Whether you’re a first-time home buyer or someone who has been down this road before, the neverending lexicon of real estate catch phrases can make you feel like you need a masters degree! You don’t need to be an expert in every real estate term (that’s what your agent is for), but this snapshot of some of the most popular phrases will help you understand what they mean and why they’re important. Here’s a closer look:
Amortization: When you’re talking financing, the word “amortization” is likely to come up. This simply means a reduction of debt. Your mortgage will be amortized over a period of time, and that timeframe is how long it will take you to pay off your home.
Closing: Whether you’re buying or selling, closing is the final step you’ve been waiting for. Closing means transferring the property’s title from one party to another once money and other considerations have been exchanged and satisfied.
Escrow: An escrow company acts as a third party to hold money, the property title and more prior to a transaction closing. All conditions of the agreement must be satisfied prior to an escrow company distributing assets to the respective parties.
Lien: When you’re talking about real estate, “lien” is never a word you want to hear. A lien is a legal claim on a property that occurs when a home owner fails to pay their debt or for services. The lienholder has the rights to sell a property in order to collect money they are due.
Pre-Approval: Long before you fall in love with a home, it’s important to secure a pre-approval letter from a mortgage broker or bank. This pre-approval will be valid for a specific amount of time and will lock-in an interest rate for you. In order to obtain a pre-approval, you will need to collect proof of your income and debts, along with other financial information. It can be a lengthy process, but one that’s important, especially if you’re house hunting in a competitive area.
Pre-Qualification: How large of a loan will you qualify for? A lender or mortgage broker will use a pre-qualification to determine the amount. It’s important to note the difference between a pre-approval and a pre-qualification. Whereas a buyer with a pre-approval has a locked-in interest rate for a period of time, a pre-qualification is merely a non-binding estimate of how much you might qualify for.