Are you in the market for a new home? Especially for first-time buyers, the process can be overwhelming, from mortgage loan qualification and approval to making an offer.
To make more sense of the home buying process, we’ve put together a “cheat sheet” with some common vocabulary to know.
APR
Annual percentage rate (APR) combines interest rates, points and lender fees to determine the true cost of a mortgage. When comparing offers from different lenders, knowing this rate can help you find which loan is best for your family.
In June 2021, the average 30-year fixed APR ranged from 3.08 percent to 3.13 percent.
Appraisal
An appraisal is defined as the estimation of a home’s current market value. An appraiser will use photos of a home and examine its condition, upgrades and amenities to provide an accurate estimate of its price, given the current real estate market.
Real estate agents typically conduct an appraisal on a home using a comparative market analysis on similar homes that were sold in the previous 90 days.
Buyer’s Agent
A buyer’s agent is a real estate agent who is legally bound to help buyers purchase a property. They assist the buyer in finding the right property, negotiating the best offer and working through any issues that arise during the home buying process.
A buyer’s agent will also write up all offers and paperwork to help the process run smoothly.
Closing Costs
Many first-time buyers do not realize there are costs beyond the home price. Closing costs are fees paid at the end of the real estate transaction. Some of these additional expenses may include attorney fees, appraisals, taxes, insurance and title fees.
According to Realtor.com, closing costs usually total 2 percent to 7 percent of the home’s purchase price.
Contingency
A contingency clause gives the buyer or seller the right to back out of their contract under negotiated circumstances. When a property is listed as “contingent”, it means an offer has been accepted but the sellers have chosen to keep the listing active in case specified terms are not met.
If you like a contingent property, you can still make an offer to put yourself in position to buy the home, should anything go wrong with the current deal.
Escrow
Escrow is a legal arrangement where a third party receives, holds and disburses money until the buyer and seller meet certain conditions. One common condition is the signing and completion of a purchase agreement.
This helps reduce risk for both the buyer and seller, in case one of the conditions is not met.
Listing Agent
A listing agent represents the seller in the transaction. They also work to sell the home at the best price possible with terms that benefit their client. A listing agent should be knowledgeable in the local real estate market and familiar with the best ways to market and stage a home to ensure the best offers.
In some cases, an agent may double as both a buyer and listing agent. Also known as “dual agency”, the buyer and seller agree that the agent can represent both sides.
Under Contract
When a listing is under contract, it means that an offer has officially been accepted but the sale has not been finalized. The property will not officially be sold until all contracts have been signed and conditions have been met. Once under contract, it usually takes an additional 30-45 days to close.
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