If you're in the home-buying game for the first time, you might find some of the real estate lingo a little confusing. But taking the time to understand these terms will help you streamline your path towards homeownership and communicate more effectively with your agent.
Before you start house hunting, make sure you get familiar with all the terms that you'll likely come across, including the following...
Before you start house hunting, you'd be well-advised to get what's called a "pre-approval" letter from your lender. A mortgage pre-approval is basically a letter that states that you may be able to get approved for a specific loan amount based on the information you supply your lender with.
After assessing your income, assets, and credit score, your lender will be able to determine whether or not you'd be able to secure a mortgage, and for how much. It should be noted that this is not a guarantee that you'll get final approval, and it will expire after about 90 to 120 days.
The interest rate on your mortgage will dictate how expensive or affordable it is. Obviously, the lower the rate, the more affordable your mortgage will be.
A fixed-rate mortgage simply means that the rate will remain the same throughout the mortgage term. These are ideal if rates are expected to increase in the near future, allowing you to lock in at a lower rate today. A fixed-rate mortgage is also ideal for buyers who prefer to have predictable mortgage payments that make things easier to budget.
Unlike fixed-rate mortgages, adjustable-rate mortgages feature interest rates that fluctuate throughout the loan term. The introductory rate is usually lower than fixed-rate mortgages, which is what makes them attractive. But once that introductory period ends, the rate could go in either direction.
Escrow refers to the period between when an offer has been accepted and the closing date. It involves dealing with all documents and monies associated with the transaction and ensures that everything is distributed accordingly once all conditions have been fulfilled.
These units are located in complexes that are governed by condominium associations which have rules that dictate how units and the building itself can be used. They also require monthly condo fees to cover the cost of common areas that all owners are allowed to enjoy.
Townhouses can either be "freehold" or "condo." A "condo" townhouse is basically a townhouse that is associated with a condominium board. Like condos that were just mentioned, there may be rules that owners have to abide by.
"Condominium" basically describes a type of ownership, meaning that you own everything within your walls, but the condominium corporation owns everything else.
"Freehold" townhomes describe another type of ownership in which you out everything on your property outright, including the structure itself, the lot, and everything on it without being governed by a condominium corporation like the other types of homes described above.
A detached home is one that is freestanding and not attached to other properties. They're also referred to as "single-family homes."
A semi-detached property is a single-family home that's actually built as one part of two homes that are constructed together and share one wall.
If you're buying a condo, the Status Certificate is pretty important. This is a document that outlines the current state of a condominium corporation and gives an overview of the financials of the complex.
When you prepare an offer for a home, you'll likely include "conditions" in your offer. These conditions must either be fulfilled (which means they were carried out) or waived (which means both you and the seller agree to nix the condition from the offer). Conditions are meant to protect both buyers and sellers in case a certain factor cannot be fulfilled.
For instance, a financing condition would give you a chance to secure a mortgage before being legally required to purchase a home. If you can't get a mortgage for whatever reason, the contract will be nullified and you'll be free to walk away from the deal without being stuck with a home you can't afford to buy.
As Is Condition
If a home is described as being sold in "as is" condition, that likely means there are some issues with it that the seller will not be rectifying before selling the property. The buyer would have to assume the home as it is.
An abbreviation for "comparables," "comps" refers to other similar properties in the immediate neighbourhood that have recently sold over the past few weeks. Your agent will pull a list of comps for comparison purposes to help you determine how much a home is worth and therefore how much to offer on it.
To ensure there are no issues with the title of the home you intend to buy, purchasing title insurance can protect you. This policy will protect you from liens, fraud, or legal ownership issues before the title is transferred.
Before your lender provides you with a loan, they'll want to make sure the property is worth the amount you agreed to pay for it. As such, they'll send an appraiser to assess the market value of the home before issuing final mortgage approval.
If the home comes in at an appraised value that is lower than your offer price, the lender may either deny your mortgage application or only approve you for a lower amount.
A home inspection is a condition you'll want to include in your offer. Adding an inspection to your conditions gives you a chance to have the home looked at by a professional who may uncover issues with the home. If the home inspector finds any problems, you can either ask the seller to reduce the price, fix the problems before closing, or you might walk away from the deal altogether.
Real estate jargon can sound like a foreign language to those who haven't been in the real estate game before. If you're in the market to buy your very first home, take some time to get to know all the relevant terms that you'll probably see and hear.