Mortgage loan originator
A business that handles the processing, underwriting, and funding of a house loan. The money for the loan are usually provided by the mortgage lender at the time of closing.
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31. Fee for the start-up
A charge or set of fees paid to a lender for the processing and financing of a loan. The fee may be itemized or calculated as a percentage of the total loan amount.
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Owner’s title insurance is number 32.
To protect themselves against ownership claims or disputes, homebuyers may choose to acquire an owner’s title insurance policy. Owner’s title insurance, unlike lender’s insurance, protects you against financial losses for as long as you own the property.
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33. PITI
A mortgage word refers to the four main components of a monthly mortgage payment: principle, interest, taxes, and insurance.
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Private mortgage insurance is number 34. (PMI)
On traditional loans with less than 20% down, the borrower pays insurance to offset the lender’s financial risk in the event the borrower defaults on the loan. PMI may be canceled after you achieve 20% equity. It can be paid monthly, in a flat payment, or a mix of both.
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Rate lock is number 35.
A lender’s written commitment to lock in a particular interest rate for a specified amount of time prior to closing. The majority of rate lock durations are shorter than 60 days.
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36. Vesting of title
Homeownership rights are governed by the law. The way a house is titled has an impact on what happens to it if the owner dies or the house changes hands.
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USDA Loan No. 37
The United States Department of Agriculture (USDA) has guaranteed a loan program to assist low- to moderate-income homeowners in rural regions of the nation.
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38. The Veterans Administration Loan
Active-duty military service personnel, veterans, and qualified spouses may get a mortgage insured by the US Department of Veterans Affairs (VA). There is no down payment or mortgage insurance required to qualify for a VA loan.
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Closing conditions in real estate
When you hear the term “closure,” you’re nearly there, and the keys to your house are just around the corner. Understanding real estate closing terms helps keep you informed as the deal progresses.
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39. Finally,
This is the process of finishing the purchase deal, also known as escrow closure. It include signing mortgage and title papers, collecting closing money, and going through the house to ensure it’s move-in ready.
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Closing agent (number 40)
An attorney or escrow agency will organize the closing, verify that all papers are signed, and collect any closing fees from the buyer and seller, depending on where you reside.
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Closing date (ninety-one)
When the transaction and final finance approval must be accomplished, as specified in a purchase contract.
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42. Finally, I’d want to make a disclosure (CD)
At closing, you’ll get a written final accounting of all expenses and fees payable. Lenders must provide the CD three working days before the closing date. Before closing on the loan, any mistakes in the mortgage terms or seller concessions should be addressed, so read the paperwork thoroughly.
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43. Take a tour
A common contract clause allowing a buyer to view a property prior to closing. A buyer verifies that agreed-upon repairs have been performed and that the property is in move-in ready shape during a walk-through.
This story was syndicated by MediaFeed.org and originally published on LendingTree.com.
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The real estate vocabulary 2021 is a list of 43 real estate terms that you should know if you’re buying a house.
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