Home buyers and sellers in the throes of the buying/selling process know that real estate terms can add an extra layer of confusion to an already complicated process. Taking the time to understand this new vocabulary can help you feel more prepared. We put together a list of common real estate terms everyone should know.
Annual Percentage Rate (APR)
The APR is the mortgage interest rate, plus any other, points, fees and costs associated with the loan and is how you can compare offers from different lenders.
Closing and Closing Costs
Closing is the formal ownership transfer of the home to the buyer (this is also known as a settlement). The closing costs are the other incurred fees and taxes that are not covered by the mortgage, including lender’s fees, transfer taxes, property taxes, etc.
Fixed Rate vs Adjustable Rate Mortgage
There are typically two types of conventional loans buyers use to finance their home purchase: a fixed-rate or adjustable-rate mortgage.
Fixed rate mortgages have an interest rate that is fixed at a specific amount for the life of the loan, keeping your mortgage payments are relatively stable. In contrast, adjustable rate mortgages have flexible interest rates that fluctuate, causing your monthly payments to change. They typically start with a low introductory interest rate for a set period before changingto a variable rate.
A cash payment that is a percentage of the property’s purchase price.
Gross and Net Income
Gross income is your total income before deductions and taxes are removed.
Net income (also known as “take home pay”) is the amount remaining after deductions and taxes are removed.
A program supplied through builders that provides homebuyers a warranty on the workmanship and materials of the home and protects against major structural defects.
The total amount that is borrowed from a lender
Preapproved vs Prequalified
These two terms are often confused with each other, but they mean different things. Preapproved (or preapproval) is a formal process a homebuyer goes through to determine the maximum amount a buyer can borrow. This process involves submitting various financial paperwork for the lender to review and is typically a signifier of a serious buyer.
In contrast, prequalification is an informal process that determines the estimated amount homebuyers may qualify to borrow but isn’t a binding loan contract.
Private Mortgage Insurance
Private mortgage insurance is an insurance policy that a lender will require for buyers who put down less than 20% down payment. This policy protects the lender in case the borrower defaults on the loan.
The calculations used to determine whether a borrower can qualify for a mortgage loan.
The legal document that proves the legal ownership of a property.
There are just a handful of real estate terms you’ll come across during a real estate transaction. If you still have questions, our community sales consultants will be able to further explain other terms. If you’re ready to start the journey to your new home, visit us online to learn more about our new home communities throughout Tampa.