Real Estate Jargon Explained for First-Time Homebuyers
Buying your first home or property can be a little intimidating. It is a long-term commitment that often involves a complex web of financial transactions. However, learning real estate jargon can make this process a lot easier. Here are some basic terms to help you get started.
A detailed list of properties a real estate agent has sold over a specified period.
Ad hoc Partnership:
A formal arrangement a buyer makes with an investor to share the buying costs and profits of a property.
Adjustable Rate Mortgage:
A mortgage option whose interest rates change throughout the life of the loan.
A buyer’s ability to pay for expenses without having to supplement income through credit lines.
The process through which a property’s value is assessed by a lender before a buyer can be approved for a loan.
This is when the value of property increases.
A mortgage option that takes the form of a hybrid loan for a set number of years. When this period lapses, borrowers are required to pay the loan amount in full.
When the real estate market swings in favor of buyers because the demand for housing is low but the supply of property is high.
The highest or lowest interest rates can go within a certain period. Caps can be imposed over a 6-month, 12-month or lifetime period.
Profit made when selling a home.
Fees paid to the lender and other parties to conclude the sale of a property.
Fees paid to real estate agents and brokers for their services. It is expressed as a percentage of a property’s purchase price.
Comparable or comps:
A list of similar properties to the one on sale compiled for the purpose of determining a property’s fair market value.
A housing unit whose interior space can be purchased and owned by an individual buyer, but whose exterior space is owned communally.
High interest expenses that do not appreciate or increase in value.
Clauses or conditions included in purchase contract which must be met for the sale of a property to continue.
Comparative or co-op apartment:
A housing unit whose ownership is expressed as shares granted to a buyer after successful purchase.
Document detailing the financial and credit history of a loan applicant for the purpose of assessing creditworthiness.
A type of real estate transaction where the owner of a property is forced to sell it by financial or personal circumstances.
A percentage of a property’s purchase price a buyer needs to contribute in order to obtain a mortgage loan.
When a buyer is represented by a real estate agent who works for the same agency that listed a property he or she wants to purchase.
The act of employing a neutral third party to mediate a real estate transaction.
Fair Market Value:
What a property is worth compared to similar properties in the same location and what a buyer is willing to pay when there are no external pressurizing circumstances.
Fixed Rate Mortgage:
A mortgage option with interest rates and monthly payments that never change throughout the life of a loan.
Individuals or companies that purchase cheap, damaged properties with the intent of making repairs and selling them for a higher price for profit.
A process through which a lender repossesses property from an owner as a result of defaulting on mortgage payments.
Fully Indexed Rate:
The interest rate determined when a lender combines the index and margin.
The amount or positive balance that a borrower has already paid on a mortgage loan.
An insurance option that covers the costs of repairing or rebuilding property in the event of damage.
A mortgage option that starts off as a fixed rate loan and changes into an adjustable loan after a set number of years.
A reference used to determine the market-related interest rate on loans.
Amount of money you earn over any period from any source.
The fee lenders charge borrowers for using their funds.
A mortgage option that allows a borrower to pay only the interest rate for a specified period before increments are added to monthly payments to cover the principal amount.
Hidden flaws or damage to property that can only be discovered through thorough inspection.
When a seller of property comes into agreement with a real estate agent to work exclusively with him or her on the condition that the agent will attract creditworthy buyers.
A fee a lender charges a borrower that amounts to 1% of the loan amount.
One part of the interest rate that expresses the amount of profit the lender wants to make from a loan.
An individual whose job is to help buyers find affordable mortgage loans, complete loan applications forms and negotiate with lenders.
Obvious, visible flaws or damage to a property.
A penalty that discourages borrowers from making mortgage payments in advance.
The amount a lender loans a client which needs to be paid back on a monthly basis.
Taxes charged for owning property.
Ratified Sales Contract:
An offer to purchase property between buyer and seller that has been approved and signed by both parties.
Real Estate Agent:
An individual charged with the responsibility of finding property, drafting agreements, negotiating and closing the sale on behalf of a buyer or seller.
Real Estate Broker:
An individual who supervises real estate agents. He or she may also act as a sales agent and office manager for the agency.
Real Estate Investment Trust:
A group of individuals who pool money together to invest in residential and commercial income properties managed by a company.
A real estate agent or broker who is a member of the National Association of Realtors and conducts business based on the organization’s principles, practices and code of ethics.
Resale Potential or Value:
What property that has already been purchased could sell for in future.
A loan given against home equity to adults 62 years and older where recipients receive a monthly check from the lender to spend however they see fit.
Also known as a Home Equity Line of Credit, it is a loan a person applies for using home equity as collateral. Repayments go towards paying off the first mortgage before the second. It is possible to take out a third, fourth and even fifth mortgage.
When the real estate market swings in favor of property sellers because the demand for housing is high but the supply is limited.
Shared Equity Partnership:
A business agreement in which a buyer and private investor share costs of purchasing and maintaining property and distribute profits accordingly after the property is sold.
A real estate transaction where a property is sold to prevent it from going into foreclosure.
When a real estate agent represents the buyer exclusively and does not use property listings made by the agency he or she works for.
The technique of decorating the interior and exterior of a property for the purpose of making it more appealing to buyers.
Payment items you can deduct to reduce your taxable income.
A type of insurance that lenders require borrowers to purchase to provide protection should claims be made against the property’s ownership after a sale.
Armed with a new knowledge of real estate jargon, you will be in a better position to find, negotiate and purchase the home or property of your dreams. Explore your options with a certified real estate agent or broker to find a solution that works best for you.