Know what these home-buying terms mean when you are navigating the real estate process. This lingo can feel like learning a new language, so here are some key home buying terms you should know before diving into the process
Pre-Approval vs. Pre-Qualification
Pre-qualification is a rough estimate of what you can afford, while pre-approval involves submitting financial documents and gives you a firmer, lender-backed number when you’re looking at homes.
Contingency
This is a condition that must be met for the sale of the home to proceed like a home inspection, appraisal, or the buyer securing financing.
Escrow
A neutral third party holds funds or documents until all conditions of the sale are met. Once complete, then the money and ownership transfer.
Appraisal
An assessment of a home’s market value by a licensed appraiser, often required by lenders to ensure the home is worth the loan amount.
Earnest Money
A deposit made by the buyer to show serious intent to purchase. It’s applied to the down payment or closing costs at the end.
Title Insurance
This protects the buyer and lender from legal claims or issues with ownership after the purchase.
Closing Costs
These are the fees due at the end of a transaction like the loan origination, title search, taxes, and more.
Understanding these terms puts you in a better position to ask questions, avoid surprises, and confidently move through the home buying process.