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January 22, 2024

Homebuyer Glossary: Key Words Homeowners Need to Know [Infographic]

Buying a home can feel especially complicated if you’re new to the process and don’t know the terms to expect. If you want to become a homeowner this year, it’s a good idea to learn these housing key words. Once you do, you’ll feel more confident and better informed.

a family is walking down a hallway in their new home

Affordability

  • A measure of whether someone earns enough to qualify for a loan on a typical home based on the most recent price, income and mortgage rate data
  • When home prices and mortgage rates are higher, it can impact affordability.

Appraisal

  • A report highlighting the estimated value of the property completed by a qualified third party.
  • Lenders rely on appraisals to validate a home’s value and ensure they’re not lending more than a home is worth.

Closing Costs

  • The fees required to complete the real estate transaction, which is paid at closing
  • Ask your lender for a complete list of closing cost items, including points, taxes, title insurance, and more.

Credit Score

  • A number ranging from 300-850 that’s based on an analysis of your credit history
  • This helps lenders determine the likelihood that you’ll repay your rates

Down Payment

  • Down payments are typically 3.5 – 20% of the purchase price of the home. Some 0% down programs are also available.
  • Ask your lender for more information about what you may qualify for.
a man is carrying a woman on his back and she is holding a key .

Equity

  • The value of your home above the total amount of liens against your home
  • Many homeowners are realizing they have more equity than they thought and they’re using it to move.

Inspection Contingency

  • A provision in a contract requiring an inspection to be completed
  • This essential step gives you information on the home’s condition and potential repairs.

Mortgage

  • A loan using your home as collateral. It may also be used to indicate the amount of money you borrow, with interest, to purchase your house.
  • The amount of your mortgage is often the purchase price of the home minus your down payment.

Mortgage Rate

  • The interest rate you pay to borrow money when buying a home
  • As mortgage rates fluctuate, consult a lender so you know how it can impact your monthly mortgage payment.

Pre-Approval Letter

  • A letter from a lender that shows what they’re willing to lend you for your home loan.
  • This, plus an understanding of your savings, can help you decide on your target price range.


Final Thought

These terms are used throughout the homebuying process. Having a basic understanding of what they mean enables you to ask questions and feel confident when shopping for a home. Speak with your local real estate expert to help you achieve your homebuying goals.



Related Article: Are You Ready to Buy?

Adapted from KCM.

a poster about key terms every homebuyer should learn .

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