Making your first home purchase can feel overwhelming for a myriad of reasons, but one of the most simple and reoccurring questions that will likely pop into your head will be: “What is everyone talking about?” The real estate industry is teeming with insider jargon and terms that you likely will not encounter anywhere else. So, let’s break down some of these terms so that when you do run across them during your home-buying journey, you can feel like an informed, seasoned pro.
1. Preparing For the Home-Buying Journey
As you prepare to begin your search, you’ll come across terms related to the mortgage pre-approval process. First of all, what is the pre-approval process? Pre-approval is when a lender determines how much they are willing to loan you for a mortgage based mainly on your credit score and income. Pre-qualification is similar to this but requires a less rigorous check of your finances and will provide a rougher, looser estimate than the pre-approval. Furthermore, a pre-approval is not an official approval as this will follow once you’ve found the property you wish to purchase, and a lender will examine the property details before making their determination.
2. Exploring Real Estate Listings
As you begin digging into active listings, you’ll likely run into plenty of abbreviations that you may not have seen before. To give you a quick breakdown: BR is bedroom, BA is bathroom, HOA is homeowner’s association, SS is stainless steel (in relation to appliances, typically), and HVAC is heating, ventilation, and air conditioning. Because many listing descriptions try to fit in as much information about the property as possible, they’ll oftentimes be full of abbreviations. As you read more and more of these descriptions, you’ll become well acquainted with the variety of abbreviations and acronyms used in real estate.
3. Navigating the Offer and Negotiation process
You’ve found your dream home and now you’re ready to make it yours. If you’ve made an offer, this opens the door to the negotiation process. If the seller does not want to accept your initial offer, they can present a counteroffer (an offer that responds to the buyer’s initial offer). Furthermore, as a buyer, there are certain protections or strategies you can employ during the purchasing process. Contingencies, which both buyers and sellers can choose to utilize, put certain criteria in place that must be met before a deal can be finalized. For example, a buyer can agree to a listing price but request that home inspections be carried out before the deal is officially finalized.
4. Understanding Closing Costs
Once you’ve made your offer, you’ll run into some more terms related to the final steps of the closing process. Let’s start with escrow. Escrow is when a third party holds the funds until the agreement is finalized. Another big term that will come up is closing costs. Closing costs are additional fees (not counting the downpayment) that the buyer is on the hook for, like appraisal fees (what it costs to have an appraiser value a home) or escrow funds (money paid towards an escrow agent).
5. Closing Day
Congratulations, it’s closing day! But what exactly is closing day? It’s when you are officially considered the owner of the property, receive the keys, and can move in. All the heavy lifting has been done at this point. Buyers may choose to do one final walk-through (where you tour the home to make sure that any repairs or changes you requested in your negotiations were made). For the most part, once you’ve made it to closing day, you’ll likely consider yourself a real estate pro, with a whole new glossary of industry terms in your back pocket.
If you’re looking to make a real estate purchase, please reach out. Although independent research before your buying journey is always recommended, a trusted advisor who can guide you through the entire process will make all the difference. Let’s achieve your goals together.