Real Estate Terms To Know Before Starting Your Home Search
August 4, 2021
Just like every other industry, real estate also has its own set of jargon and terms that might seem like a word salad to someone who is completely new to it. To make sure that the already convoluted process doesn’t become even more confusing, it is always a good idea to learn the most commonly used terms in the real estate industry. This is the reason that we have compiled a list of 17 real estate terms to know before you start your home search.
For a thorough understanding, we have grouped the real estate terms and definitions in various categories. Let’s take a look:
17 Real Estate Terms to Know When Planning To Buy a Home
Before Starting Your Search
DOM is an acronym used for Days on Market. It means the number of days that a property has been active on listing. In other words, the number of days for which the house has been available for sale in the market.
2. Buyer’s Market
When the number of homes outnumbers the buyers, it is considered to be a buyer’s market. High DOM and low prices are the first sign of a buyer’s market.
3. Seller’s Market
Opposite to the conditions in a buyer’s market, the buyers outnumber the homes available for sale in a seller’s market. Similarly, DOMs become lesser and property prices rise in a seller’s market.
CMA stands for comparative market analysis. It is an analysis prepared by your real estate agent to give you an estimated value for a home you are looking to buy. CMA is based on recently sold homes with similar features, size, and condition in the same neighborhood.
Multiple Listing Service or MLS as it is commonly called is the database used by real estate agents to know about the properties available in the market. Agents and brokers can add information about homes in this database.
6. Short Sale
A home sale initiated when the homeowner owes more money than the actual worth of the property is called a short sale. The lower listing price of the home in a short sale must be approved by the bank.
Before You Apply For A Mortgage
Debt to Income ratio is one of the most important factors in getting mortgage approval. In simple terms, it is the ratio that compares your expenses to your gross income. Lenders use DTI to estimate the amount you can pay monthly.
2. Fixed-rate and adjustable-rate mortgage
Congenitally, there are two common types of mortgages. Fixed-rate mortgages, where you have to pay a fixed rate for your loan throughout its duration and adjustable rate mortgages, where interest rates can vary over the course of time.
If you are looking to pay off loans for a longer duration (say more than 5 years), it is recommended to go for fixed-rate mortgages.
One of the most commonly used terms in the real estate market, a pre-approval is the basic assessment of an individual’s credit score, assets, and income to determine the loan programs they can get qualified for.
Pre-approval is a more thorough assessment of the borrower’s assets, income, and credit score, and other important data to determine the amount of loan that they can get.
Federal Housing Administration or FHA is the government agency that insures home loans that private lenders offer.
This is the term used for the process that a lender needs to follow when assessing a loan application and the risks involved in lending the money.
When You’ve Found Your Dream Home
1. Earnest Money
The initial security deposit that you will be paying to the owner of the house to ensure that you are interested in buying the property.
2. In Escrow
In the simplest of terms, in escrow is the period between the contract signing and the closing of a property. Once you have made an offer and the buyer has accepted the offer, the home moves in escrow, generally for a period of 30 days. You can have the home inspected during this period, get titled searched for liens, and so on.
These are the terms and conditions in a written agreement to protect a buyer in case any issues arise during the financing, or the home inspection process.
4. Closing costs
Fees such as appraisal, home inspection costs, title search, etc. are all part of the closing costs. These have to be borne by the buyer and estimated to make anywhere between 1-3% of the home’s price.
American Society of Home Inspectors is a leading association that sets standards for home and property inspections. When shopping for a home inspector, it is recommended to look for someone with an ASHI or similar accreditation.
Looking to buy your first home? Besides having knowledge of these commonly used terms in real estate, it is also great to have a trustworthy professional by your side. This is where an NRP or a Negotiator Recognized Partner comes into the picture. Get in touch with one, and they will make your journey to buy your first a smooth and successful one. Contact now!