Home Buying Language You Should Know

It can be really hard to keep up with all of the terms that are used in real estate. If you need a crash course on real estate terms, this glossary on home buying lingo you should know will get you started.

Home buying language you should know

The appraisal management company (AMC)

This is a real estate appraisal institution that is operated independently. It is engaged by a mortgage lender to undertake valuations on potentially mortgaged properties.

Appraisal

An informed, impartial and well-documented opinion of the value of a property. An appraisal is typically prepared by a licensed and certified appraiser.

Approved for short sale

A real estate term that shows that a bank has approved a reduced listing price on a home.

Buyer’s market

A real estate market condition where homes for sale outnumber buyers. This is usually characterised by price drops on homes and homes staying on the market for longer.

Cancellation of escrow

A situation in which a buyer pulls out of a home purchase.

Capacity

In real estate, this simply means the amount of money a buyer can afford to borrow.

Cash-value policy

A homeowner’s insurance policy that pays the replacement cost of a home, minus depreciation, should damage occur.

Closing

The real estate process under which ownership of a property transfers from a seller to the buyer.

Closing costs

These are the fees associated with a property transaction that are due at the end of the sales transaction.

Closing escrow

The official delivery of paperwork to each party and the final transfer of the property from the seller to the buyer.

Comparative market analysis (CMA)

An in-depth investigation that is conducted by a real estate agent to determine an estimated value of a property based on recently sold similar properties.

Contingencies

These are conditions that are written into a home purchase agreement that protects the buyer should issues arise either with their financing or with the home inspection.

Days on market (DOM)

The period of time a property listing is considered active.

Down payment

A portion of the home’s purchase price that a buyer must pay.

Debt-to-income ratio (DTI)

An analysis that compares a home buyer’s expenses to gross income.

Earnest money

A security deposit made by a buyer to assure the seller of their intentions to purchase the property.

Equity

The percentage of the home’s value that is owned by the homeowner.

Foreclosure

The process under which a property is repossessed by a lending institution after a buyer fails to meet their mortgage payment obligations.

Homeowner’s association

This is the governing body of a housing complex that is tasked with setting the rules and regulations that residents must abide by.

Home equity loan

A type of loan that allows a homeowner to use the equity in their home as collateral.

Home inspection

A non-destructive examination of a home’s systems.

Homeowners insurance

An insurance policy that covers the structure of a home, its contents, injury to others and alternative living expenses should damage occur.

Listing price

The price of a home, as set by a seller.

Mortgage broker

A licensed professional working on behalf of a buyer to secure financing for them through a bank or other lending institution.

Mortgage interest rate

Simply put, this is the of borrowing money through a mortgage loan.

Multiple listing service (MLS)

Can be viewed as a database used by real estate agents to list properties for sale.

Origination fee

An amount charged by a mortgage broker or lender, to initiate and complete the home loan application process.

Pre-approval

An assessment of a borrower’s income and assets to determine the loan amount they qualify for.

Property tax exemption

A reduction in property taxes based on specific criteria.

Seller’s market

Market conditions that exist when homebuyers outnumber properties for sale. Generally, bidding wars ensue and property prices go up.

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