Tuesday, February 16, 2021 / by Breanna Thornton
Real estate lingo can be difficult to pick up on. There is a lot that goes into the process from beginning to end. For some basic terms, continue reading! Let us know if there are more terms you would like defined.
This is how much the home will raise in value over time. As inflation occurs, homes will naturally show a higher price tag.
Why is this helpful? It’s important to know how much your home costs so you can be realistic about a good selling price. The good news is, even if a home looks pricey up front, low mortgage rates can still make the property more affordable.
2) Bridge Loan
A bridge loan is a short term loan that is taken out of someone's own property in order to help finance their next property.
Why is this helpful? Taking a loan out of your current property can help cover some immediate costs before a more permanent financing plan is in place. In addition, it might give you the upper hand as you try to buy a new home in this competitive market.
3) Closing Costs
These costs could include appraisal fees, loan origination fees, title insurance, and other fees. They typically take up 2-5% of the total purchase of the home.
Why is this helpful? It is helpful to be prepared for these costs in the purchase of a home, since they tie up loose ends and complete the transaction of buying your new home.
4) Comparable Sales
In order to determine a reasonable price point for a home, it will be compared with other similar homes in the area. Only homes that have legally been closed are considered a “comp.”
Why is this helpful? With this market, price points can be difficult to navigate. Comparable homes are a great resource to make sure you are getting the most out of your home when it sells.
5) Discount Points
These are also referred to as mortgage points. These fees are paid from a homebuyer to lenders during closing in order to get reduced mortgage rates.
Why is this helpful? A reduced mortgage rate means lower monthly payments! This could save you thousands of dollars in the long run.
6) Earnest Money
This deposit is made when a homebuyer is interested in a property and decides to enter into a contract with the seller. It can make up about 1-2% of the home's total price.
Why is this helpful? We are in a competitive market. Putting a deposit down shows the seller that you are serious about their property. For sellers, this means that the potential buyer is less likely to back out.
This is a part of the home buying process. Usually some third party will hold onto something of value during the transaction, like the earnest money check. At closing, this money is given to the seller.
Why is this helpful? Going into escrow is an easy way to protect buyers and sellers during the process.
8) Home Inspection
A third party will come to the home and create a report about important aspects of the home. This often includes inspecting the roof, the heating system, and more.
Why is this helpful? By having an inspection done, major issues can be identified and dealt with. This is often to help buyers from purchasing a home with certain defects they are not aware of.
This refers to the institution or individual who lends money to a buyer in order to purchase a property. The buyer agrees to pay back the loan with certain dates and interest rates.
Why is this helpful? Few people have a couple hundred grand laying around to purchase a home. By going through a lender, you are able to finance your home and pay it off in increments.
A sale is considered to be “pending” if all contingencies are met and both parties are progressing towards the closing table.
Why is this helpful? At this stage of the process, it is rare for a buyer or seller to walk out of the deal. It is reassurance that the transaction will continue towards becoming closed.
We hope this was helpful information! If you have questions about buying or selling real estate, Hip has your back! Stay warm out there!
Header image from Macmillan Dictionary Blog