Helpful
Terms for Selling Your Home
Selling a home requires the marriage of several moving parts.
Even seasoned homesellers can find the process to be daunting. Knowing basic
vocabulary and terminology can greatly aid in easing the anxious home seller.
Here is a helpful glossary of terms to reference as you move forward:
Realtor. Realtors, or real estate agents are
integral to the homebuying process, and they serve as your guide to your area’s
housing market. Agents will show you listings that fit your specific needs, and
often have access to homes that may not even be listed on the market yet. A
real estate agent is your unique personal shopper when it comes to home
listings.
Annual Percentage Rate. An APR is the
standardized method of showing you the total cost of borrowing money. An APR is
the combination of the interest rate charged by your creditor, in addition to
any fees you may be charged for. These fees are usually presented in
percentages, and will be added to the interest rate to give you the total of
your APR.
Appraisal. An appraisal is a
document that contains the estimated value of a home. These are professional opinions
of the market value of a property and can often help you determine if a home’s
value is appropriately reflected in an asking price.
Conventional Loan. There are a variety of
different loans and mortgages available for homebuyers. However, a conventional
loan is usually the route most first-time homebuyers will take. A conventional
loan will typically require a 3 percent down payment. They are not typically
advisable for people with low credit scores. Conventional loans are not
guaranteed by a government agency and require private firms to administer them.
Credit Score. What exactly is a
credit score? In terms of homebuying, a credit score helps potential loan
officers determine the risk level of providing a mortgage to a potential
client. These scores are calculated using a formula that assesses your
comprehensive credit history. The higher your credit score, the more likely you
are to have better options as a homebuyer.
Closing and Closing Costs. First time homebuyers
may be surprised to discover there are often closing costs associated with the
completion of a sale. These fees may be related to insurance fees, survey fees
or attorney’s fees (if applicable). These costs will vary from location to
location. Be mindful of these fees before putting an offer on a home, to ensure
you have the extra funds to cover any surprise costs.
Closing
is the fun part! Closing means the home is now yours, and a deed will be given
to you once all necessary documents have been verified and approved. The home
is now in your name, and you can begin the move in process.
Down Payment. A down payment is a
portion of the sales price you will be required to pay the seller in order to
close a sale. The down payment must be paid at the time of settlement
(closing). Purchasing a home does not require the entire sale price be provided
upfront. This is where your mortgage payment will come into play.
Due Diligence.
The due diligence period is the time within
which the home buyer will complete all inspections and loan preparations. The due diligence fee is paid to the seller
and is applied toward the purchase price at closing. Should the buyer back out of the transaction
the due diligence fee typically is retained by the seller.
Earnest Money. The amount of Earnest Money varies in a transaction. It is typically 1% of the purchase price and
is applied toward the purchase price at closing. Earnest Money is testimony to the buyer’s
good intentions to follow through to closing and offers the seller assurance
that the buyer is acting in good faith.
Home Inspection. A home inspection is a
close physical examination of a property. Home inspections determine the
functionality of plumbing, electrical units, heating and cooling systems,
appliances, structural stability, etc. Home inspections occur before the purchase of a home
is finalized.
Lender. A lender is the
financial institution or private agency that is responsible for your loan.
Mortgage Banker. An individual, firm or
company that originates, sells and/or services loans secured by mortgages on
property.
Mortgage Broker. A mortgage broker is a
loan provider who serves as a liaison between the borrower and the lender.
Hiring a broker can help ease some of the anxiety that comes with applying for
major loans. Brokers can work for firms or independently.
Net Income. Your net income helps
determine your financial standing when applying for a mortgage. Net income is
your after- tax pay and is the money you receive after all tax withholdings
have been deducted from your gross income. Net income allows lenders to gauge
your viability is a potential homeowner.
Offer. An offer is your bid on a home that you
are interested in purchasing. Offers are almost always the exact asking price
or a lower value. Once you place an offer, depending on the value, you may
enter a negotiation process with the seller. A seller will either accept the
offer, negotiate a value somewhere in between your offer and the asking price,
or decline the offer entirely.
Pre-Approval vs. Pre-Qualification. These terms are closely
related but still have a few fundamental differences. Pre-Qualification is
essentially a less formal version of a pre-approval process. Pre-qual asks for
estimated information that you will give to your mortgage broker, that helps
them determine if you are a viable candidate. If you get pre-qualified, getting
pre-approval is the next step. Pre-approval is far more involved and will
require verified documentation of your financial history. Pre-approval is not
necessarily required for homebuyers to have, however it is strongly advised, as
not being pre-approved by a reputable bank or broker will significantly hurt
your chances of closing on a home.
Feeling overwhelmed? Not to worry, you will
not be expected to know everything about the buying process up front. Buying a
home takes time and patience. Don’t be afraid to ask your real estate broker
any questions; that’s what they’re there for!
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