Whether you’re preparing to buy your first house, or you’ve decided to sell your existing home and move, it always pays to understand the terminology used by real estate professionals and lenders. Below, you’ll discover a simple glossary that will help you in your endeavors. Read it now and refer to it throughout the process to make it simpler and easier to reach your goals.
This term is a common one that you’ll likely hear from lenders when buying or selling a house. Those who are interested in buying homes will often obtain preapprovals from their lenders in the form of a letter. These letters show how much house a buyer can potentially afford to buy based on his or her income, debt, and creditworthiness. If you’re buying, a preapproval will allow you to make an offer on a home, and if you’re selling, it’s important to ensure that people bidding on your home were preapproved for the amount of their bid, too.
Fixed Rate and Adjustable Rate
There are a few different types of mortgages, and you’re likely to hear these terms used to describe them. A fixed rate mortgage is one that has an interest rate that will not fluctuate over the course of the loan term, which is usually anywhere from 15 to 30 years. An adjustable rate mortgage may fluctuate somewhat, but the term is far shorter – usually only five to 10 years.
It’s easiest to understand contingency with an example. In this case, imagine you’re interested in making an offer on your dream home, but you want to ensure the seller fixes the roof in exchange for the price you’re offering. The request to fix the roof, in this case, is called a contingency because the purchase itself is contingent on that condition being met. You might also choose to include inspection contingencies, which means your offer would be contingent on a satisfactory inspection with no major issues discovered. The same applies if you are the seller; you may receive offers with contingencies, so be sure to consider these carefully before accepting.
A home inspection is an important part of the home buying or selling process, too. As the buyer, once you have your pre-approval, you’ve made an offer with or without contingencies, and you have your mortgage, a home inspection should be conducted before closing. This will ensure that there are no undisclosed issues with the house that may impact closing. As the seller, even if you’ve already had the home inspected by someone you trust, you should still expect the buyer to hire an inspector, as well.
After the seller accepts your offer, you’ll likely be required to pay closing costs. Title insurance is often included in those costs, and while it may sound simple enough, it’s actually not what it sounds like. Essentially, once you pay these costs, the title insurer will do a thorough public records check to ensure that the person selling the house has the rights to do so and that there are no liens or unpaid taxes on the property that you may ultimately become liable for. As the seller, you can anticipate a buyer checking your public records, as well.