HOA what? Contingent on who? If you’ve ever felt overwhelmed by the real estate terms tossed around during a transaction, you’re not alone. Real estate can seem like its own language, with industry-specific jargon that isn’t always explained.
Here’s a breakdown of the most common terms to ensure you’re confident and informed as you navigate buying or selling your next home.
Key Real Estate Terms You Should Know
HOA (Homeowners Association)
An HOA manages shared spaces and amenities in certain communities, such as condos or planned neighborhoods. Members pay fees, and the HOA enforces rules to maintain property values. Review HOA bylaws and fees before purchasing.
Amortization
Amortization is the schedule of payments over the life of a loan. Early payments are interest-heavy, with the principal balance reducing more gradually. Understanding this helps you see how your loan balance decreases over time.
DTI (Debt-to-Income Ratio)
This ratio compares your monthly debt obligations to your gross income. Lenders use DTI to evaluate how much house you can afford. A lower DTI improves your chances of securing favorable loan terms.
CMA (Comparative Market Analysis)
A CMA is a report your real estate agent provides to determine the fair market value of a home. It’s based on recently sold comparable properties, helping sellers set a competitive price and buyers make informed offers.
Title Insurance
Title insurance protects against legal or financial issues that may arise from disputes over property ownership, such as liens or claims. It’s a one-time purchase at closing but offers long-term protection for buyers and lenders.
DOM (Days on Market)
DOM measures the length of time a property has been listed for sale. High DOM might indicate a property is overpriced or faces challenges, while low DOM suggests strong buyer demand.
"As-Is"
Selling a property "as-is" means the seller won’t make repairs or updates. Buyers should conduct thorough inspections to assess potential costs before proceeding.
Buyer’s Agent vs. Listing Agent
- Buyer’s Agent: Represents the buyer, guiding them through the process and negotiating the best deal.
- Listing Agent: Represents the seller, marketing the property and negotiating on their behalf.
Concessions
These are incentives a seller may offer a buyer, such as covering a portion of closing costs or providing repair credits, to make the deal more appealing.
Down Payment
The upfront cash a buyer contributes toward the home’s purchase price. Typical down payments range from 3.5% (FHA loans) to 20% (conventional loans) but can vary based on loan type and buyer qualifications.
PMI (Private Mortgage Insurance)
If a buyer’s down payment is less than 20%, lenders often require PMI. This insurance protects the lender but adds to the buyer’s monthly payment. PMI can often be removed once sufficient equity is built.
Closing Costs
These are fees and expenses buyers and sellers pay to finalize a transaction. They typically range from 2-5% of the home’s purchase price and cover items like title insurance, taxes, and lender fees.
Fixed-Rate Mortgage
A loan with an interest rate that stays constant throughout the loan term, providing predictable monthly payments.
Adjustable-Rate Mortgage (ARM)
A loan with an interest rate that can change periodically after an initial fixed-rate period. ARMs often start with lower rates, but they may increase later, based on market conditions.
Refinance (REFI)
Refinancing replaces your current mortgage with a new one, often to lower your interest rate, reduce monthly payments, or change your loan term.
HELOC (Home Equity Line of Credit)
A HELOC allows homeowners to borrow against their home’s equity. It functions like a credit line, with flexible borrowing and repayment terms, making it a popular choice for funding renovations or major expenses.
Lien
A lien is a legal claim against a property, often due to unpaid debts like taxes or contractor fees. Liens must be resolved before selling or refinancing.
Deed
A deed is the legal document that transfers ownership of property from one person to another. It’s recorded with the county and serves as proof of ownership.
Depreciation
Depreciation refers to the loss of value in a property over time due to wear and tear. For investment properties, depreciation can provide tax advantages.
Why Knowing These Terms Matters
Real estate transactions involve significant financial and emotional decisions. Understanding these terms empowers you to ask the right questions, make informed choices, and feel more confident throughout the process.
Let’s Make Real Estate Simple
Whether you’re buying, selling, or investing, I’m here to guide you through the process. As an Accredited Buyer’s Representative® (ABR®) and Seller Representative Specialist® (SRS®), I provide clarity and expertise to help you achieve your goals.
Have questions about these terms or the real estate process? Let’s connect today to simplify your journey! You can find helpful resources and connect with Danielle Dimond Real Estate using this link.