Real Estate Vocabulary
This page is dedicated to demystifying the vocabulary used by realtors and mortgage lenders, providing essential terms that everyone should understand.
Whether you're a first-time homebuyer or looking to refinance, knowing these terms will empower you in your real estate journey.
Home Buying Basics
1
Down Payment
The amount of money you pay upfront when buying a home. It’s usually a percentage of the home’s price (e.g., 5% or 20%).
2
Mortgage
A loan you get from a bank or lender to buy a home. You repay it over time, usually 15 to 30 years.
3
Interest Rate
The cost of borrowing money, shown as a percentage. It affects how much you pay monthly and over the life of the loan.
4
Principal
The amount of money you borrow (not including interest).
5
Pre-Approval
A lender’s written estimate of how much they’re willing to lend you, based on your income, credit, and debt. Helpful when house hunting.
6
Escrow
A third party that holds money or documents during a transaction. For example, your down payment might be held in escrow until closing.
Financial & Legal Terms
1
Appraisal
An estimate of a home’s value done by a licensed appraiser, usually required by lenders.
2
Closing Costs
Fees and expenses (like taxes and lender fees) you pay at the end of the home buying process. These usually range from 2% to 5% of the home price.
3
Earnest Money
A deposit you make when making an offer to show you’re serious. If the deal goes through, it’s applied to the purchase.
4
Title
Legal ownership of the home. A title search ensures the seller really owns the home and has the right to sell it.
5
Homeowners Insurance
Insurance that protects your home and belongings against things like fire, theft, and some natural disasters. Required by lenders.
6
Property Taxes
Taxes you pay to the local government based on your home’s value. Often included in your monthly mortgage payment.
People Involved
1
Lender
A bank or company that loans you money to buy the home.
2
Underwriter
The person who reviews your mortgage application to decide if you qualify for the loan.
3
Inspector
A professional who checks the condition of the home before you buy it to uncover any problems.
During the Process
1
Contingency
A condition that must be met for the sale to go through (e.g., passing a home inspection or securing financing).
2
Offer
The price and terms you propose to the seller when you want to buy the home.
3
Closing
The final step where you sign paperwork, pay fees, and get the keys to your new home.
4
Equity
The portion of the home you own (home value minus the loan amount). Grows as you pay off your mortgage or as the home’s value increases.
5
Amoritization
The schedule of payments over the life of your loan, showing how much goes toward principal and interest each month.