When you buy your first home or get ready to sell your home, there are a few terms you may be intimidated by. However, there's no reason to be. Here are a few common real estate terms you should know before buying or selling a home.
This term refers to the guarantee of a lender giving you the required capital to purchase the home before you start looking. You will need to go through the full application process and the lender will pull your credit. If everything checks out, they will pre-approve you and give you a conditional approval letter.
After you have been pre-approved for a mortgage, you will need to submit documentation backing up the income you claimed on your application. As long as everything checks out, you will become pre-qualified and receive a pre-qual letter. This shows you are very serious when you make an offer on a home.
Good Faith Estimate
Your lender will give you a good faith estimate, which is the total amount needed to close on the property. This will include both closing costs and the down payment. It may also include taxes and other items, which may be prorated.
A common term used in real estate, MLS stands for Multiple Listing Service. This is where your real estate agent will go to find or list a property for you.
When an appraisal is done for a home or your real estate agent is trying to determine the market value, they will pull comps or do a CMA (Comparative Market Analysis). A comp is a comparable property in the same or similar neighborhood that has sold recently. The selling price of the comp is used to help determine the value of the home you are looking at or selling.
When an offer is accepted on a home, you'll write a check to the seller, to show you are committed to the purchase of the house. This money, called earnest money, is put into an account, called an escrow account. The earnest money is held by the escrow company until the sale closes or the home buying contract is canceled.
If you back out of the home buying contract under the wrong circumstances, you could lose your earnest money. Your real estate agent can help you understand when you can (and can't) back out of the contract without losing your earnest money deposit.
These are just a few of the basic, yet often misunderstood real estate terms you should be familiar with. After you hire an agent, they can help you with any other real estate terms you are unsure of.
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