Top Real Estate Terms You Should Know When Buying or Selling
Whether you’re in the market for a new home or selling your current residence – or both – it pays to know certain real estate terms used by your real estate agent or mortgage lender. You don’t want any confusion when it comes to one of the major purchases of your life.
Fixed Rate Mortgage vs. Adjustable Rate Mortgage – A fixed rate mortgage provides a specific interest rate for the life of the loan. That life is usually 30 years. An adjustable rate mortgage will vary, either up or down, and the loan life varies with changes every few years.
Preapproval vs. Prequalified – Although these terms sound similar, there is a distinct difference, and a seller will prefer a preapproval letter from a potential buyer’s lender than a prequalification letter. If the lender issues a pre-approval letter, that means the buyer has submitted extensive financial information and the lender knows just how much the buyer can borrow. With prequalification, an earlier phase, the lender is acting only on basic information supplied by the buyer, so the actual amount of the loan isn’t as certain.
Contingencies – When a buyer makes a home offer, the contract may include certain conditions in order for the sale to occur. The seller must agree to these contingencies for the sale to proceed. Common contingencies include the buyer selling their current home, approval of financing and an appraisal that comes in at or above the amount the buyer has offered to pay.
Inspection and Appraisal – These terms are not interchangeable. An inspection is performed at the buyer’s expense after the offer is accepted. The inspector goes through the property diligently, noting any issues with dwelling and its condition. An appraisal is required by the mortgage lender. The appraiser estimates the value of the house based on “comps,” or recent sales of comparable properties. If the appraisal comes in at less than the buyer’s offer, the contingency clause may kick in. A lender will not loan a buyer money to purchase a property for more than its appraised value.
Title Insurance – Title insurance protects the buyer and the lender from the possibility that the seller, or prior seller, did not have clear ownership of the property. Lenders will not finance a property that has any title issues.
Listing Agent and Buyer’s Agent – Most home sales involve two real estate agents. The listing agent represents the seller, and the buyer’s agent – well, the term makes their representation obvious.
Closing Costs – The down payment and mortgage aren’t the only costs buyers face when making a home purchase. There are also closing costs, some of which are borne by the seller, and these fees can make up as much as 5 percent of the home’s price. These costs include title insurance, recording fees, lender processing fees, taxes and myriad other fees. Ask your lender to go over closing costs prior to the sale so you know exactly how much is due.
If you’re looking to buy or sell a home or find a rental property, you need a knowledgeable, experienced realtor. We make sure buyers, sellers and renters understand the process every step of the way. Contact Island Realty Group LLC at 808-689-7407 or IslandRealtyGroup@irghi.com.