Home Buying Terminology: A Cheat Sheet
Buying a home shouldn’t be rocket science. You find the perfect home, make an offer to the seller, pay a couple of fees, and bam! You just bought a home.
However, buying a home actually has a lot of moving parts which include a number of funny real estate terms you’ve probably never heard before. Are Realtors and real estate agents even speaking English anymore?
To help you out, we’ve come up with a cheat sheet so you’ll know exactly what we are talking about when we explain the home-buying process.
If you meet with an agent before you begin looking for homes, they’ll likely recommend you get pre-approved for a mortgage. Mortgage pre-approval is the best first step to buying a home, because it essentially sets your budget for you.
Pre-approval involves sitting down with a lender to discuss your financial portfolio. This includes your credit score, borrowing history, outstanding debts, annual income, and any assets you have. After reviewing all of this, the lender gives you an exact number: that’s how much the bank is willing to lend you.
Not only is your budget set, home sellers will take you more seriously because they know you can qualify for enough loan to support your offer.
Defined loosely, earnest money is the money you pay to confirm a contract. When you’re buying a home, this is essentially a good faith deposit. It lets the seller know that you’re serious—serious enough to go ahead and put money down.
This money sits in a joint account (called an “escrow” account) held by both the buyer and seller. When the home purchase is finalized, the earnest money goes toward the buyer’s down payment.
Due diligence refers to the period of time after the seller has accepted a buyer’s offer. This is the time when you as the buyer can schedule inspections, confirm financing, and make sure that buying this home is in your best interest.
Now’s the time to do some research! Have the home inspected by a professional to ensure nothing is wrong with it, consult public records to learn more about its past homeownership, as well as any environmental issues in the neighborhood, and work with your lender to make sure this is a good financial decision.
So…. Are Realtors and Agents the Same Thing?
Yes and no. The primary difference between REALTOR®s and real estate agents is the National Association of Realtors, also known as the NAR. The NAR is a professional organization of real estate brokers that abides by a specific Code of Ethics that all REALTOR®s are required to follow.
A real estate agent works under a brokerage, but is not necessarily a licensed NAR member.
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