Buyer’s Guide to Key Real Estate Terms
Finding the perfect home can be no easy task. Trying to check all the boxes and work within budget constraints may be challenging, but if you never bought a home before (or its been a long time) trying to understand all the language used in the process can seem overwhelming. As the premier real estate team for all your Conejo Valley real estate needs, below are some key terms to help you better understand the terms associated with the home buying process.
Key Home Buying Terms
Listing Price – The price of the home set by the seller.
Days on Market (DOM) – The number of days a home has been listed on the market.
Multiple Listing Service (MLS) – A database used by real estate agents that list properties for sale.
Appraisal – A thorough assessment on the value of a property that is based on similar homes in and around the neighborhood.
Escrow – A specific time period after a buyer’s offer has been accepted by the seller. During this time, title searches are performed, all liens are removed, and the property is inspected and appraised.
Home Inspection – A visual inspection of the various systems of a home (the piping, roof and wiring etc.). Home inspections take place when the property is in escrow.
Walkthrough – The final inspection of a home done before closing.
Closing – The final meeting where ownership of the home is transferred from the seller to the buyer. The buyer, seller and both real estate agents are typically all present at this meeting.
Closing Costs – Fees attached to the purchase of a home. They are due at the closing transaction. These fees include, home inspections, title searches, appraisals and lawyers’ fees. Closing costs are usually 1% – 3% of the home’s original purchase price.
Foreclosure – A home that has been repossessed by the lender because the owner has defaulted on their mortgage payments.
Homeowners’ Insurance – A policy designed to protect the structure of the home as well as the owner’s personal belongings and contents of the property.
Property Taxes – A municipal tax based upon the value of the home. Property tax helps fund services such as sewer, water and garbage collection.
Key Lending Terms
Down Payment – The portion of a property’s purchase price that a buyer must pay. The down payment is not part of the mortgage.
Mortgage Broker – A lender who works on behalf of the buyer to secure a mortgage loan through a bank or other lending institutions.
Mortgage – The type of loan that is used to secure payment of a property. A mortgage is usually paid off over a specific period through monthly payments.
Interest Rate – The cost attached to borrowing money. The interest rate of a mortgage is set by the lender and is either fixed for a specified time period or it can float.
Pre-Approval – The amount of money (mortgage amount) the buyer is approved for. The amount is based upon factors such as credit score, assets and the borrower’s income. It’s usually a good idea to get pre-approved for a loan prior to submitting an offer.
Principal – The outstanding balance of a mortgage. As payments are made, the mortgage’s principal is reduced.
Equity – The percentage of the home’s value that is owned by the owner. The lender (bank) owns the rest.
These important real estate terms should help bring clarification to any questions or language that you may not understand during your search for the perfect home. If you would like more information on these terms or are interested in seeing some of the new and exciting properties that are available in and around the Conejo Valley, please contact us today. We look forward to hearing from you soon!